For over a year now, COVID-19 has wreaked havoc on our economy and destabilized the structures that keep our nation afloat. The supply chain sphere has been no exception; indeed, it is perhaps the most heavily impacted industry yet. The demand for pallets reached an all-time high in 2020 as stay-at-home orders encouraged e-commerce and skyrocketed shipments of products like groceries, medical supplies, and cleaning products. Meanwhile, key interrelated industries dealt with blows of their own. What resulted was a perfect storm that made pallets scarce and their prices steep, where they continue to be to this day.
Utilizing recycled over new pallets is one of the most efficient ways to make stocking a supply chain more affordable, particularly when new pallets are near exorbitantly expensive.
Yet, the decision between new and recycled pallets may not be as simple as it appears, especially when unfamiliar with the subclassifications of recycled pallets, known as GMA grades, which designate pallets according to quality. Still, the GMA grading system is an invaluable tool when deciding whether, and/or which, recycled pallets may be best and most cost-effective for your needs.
The Basics of Pallets and Repairs
Although there are six pallet dimensions recognized by the International Organization for Standardization (ISO), the most commonly used in North America is the GMA pallet, a standard 48”x40” pallet meeting the standards set forth by the Grocery Manufacturer’s Association (GMA). Recently rebranded as the Consumer Brands Association, the GMA created pallet grades as a way of classifying the quality of wood pallets prone to breaking, ensuring that purchasers had a clear picture of the pallets they would be receiving from vendors.
Understanding the necessity for these grades and how they are separated requires a basic knowledge of a pallet’s structure.
All pallets consist of three primary components: a top deck and bottom deck, with blocks or wood boards (known as stringers) providing support between them.
Pallets may receive all sorts of damage throughout their usage cycle, such as missing or broken blocks and/or boards, significant splits in deck or stringer boards, or delamination of pallet components. Fortunately, repairing pallets that have sustained these damages is a reliable way to restore their functionality and allow for reuse. While repairs may address a wide range of issues, such as protruding fasteners and loose components, the most common and substantial repairs are board replacements, as well as the installation of plates or plugs.
When a deck board is frayed, split, splintered, or broken, it may simply be removed and replaced with a new board. Repairing blocks and stringers, however, is slightly more complicated, due to their positioning and critical role in structural integrity. If a stringer or block is cracked or split, metal plates may be installed that sit over the split, holding the wood together and preventing further damage. Per the National Wooden Pallet and Container Association’s Uniform Standard for Wood Pallets (2014), these plates are to be installed using mechanically, hydraulically, or pneumatically operated presses, with no less than two plates being used for each repair.
Meanwhile, in the case that a stringer board has been cracked or broken entirely, a second board, commonly known as a companion stringer or plug, may be used to reinforce the section by nailing it directly adjacent to the damaged board. Companion stringers come in a variety of sizes ranging between six and twenty-four inches in length, as well as a range of designs specialized to repair specific types of breaks.
The GMA Pallet Grades
When it comes to GMA pallet grades, the type and number of repairs done to a pallet are a significant factor in determining its grade. This is not only because it speaks to the potential lifespan or structural integrity of the pallet, but because it contributes to the second major determining factor of grading as well— appearance. While there are other important elements to consider, such as compliance with size standards, these two are the true deciders of the grade a pallet is ultimately given.
A GMA pallet can be categorized into one of three grades:
- Grade A: These pallets are those with the highest quality appearance that have yet to undergo any major repairs. They will have bright, unstained, white wood free of contaminants such as paint, grease, and other such substances. While A grade pallets must have stringers that are intact and lacking any repairs, they may have some boards reinforced with metal plating. These are pallets that, although recycled, look as close as possible to a brand-new pallet, if not as good as.
In some cases, manufacturers will further delineate pallets within grades according to their quality or appearance. For example, some classify pallets which meet the requirements of grade A while still having superficial defects or more repairs as “Regular A” pallets, while the highest quality and most attractive recycled pallets are deemed “Premium A.” Though this example features only two subcategories, some manufacturers use as many as four to classify their products.
