There is a pallet shortage. Why? My take is that the bullwhip effect is on full display. According to Investopedia, “ the bullwhip effect refers to a scenario in which small changes in demand at the retail end of the supply chain become amplified when moving up the supply chain from the retail back to the manufacturing end. End this effect may lead to disproportionate investment in no-need inventory, lost income, declines in customer service, delayed schedules, and even layoffs or bankruptcies.”
For example, after hoarding toilet paper, consumers stopped buying (sales down 14%), but manufacturers kept making it. I suspect that we are seeing this in a lot of commodities.
With lumber prices sky-high, expect pallet pools (Chep, Peco, etc.) to scour the world for empties, raise prices, convert some parts to plastic, or all of the above. In any event, be prepared to pay a significant premium for new pallets.
It brings up a significant problem – case-pick operations often use more pallets than needed because pickers encounter unreplenished bins. Also, the bin has insufficient stock forcing a return trip – generally by a different picker with an additional piece of wood!
More wood, more problems on the dock, more re-stacking, the issues growing.
To minimize the bullwhip effect and problems with excessive use of the deficit and expensive pallets and the costs of transportation and labor, use load building software or, even more, a transportation planner (also called Deployment Transportation Scheduler) with a load building planner – is the best possible decision.
UPS, whose stock was up 10% last week, sees many improved margins (Revenue was up 10.2% while cost was only up 2.2%).
Why:
More small shippers who pay closer to the list price
Better delivery density
$2.93 = Average rate per mile for flatbed truck transport on the U.S. spot market in the first three weeks of April – up 44¢, or 17.7%, since January, according to DAT Solution.