Pricing Trends: What Should You Be Including In The Cost Equation?

The More You Know: Pallet Pricing Trends

A 2018 report published by North Carolina State University notes that the “wooden pallet industry is an $11.5 billion American success story, with close to two billion wood pallets in use every day in domestic shipping and warehousing operations; and about $400 billion worth of American trade exported annually using wood pallets and containers.”

NC State University: Supply Chain Resource Cooperative

Collectively, the numbers are huge. But, no matter how many pallets your organization uses, you face a common concern: Pricing trends point to ongoing fluctuations in shipping and handling costs. As costs rise and fall – mostly rise – it’s important to protect your bottom line, and pallet selection plays an essential role in that.

To Pool or Not to Pool – That is the Question

Your two main options are pooled, sustainable pallets or GMA white wood, one-way pallets. Pooled pallets are rented or leased from a shared pool. Costs are reduced, as you don't have to buy new pallets or maintain your own pallet fleet. Over the past three years, the price of the block pallet has remained steady, with inflation-related increases from 3% to 7%. Based on pallet usage, customers using pooled pallets have been able to keep their costs per unit load low.

With GMA white wood pallets, the customer takes on the cost of ownership, usage and disposal. For Grade A white wood, the last two years have seen a constant increase in cost per unit. Hardwood is the main component used to build GMA pallets, and the cost for it is increasing (over 15% above the cost of better-quality wood in 2017). In addition, there is now a limited availability of cores – the residual pallets that serve as the raw material for the recycled Grade A pallets – and what exists is of lesser quality. Together, these factors have driven a 9% to 15% cost increase in GMA Grade A white wood pallets over the last 18 to 24 months.

Beyond the basic price of the pallet, trends show organizations are increasingly interested in related expenses, such as:

  • Time spent on handling, distribution, pickup, repair and disposal
  • Lost profits caused by unsaleables
  • Opportunity costs of not obtaining required, measurable sustainability results

As you consider all the pricing impacts, NPR’s Planet Money says pooled, block pallets have proven to help retailers save time. The value of that goes far beyond trendy: Time is money.

NPR: “Episode 545: The Blue Pallet”

A Better Mousetrap

While a cost-benefit analysis will continue to show that it’s materially beneficial to consider pooling, the advantages go beyond the numbers. CHEP pooled pallets move through an established and sustainable network. Looking forward, CHEP continues to invest in making what NPR terms “a better mousetrap.” CHEP innovations trending upward in 2020 include our CarbonNeutral® half pallet, on-site customer storage and managed recovery programs. Can our pallet progress support your bottom line?

Pooled Pallet Model

Pooled Pallet Model

Recycled White Wood Pallet Model

Recycled White Wood Pallet Model

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Pricing Trends: What Should You Be Including In The Cost Equation? | CHEP