Online stores and e-commerce have been disruptive forces in the retail sector, even before the emergence of the COVID-19 pandemic. Previous estimates showed global retail sales were to reach $27.7 trillion by 2020, with the figure later revised down $23.4 trillion by Business Insider.
Shipping plays a critical role in the recovery of different sectors of the economy, including the retail sector. Such market factors continue to spill over their effects on critical infrastructure in product distribution, such as wood pallets. Sourcing pallets has become trickier as the prices skyrocket across all geographical markets.
Pallet pricing responds to a variety of crucial factors that influence how much you spend. Here are five cost factors to watch out for when sourcing pallets:
1. Wood Type
The type of wood used to manufacture new pallets may vary significantly in price. In the last year softwood pricing increased exponentially which led to a large disparity in hardwood pallet pricing versus softwood. However, due to hardwood shortages the cost of those pallets rose as did the availability. Softwood pricing tends to fluctuate more than hardwood and lately softwood lumber pricing has softened, bringing the two markets closer in price.
2. Lumber Prices
Raw material costs are the primary determinant of pallet costs (roughly 60%). Availability of certain products such as lumber is dictated by the market, which subsequently has a ripple effect downwards to other industries such as the pallet industry. The demand has exponentially increased over the last year, with most mills having low lumber supplies. The pandemic, beetle infestations, massive wildfires, mill production lapses, and other market conditions continue to stifle supply. As such, you may have to pay more when sourcing pallets.
3. Pallet Size and Preparation
The board sizes for your new pallets may affect the quantity of wood used in the construction. Custom pallet construction allows you to tailor your order to fit your preferred design, weight, and transportation needs. Heavy-duty pallets may attract a higher price tag. Additionally, if exporting outside the US then heat treatment is required for wood pallets, which adds to the cost of the pallet to cover the extra process.
4. Fasteners Quality and Price
Your pallet construction is more than just lumber, requiring fasteners such as nails, staples, or screws to hold it together. Nail costs in particular have nearly doubled in the past 12 months. A typical grocery pallet (48 x 40 4 way) has 84 nails and in the increasing nail price market impacts the cost of a pallet.
5. Order Volume
Sourcing pallets in truck load quantities will lower your pallet costs. Your bulk purchase may attract discounts that can lower the overall cost in the long term as you can reduce the frequency of your orders. Also, since freight costs have crept up along with other supply chain prices the distance from the mill to your location can have a significant impact on delivered pallet price.
Pallets play a critical role in the shipping and distribution of retail products across the globe. Understanding the factors that influence the cost of pallet production may help you keep your company’s pallet budget costs in line. To discuss your custom order for wood pallets, contact Premier Pallets, Inc at 1-800-570-9727.