Understanding the dynamics of supply and demand are crucial in the recycled pallet industry. Regional Director of Supply Chain for the West Marcus Blood shares what factors are influencing the pallet market right now and how businesses can prepare for the coming months.
What's influencing the recycled pallet industry right now?
I've been in the industry for about 16 years, and I think that this year might be the most unique of those 16 years.
One of the things that I get asked a lot is, well, what's the precedence or what happened last time? And as I've thought about different things over the last year, there isn't really a precedence in our industry to what we've seen over the last three to four years.
So I mean, when I talk about the state of the pallet industry, we have a lot of inventory, but the factors that built that inventory up are drastically different. That's having an impact on prices as a lot of pallet yards are trying to figure out how to absorb the additional inventory, make space, keep pallets moving.
There's also a ready supply of lumber that we really haven't seen for four or five years, which has allowed new pallets to have a different impact than it has for several years. So right now we see inventory levels that we haven't seen for 15 years, and we're seeing pricing that was comparable to the time that inventory levels were in the same comparison.
What's really kind of unique about it now is we see similar core and finished good pricing as we did in 2008 and 2009, but our labor costs are higher, our transportation costs are higher. Our overhead costs for facilities are higher. And that's true whether you're in the pallet industry or whether you're in the manufacturing industry or whether you're in distribution. We've all fought this battle of labor and labor costs, increasing real estate, becoming more expensive.
At the end of the day, pallet is a supply and demand product. We move the supply chain and it's a necessary pallet or a necessary product that's critical to the infrastructure within our country, within most of the world, because that's what goods moved on. But at the end of the day, what drives the pricing is the supply and the demand. And over the last 12 to 14 months, we've seen less demand and more supply coming back out of the retail world. So we've seen inventories build up.
How is 48forty helping customers navigate the current market?
We talked about this as we went into the pandemic and inventories were tight, and we had the ability because of our footprint, being national, having 70 plus facilities, having facilities in Canada to be able to provide inventory when inventory was tight, right? So now we kind of have the reverse of that, our footprint, our ability to take a pallet and get it moving back into the supply chain.
A lot of our competitors just don't have that network to be able to take them from one region to another. Even going to our sister company in Canada, Paramount. We've had situations recently where a particular type of pallet was tight in a particular type of market that we've shifted in from Canada into our customers along the Great Lakes region because we had it at one of our Canada facilities and didn't have it in our US facilities.
So the real strength of 48forty is our footprint, our network, 70 plus facilities in the United States, six or seven facilities in Canada, 800 plus affiliate partners across the United States, 200 TPM locations with our retail partners across the us. And so I think that it's actually a great time to be talking to us. There are a lot of retailers out there that are struggling to get pallets off their dock that we've been able to solve the problems for if we can't get it back into the supply chain. We're committed to help our partners find a good place to put it in the environment that's environmentally friendly and be conscious of that as well.
So from any way you look at it, I just think that our footprint across the country, across North America, our partnerships with our affiliate partners is just unsurpassed by anybody. So we can offer value beyond the pricing, beyond the day-to-day of things. We can think outside the box and help solve the problem, and we have the resources to do it.
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