- Grade B: Where grade A pallets are the most attractive and “newest” of recycled pallets, grade B are those that have undergone significant repairs and have a comparatively rougher appearance. A B grade pallet is likely to have cosmetic blemishes, typically featuring stained or dirty wood blended with unmarred white wood, as well as replaced deck boards and/or extensively repaired stringers, utilizing plates or companion stringers. Although this may be the case, these pallets are just as structurally sound as grade A pallets and are perfectly suited for use in the supply chain. Notably, they are also the most readily available recycled pallets on the market.
Like A grade pallets, some manufacturers have defined subcategories to further define grade B status, such as “Premium B.” However, rather than being judged on appearance, grade Bs are typically differentiated by the number or extent of repairs they have undergone.
- Grade C: These low-ranking pallets are those that have received multiple repairs, with the poorest appearance of all three categories. As they are typically of questionable structural stability, most vendors avoid selling C grade pallets at all. Indeed, in many cases, C grade pallets can already be considered as cores rather than intact pallets themselves.
Worth noting is that all grades must meet the minimum GMA pallet standards, including the 48”x40” measurement, a load capacity of at least 2,500lbs, four-way forklift entry, as well as all requirements related to board thickness and amount.
The Pallet Market and Its Impact on New and Recycled Pallets
Currently, the question of how to distinguish and choose between grade A and grade B pallets is a popular one, and for good reason— even a surface look at the pallet industry today is enough to show that the events of the past year have made a serious impact that has destabilized the market as a whole. At present, many businesses are paying exorbitant prices to maintain stock, in some cases needing to purchase at rates as high as $10+ per individual pallet.
Several factors have contributed to this stark increase in prices, the most significant of which being widespread lumber shortages and their resulting increase in lumber cost. Since May of 2020, lumber pricing has seen an astonishing increase of 377.45%. At the time, one thousand board feet of lumber cost approximately $335. As of May 2020, that same thousand board feet costs nearly $1,600— and prices continue to rise at a steady rate each day. What lies at the root of this issue is a simple matter of supply and demand.
With the onset of quarantine orders and the resulting exodus of workers out of the office and into their homes, many found themselves suddenly dissatisfied with their living situation. Some responded to this by purchasing new homes, driving the construction of houses into record numbers; in December of 2020, new housing starts were at the highest they had been in fourteen years. Others responded by improving their current homes, either through do-it-yourself (DIY) projects or renovations.
The home improvement market suddenly experienced an enormous increase in demand, with consumers all but depleting supplies of grade 2 lumber and slowly eating into the grade 3 and 4 lumber utilized in the manufacturing of pallets.
Each of these two markets consume a large amount of lumber even in years without unprecedented demand spikes, and when these spikes did occur, they were met with a quickly depleting supply. On the production side, lumber mills struggled immensely under the weight of COVID-19, which removed many laborers from the workforce, and the safety restrictions imposed to combat it, such as limiting facility capacities and the number of workers able to be scheduled for a single shift. With mills already scrambling to meet the ordinary, expected levels of demand, the sudden spikes caused by quarantine highly exacerbated the issue. These factors are what drove and continue to drive the lumber shortages resulting in the material’s currently astronomical price, although interest in home improvement appears to be slowly dwindling as travel restrictions are lifted and vaccines are administered.
Another material market heavily impacted by increased demand in home improvement is steel. As with lumber, steel mills were heavily impacted by COVID-19 mandates and struggled to meet the demand of markets consistently performing at pre-pandemic rates, such as construction and automotive. Again, like lumber, sudden consumer interest in home improvement weighed heavily on steel supply. Moreover, where manufacturers in the past may have imported steel to meet demand, COVID-19 is a global pandemic— steel mills throughout the world were and are experiencing the same issues and are generally no more productive than those in North America. What makes this relevant to pallet pricing is nail prices and production challenges. Not only are nails more expensive at present, but many find themselves experiencing significantly longer lead times to receive nails as well, at times waiting as long as two weeks for a single order, making it necessary for manufacturers to order in larger quantities to ensure supply.
