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David Dixon CEO Conner Industries One of the biggest trends we're seeing, and expect to continue, is that customers are better educated on the packaging products available. In the past, many customers opted to use standard sized pallets and just figure out a way to make it work with their products. Today's customers, however, clearly understand the benefits of using custom pallets to optimize loads, improve handling efficiency, and reduce overall costs. Manufacturers today understand that they no longer need to package their products around a standard 48x40 pallet and are often better off with a custom solution. Thanks to automation technologies and custom size pallet machines, we think that trend will continue to grow. With fewer man hours required to produce more pallets, the availability of these new machines allow manufacturers to purchase custom pallets at a lower price. Pallet machines are safer, allowing for exact nail placement, and they're more efficient. We expect to see more of these kinds of technologies in the future. We've noticed that wood packaging is becoming more recognized as a true green alternative. Plastic pallets can't be repaired, must be melted down to be recycled, and require five times more energy to manufacture than a wood. Cardboard pallets carry a 5-10 times larger carbon footprint than a comparable wood pallet, plus they require chemicals to produce. It's great to see wood packaging find its place as an eco-friendly option. Mia Allen VICE PRESIDENT AND CO-FOUNDER Rose Pallet We're seeing more interest in specialty-sized pallets. We project a strong demand for the first three quarters of the year and we anticipate a stable to strong economy. Pallet prices have risen. Because of this, we predict more and more buyers will shop based on price in order to minimize the impact pallet spend has on their bottom line. Lead times have increased, too, and we believe it is important for all suppliers to inform their customers so there are realistic expectations. Rose Pallet has also become aware of credit card scams affecting pallet suppliers. This has occurred when third parties order and pay COD with a credit card. However, once pallets are received, the credit card payment is stopped. Innocent pallets companies are left without payment for thousands of dollars. We encourage suppliers to be wary of this in 2019. As a result, Rose Pallet has implemented strict credit and collection polices to ensure that all our corporate clients are staying within terms. Marco Turcotte PALLET & PALLET COMPONENTS SALES MANAGER Groupe Savoie Inc. The pallet industry is in a state of change. The price increases on both softwood and hardwood have resulted because the majority of producers had no choice but to increase their pallet price. However, should the price of wood drop a little, I expect the price of pallets to remain at the new price level that has just been established. As we are all faced with significant labor shortage, investment in automation and lean management will be a must in order to reduce waste and respond to the demand. These investments and new approaches are necessary if we want to continue to serve our customers first while remaining competitive. Transportation will also be a major cost driver, both in terms of supplying raw material to sawmills as well as pallet deliveries directly to customers. I see 2019 as the pivotal year that will change the way we do things to adapt to our new reality of doing more and better with less. Robert Heys PALMATE CLIENT RELATIONS Automated Machine Systems Profit margins will continue being under pressure in 2019. It is hazardous making predictions based on current trends. Trends tend to change when they meet extremes. That is the point when macro- economic or government policies precipitate changes in the market forces that have led to the trend. Economically the domestic labor shortage and the subsequent wage increases of 2018 are putting pressure on costs. Wage gains have been relatively tame thus far. However, look for them to continue and expect the increases in wages to be greater in 2019. The Federal Reserve has indicated there will be two further interest rate increases and a possible third next year. Higher interest rates will result in higher debt service costs and pinched margins. There was a time when costs could be passed on to the consumer. With most of the world outside the U.S. and China still experiencing weak growth and moderate inflation, those days likely will not come back next year. Having said the above, the likelihood of reaching an extreme next year, which would affect an economic or policy change, is remote. None of the above is that significant. Only enough to chip away at profits. Finding productivity gains and cost reductions are key to maintaining margins next year. PalletCentral • November-December 2018 13

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