Issue link: http://palletcentral.uberflip.com/i/1390499
PalletCentral • July-August 2021 15 historical partnerships have allowed us to maintain uninterrupted supply and unaffected lead times for our customers. We are reassuring our customers that we have them covered. We are declining new opportunities to make sure we keep our historical accounts stocked up. While disappointed we couldn't help more customers, we are offering invitations to keep us in mind when the market turns around. Once we can safely bring new customers on, we'll work to confirm more supply for the next time we enter a lumber shortage cycle. We expect overall demand to remain very strong for the next 12 months. Acute shortages should improve over the coming months. Labor, on the other hand, will be a challenge for the foreseeable future. Eliminating the extra government COVID unemployment benefits will help, however the issue is complex. Pallet manufacturing is hard work. As we continue to receive fewer applicants, we need to be creative in terms of shifting more of our product offering towards automation. We also need to continue to improve employee engagement and the overall work environment. Jose Padilla Operations Manager Oakland Pallet Company We are reaching out to our customer base to inform everyone about the unprecedented pallet shortage taking place throughout the country. Just in this year alone, new lumber pricing has increased by up to 400%. As a result, demand for recycled and combo pallets has increased to levels never seen before, causing shortages throughout the country. We are receiving multiple requests for pallets from Southern California, as well as out of state, but have declined any new business and limited all sales to our current customer base only. Even with these measures we are behind on customer requests as the whole market is overstrained. We have done everything possible to hold our pallet prices with hopes that the market would improve, while availability continues to worsen every week. We predict the current situation will continue through the end of the year. Factors affecting current pallet shortages: • Labor shortage in lumber and pallet industries • Shortage of pallet cores • Reduction of new pallet builds due to high lumber costs • DIY projects increase during pandemic shutdown • New build increases in the housing market • Increased forest fires over the past two years • Renewed lumber demand from overseas markets Derek Kiser Principal Pallet Alliance The often-overlooked pallet is now a leading cause of supply chain disruption. No one predicted the tsunami of price increases that we are still experiencing. Booming demand, extreme raw material shortages, rising diesel prices, vanished labor, wet weather impacts, and sawmills/manufacturers reaching 100% capacity created the perfect storm. Sticker shock aside, many production planners are in a panic wondering why they don't have pallets and why orders are being delayed. Many industrial lumber buyers are questioning how much they should pay over publication prices and how late the shipment will arrive. Competition remains fierce throughout the pallet supply chain, and a record increase in demand and price has left everyone scrambling. My recommendation to pallet purchasers: lead time and safety stock are your best friends. You must be flexible, understanding, decisive and act quickly to secure production. To manufacturers: keep legacy accounts a priority and advise clients about all production delays. Communication, collaboration, and extended lead times are paramount to keep supply flowing. Relationships and respect are everything. Be fair, strategic, and relentless in the pursuit to maintain continuous supply throughout these unprecedented market conditions. Signs of relief are on the horizon, but things in the pallet industry will get worse before they get better – including price increases. Looking ahead, the new normal for pallet prices could be much higher than the industry is accustomed to. My prediction is 90+ days to deplete peak lumber inventories, a plateau stretching 3-6 weeks in mid- late Q3 and then a gradual but steady decline in mid-late Q4. Companies will likely want to revert to favorable species/specs at lower prices once supply loosens. Keep your head on a swivel in this extremely volatile market and together we will thrive through the disruption. iStockphoto.com/catalby