Aside from material costs, there are other influences dictating the current pricing of pallets; namely, labor shortages and fuel prices have had no small impact. Regarding labor, the transportation sector, as well as warehouses and distribution centers, have been experiencing labor shortages since well before COVID-19. Pre-pandemic, these shortages could be attributed to factors like an aging workforce which began quickly moving into retirement, as well as lower job market participation among the key demographics who typically take up blue-collar jobs, such as young adult men and individuals without college education. In 2019, recruitment also struggled against low unemployment rates, which reduce the number of qualified applicants available for hire overall. Rather than causing the labor shortage, COVID-19 only worsened an already dire situation by slowing production and removing at-risk workers from their positions.
Meanwhile, fuel prices have steadily risen over the last year and are expected to rise even further as pandemic restrictions are lifted and consumers return to usual behavior, with the U.S. Energy Information Administration (EIA) predicting an increase of $2.94/gallon in the average price of diesel in the next year. A major factor in this is the blow dealt to oil refineries during the February winter storms, which dropped refinery utilization rates to only 56%. With high oil prices comes higher transportation costs for pallets, as well as the material to produce them, which trickles into overall pallet cost.
These elements account for the currently high pricing of new pallets. Yet, recycled pallets have also seen a significant increase in price over the last year. As people stayed home and avoided shops during quarantine, e-commerce boomed, creating a nearly unprecedented demand for pallets. According to data collected by the U.S. Department of Commerce, e-commerce sales in the U.S. increased by 32.4% from 2019 to 2020, accounting for 14% of all total retail sales.
As new pallets became increasingly costly and their production continued to slow, businesses began looking to recycled pallets to maintain supply in a more cost-efficient manner.
As a result, pallet cores, the damaged pallets which eventually serve as the basis for a recycled pallet, began selling and continue to sell at higher rates. That said, probably the most significant challenge this trend has posed to the pallet market is that existing supply of recycled pallets is dwindling at a rapid rate. Because fewer new pallets are being produced and sold, fewer cores are now available to be converted into recycled pallets. This direct relationship has created an overall pallet shortage, particularly in the northeast and southeast regions, although it is quickly spreading across the nation.
Choosing the Grade for Your Needs
How does one make the choice between new or recycled, grade A or B pallets? And how does the current state of the pallet market play into this choice? Ultimately, these decisions come down to considering your products and needs and weighing them against each option to find the most cost-effective solution. With an awareness of the influences driving pallet price increases, one may better monitor and predict how prices will change in the future. What makes this significant is that choosing between A and B grade pallets should not only be a question of what serves your needs at this exact moment, but one of operational sustainability as well. With the prices of materials like lumber and steel still rising, one would be remiss not to consider which options will be most cost-effective over a sustained period, as well as during peak seasons and sudden demand spikes. This is particularly true when considering new pallets.
With the market as it currently is, new pallets are both difficult to find and (sometimes extremely) costly when you do. On one hand, new pallets will be the most attractive when looking for display pallets to be used in customer-facing spaces such as retail floors and will obviously have the most potential for extended repair and reuse. On the other hand, their currently exorbitant price and diminishing quantity means that choosing to opt for new pallets is a weighty decision. When pallets are to be used in supply chain applications, recycled pallets are likely to be the most cost-efficient option of the two. Even when appearance is a concern, there are likely to be recycled pallet options to fulfill those needs.
And while cost-effectiveness may the drive behind your choice to utilize recycled pallets, it is not the only benefit to be had. The repair, reuse, and recycling of wood pallets has made real, measurable change in the war against climate change; one study performed by Virginia Tech in collaboration with the USDA Forest Service in 2016 found that wood pallets carried a recycling rate of 95%.
