The worm has turned. It wasn’t long ago that customers were clamoring for 48×40” pallets. Demand spiked in the wake of COVID as buyers unleashed their pocketbooks, and supply chains boosted their ‘just-in-case’ safety stock. A lack of recycled pallet availability led to increased new pallet production. Likewise, shortages of rental pallets also helped fan the flames of white pallet demand. There was a large influx of new whitewood pallets.
But that was then and this is now. Retail sales are down, and retailers are reducing inventory levels, freeing up empty pallets. In many parts of the country, we are seeing a glut. Pallet sales have languished, and recyclers are reporting their yards crammed with both incoming pallet cores and finished inventory alike.
Larger recyclers, still working through expensive inventory, are faced with the prospect of selling at a loss or losing sales. Pallet buyers are being offered attractive pricing by small, nimble providers, causing further confusion as pricing struggles to find a new equilibrium.
This is just one type of market where sophisticated pallet brokers or management companies shine. They offer a unique value proposition to pallet customers and pallet suppliers alike. Here are nine ways a pallet broker relationship can add extra value in a depressed economy.
Let’s start with pallet buyers:
Deep understanding of prices and the market. Facing economic headwinds and inflationary pressure, there is invariably pressure to hold the line on procurement costs, including pallets, resulting in price shopping. Additionally, Suppliers are probably knocking on your door offering to undercut your current supplier. It ends up causing uncertainty about where pricing should be. Leading brokers are regularly negotiating with pallet suppliers across the country and have an excellent understanding of what your pallet expenditure should look like in any market situation.
Saved time and money. Customers benefit from the broker’s deep knowledge without feeling compelled to divert scarce resources toward supplier research. Because of their comprehensive understanding of the market, brokers can often find lower-cost options, even tapping more distant sources of supply, thanks to their transportation expertise. While asset-based pallet companies are often only viable to a distance of about 150 miles, brokers can often source pallets from a much longer range competitively, thanks to their expertise.
Increased transparency. In a recent article by McKinsey, the consulting group’s top recommendation to Chief Procurement Officers in these troubling times was to increase visibility. Leading brokers such as First Alliance Logistics Management (FALM) offer critical online visibility to procurement teams regarding pricing, inventory, delivery times trends, and more.
Reduced risk: By working with a broker, pallet buyers can benefit from advanced visibility technology, save money, save time on reduced research, and benefit from the broker’s deep experience and knowledge. Ultimately, working with a broker can reduce risk for pallet buyers.
For pallet suppliers, a pallet management provider can also make a difference when sales are slow:
Supplement pallet company sales force. As pallet yards brim with ready-to-go inventory, pallet brokers can help generate sales without the need for investment in sales personnel and without the need to pay a sales commission. Many pallet companies use pallet management companies to subsidize sales regularly and, in some cases, use them almost exclusively as a substitute for in-house sales personnel.
National reach: Because pallet brokers work nationally, they can provide opportunities to bid on pallet requirements of local branches of multi-site companies that might not have previously been available.
Market insights: Pallet management or brokerage companies rely on a partnership with pallet companies across the country. Frequent conversations and transactions enable the broker to provide local pallet companies with razor-sharp insights into competitive pricing to find the sweet spot between sales volume and profitability. If you are not tapped into the market, you can be late to the party when prices are dropping.
Logistics expertise. Pallet brokers can tap into affordable freight lanes to sell pallets far beyond conventional pallet market areas when sales are hotter in other areas. Cheaper transportation opportunities can help brokers sell your pallets further from home.
Prompt payment. When things slow down, the danger of slow payment can escalate. How much time does your sales and administration staff spend chasing overdue invoices? Another negative, some customers also use the slow economy as a way to stretch out payment terms from Net 30 to Net 90 and beyond. Dealing with a reputable broker such as First Alliance Logistics Management takes those collection concerns out of the equation.
Bottom line, an economic downturn presents challenges for pallet buyers and asset-based pallet suppliers alike. Working with a leading pallet management company like FALM and its network of pallet supply partners can help customers and pallet providers alike to thrive in tough times. Pallet suppliers interested in participating in FALM’s Preferred Supplier program can click here.