Businesses need pallets before they can ship goods.
Foundational to shipping and receiving, trucking and distribution, commerce and trade, the wooden pallet and skid business is brisk and strong demand for these handling workhorses is expected to continue.
“2020 has changed us, and we’ll behave and buy goods differently,” said Ben Remmey, president of Remmey The Pallet Company in Beaver Springs, Snyder County. His company operates a facility in Lehighton, Carbon County.
According to a September 2020 report by IBIS World, the U.S. wooden pallet industry is worth about $10 billion and expected to increase over the next five years.
From lumber to logistics it’s even bigger business, accounting for roughly $31 billion a year in total U.S. economic impact from lumber and sawmills to end users, storage and transportation. “Two billion pallets are in circulation at any given time,” said Patrick Atagi, vice president of advocacy and external affairs at the National Wooden Pallet and Container Association in Washington DC.
He said the sector creates about 173,000 direct and indirect jobs in the U.S.
A boom in online retail sales and increases in delivery services – from everyday grocery staples to shipments of the much-anticipated coronavirus vaccine have created a sustained spike in demand for shipping products as well as the wooden pallets to conveniently store or inventory them.
Pallets are a good lead indicator of how product is moving in the market.
“And demand is very strong across the board,” Remmey said.
Split into two sectors, new wood pallets and recycled pallets, provides opportunities for different companies and sectors of the industry.
Remmey deals in new pallet construction and sales.
Pallets that get flushed out of the distribution centers validate that people are spending, and the indicator is above average for this time of year, Remmey said. Wooden pallet and skid production is a solid predictor of an economy’s health, as well as a measurement of whether an economy is rising or falling, he said.
“If pallets slow down in the logistical supply chain that is indication things – and the economy – are slowing down,” Remmey said.
Atagi said the demand for pallets was about six months ahead of actual goods shipments. After sales and demand dropping off about 30% in March, April and May, Remmey said business had not only recovered but is up about 5% over pre COVID-19 numbers.
Nazareth Pallet Company, Inc. in Northampton is owned and operated by three brothers: George, Brian and Jason Frack, who continue the company their parents founded in 1984.
Nazareth is part of the recycled pallet market.
“The business continued to grow as we did,” said George Frack, Nazareth president. Brian Frack is vice president, and Jason Frack is the company’s chief financial officer (CFO.)
The recycled pallet market refurbishes and repairs pallets to return to logistics streams, as well as repurposing them at the end of their usefulness to other products, such as colored mulch, playground mulch animal bedding and pellets for pellet stoves and inserts.
About 100 percent of a wooden pallet can be recycled, including the nails, Atagi said.
“About 95% of all wooden pallets are recycled, with only 1.8% of wood in landfills coming from wood pallets,” he said. With a vaccine to be distributed and more people going back to work, the pallet industry should expect continued growth and demand.
Having pallets move through the supply chain quickly was a top priority. “That’s a very important role we play that gets overlooked,” Frack said.
Moving empty pallets out of a warehouse or distribution center to be refurbished and put back into service ensures supply houses don’t become bottlenecked, causing point of sale delays, Frack said.
“Once they cannot be repaired we’ll take all of the good parts to fix other pallets. Parts that can be rebuilt for other uses, like store displays at check out registers or the ends of aisles” are repurposed, Frack said.
Pallets that are beyond repair are ground up and turned into mulch and pellets. Nazareth Pallet handles the complete recycling process, including colored mulch.
“We spent a lot of time around our homes, and the mulch was in demand this year,” Frack said.
After the pandemic hit in March, Frack said some traditional sectors like non-essential retail and restaurants dropped off, but other sectors picked up the slack. He predicted businesses that open or reopen next year will further increase the demand for shipping pallets.
“There was shuffling of how clients needed pallets. About mid-way through the summer demand started to increase,” he said.
Most of Nazareth Pallet’s customers are within a 30-mile radius of the 27-acre business complex.
“More of our target goals have been centralized in the area,” Frack said. “When an opportunity comes in, we look to be the start-up pallet recycler for those companies.”
Nazareth Pallet serves warehouses and distribution centers in Breinigsville, Fogelsville, Bethlehem and Upper Macungie Township, among others. Filling vacant jobs at the manufacturing facility continues to be a hurdle for growing his business.
“There is increased demand [and] our facility has the capability of doing more,” he said.
With social distance spacing and following Centers for Disease Control and Prevention recommendations to keep employees safe, many employees are already working overtime to help the company meet the demand.
Frack plans to new equipment investments in 2021 to help grow employees and the company. So far, even hiking wages and paying signing bonuses has not yielded enough candidates to ramp up staffing levels and fill vacant jobs.
“It is somewhat capping our capabilities of what we can do,” he said.