At Prime360, our sustainability services divert 55 million wood pallets from landfills each year through recycle and reuse, and utilize what would otherwise become waste for applications such as biomass fuel, which reduces overall air pollution by replacing fossil fuels in electricity generation.
A single pallet may be recycled and reused up to seven times. Each of these cycles represents one fewer pallet relegated to the landfill, and one fewer manufactured to take its place. These numbers translate directly to wood and thus trees saved— our efforts alone conserve an impressive 2.75 million trees per wood waste/carbon calculations each year. If reducing sustainability is of any concern to you, utilizing recycled pallets is a surefire way of making a tangible difference in your carbon footprint.
Key Considerations When Picking Pallet Grades
If opting for recycled pallets, the next step will be choosing from one of the two widely available grades. Following are some of the most important factors when making the choice between A and B grade pallets:
- Appearance: As the major delineator between the two grades, appearance should be the first thing you consider. If you are looking for pallets to be used in product displays or storefronts, grade A pallets, and particularly “Premium As” and other high-tier A grades, will be the best fit for you. Inversely, grade B is likely to be the preferable option if the pallets will exclusively be used for supply chain purposes, where blemishes and unsightly repairs are no issue.
- Products: As is the case with every pallet-related decision you make, ensuring that the pallets you use are those best suited to your product should be a top priority. Mostly, this means ensuring that the pallets you choose are able to support the products’ weight. If you are shipping particularly heavy loads, you will want the most structurally sound pallets available.
Perhaps unexpectedly, although one would assume that grade A pallets would have the best structural integrity and highest capacity, this is not always the case. In some instances, grade B pallets, or those that have undergone repairs using plates and/or companion stringers, may actually be better suited to high-capacity loads, as heavy-duty repairs can reinforce the pallet to the point of exceeding its initial weight limit.
- Durability: When speaking on this topic, durability is a concept that covers not only the number of trips a pallet is capable of withstanding, but several other factors as well. For example, how and how long a pallet will be stored or transported may influence your decision. You might also consider the intensity of handling, including how often the pallet will be handled and the severity of stress or damage it may incur during. These considerations are sometimes bundled under the umbrella of what is referred to as supply chain depth. Taking a closer look at your supply chain and determining where it falls in terms of depth may be a useful tool in deciding the proper grade of pallet for your needs.
- Safety: Considering structural integrity is not only important to properly moving and protecting your products— it is also a key factor in ensuring the safety of your workers. An improperly chosen pallet is more likely to break, splinter, or otherwise fail in some way. Each time this happens, legitimate safety risks are posed to workers handling that pallet. Because their health and safety is a top priority, it should always be considered in pallet selection.
While these are the most primary of considerations, you may need to factor in others depending on your specific business or industry.
Ultimately, choosing the right pallet for your needs, whether it be new or recycled, grade A or B, is a matter that requires a thorough understanding of your supply chain needs and the features a pallet must have to best serve them. GMA grades are an important reference point for locating pallets that will provide these features and may even point you towards a more cost-effective option than you otherwise would have chosen.
Even so, if pallets and pallet management lie outside of your core competencies, you may need support to ensure you get the best results. Part of Prime360’s role as an end-to-end pallet solution provider is guiding you through crucial decisions like these, helping you to reach a solution that provides the best performance and cost-efficiency available. Our pallet experts work with customers to identify the exact pallet specifications to meet their needs, and we leverage our vendor network to connect them with those pallets locally and at reasonable rates. Whether this means designing new pallets to meet highly specific needs or identifying the GMA grade of recycled pallet with the best cost-performance, Prime360 adapts our services to provide custom solutions that encompass the entirety of your supply chain, pushing efficiency and cost reduction as well as safety and sustainability in every aspect. While we continue under uncertain circumstances, we strive to provide the support your supply chain needs to remain running optimally through it all— whether it be pandemic or peak season. Navigating the question of when to use recycled pallets is only one, albeit important, aspect of this support.
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