A shortage of pallets is exacerbating the supply chain crisis.
A shortage of timber and rising prices have combined with a surge in demand to create the situation, according to the UK National Association of Pallet Distributors (NAPD).
A spokesman for the NAPD told Supply Management the situation was adding to general supply problems. “Talking to people in the supply chain, it's possible to get hold of supplies, but prices are higher and people are working harder to get hold of them,” he said.
“You sort of have a dual pressure there on availability, where certain supply chains would normally use newly-manufactured pallets. There certainly has been an increase in demand and people who want to repair and reuse them.
“The demand for reusing palettes has reached a level it's never been at before. And they're getting inquiries from further afield as well. So it's not just their normal markets. They're getting new businesses and I think more geographic regions as well, sort of approaching people here in this country to provide them with reconditioned pallets.”
The conflict in Ukraine has prevented about 10m cubic metres of timber from reaching the markets in Western Europe. This has hit the Netherlands particularly hard, and traders there are buying up bulk stocks of any surplus pallets from UK dealers at “unprecedented” prices.
Pallet prices up 60-70% for end users, one pallet distributor told the NAPD.
“Our own volume of incoming pallets for January to June inclusive for inspection/repair and return to the market is down 40% on the same period last year which of itself was some 25% lower than pre pandemic levels," they said. "The demand surge post Covid has put further pressure on supplies.
“The impact of the current situation on pricing is that end users are paying 60-70% more than they were last year simply to secure the stock they need. This may ease if the economy cools as predicted. That said, the disparity between supply and demand is greater than we have seen before and will take some time to stabilise.”
Additionally, demand from all sectors of timber users doubled the price of timber during 2021, and drove pallet users to find alternatives, placing more pressure on the supply of reused pallets. The pandemic hastened the move to online shopping creating a much higher level of demand from internet retailers.
“Those who can compromise on size and specification will adapt most easily but many automated storage and order picking systems rely on a specific pallet design, where it will be much more difficult to source pallets of the correct specification,” the NAPD added.
“Experienced operators in the industry expected very strong demand once the world awoke from the Covid slumbers. No one anticipated the speed and severity of the current shortage, the one factor that has had a major impact and was never even considered until February of this year was a land war in Europe.”