Supply Chain Disruptions Shake New Jersey’s Pallet Manufacturing Industry: How Local Companies Are Adapting to New Market Realities
New Jersey’s pallet manufacturing sector has faced unprecedented challenges over the past few years, with supply chain disruptions fundamentally reshaping how companies operate, source materials, and serve customers. From skyrocketing lumber prices to labor shortages and raw material scarcity, the Garden State’s pallet industry has been forced to innovate and adapt at breakneck speed.
The Perfect Storm of Supply Chain Challenges
New Jersey manufacturers learned valuable lessons associated with the supply chain disruptions and other challenges connected with COVID-19. According to Resilinc’s AI monitoring system, EventWatchAI, the industry experienced 10,629 potential disruptions in H1 2024, up from 8,197 the previous year—a 30% increase. These disruptions have created a ripple effect throughout the pallet manufacturing ecosystem, forcing companies to reconsider everything from sourcing strategies to production methods.
The lumber market, which forms the backbone of wooden pallet production, has been particularly volatile. It has been widely reported that lumber prices are skyrocketing. The increased lumber prices have dramatically increased the cost of purchasing a new Grocery Manufacturers Association (GMA)-certified nine-block 48×40-inch white wood pallet, which today is approaching $50 (a year ago it was closer to $35.) This dramatic price increase has forced manufacturers to explore alternative materials and production methods.
Labor Shortages Compound Manufacturing Challenges
Beyond material costs, New Jersey pallet manufacturers are grappling with significant workforce challenges. In H1 2024, manufacturing experienced a notable surge in labor disruptions, with 1,047 disruptions, marking a 42% increase compared to H1 2023. This uptick can be attributed to manufacturing supply chain challenges within the industry, such as low wages, an aging workforce, and a scarcity of skilled labor.
The competition for workers has intensified across all manufacturing sectors in New Jersey. Right now, our manufacturers pay on average 50% more for electricity than not only their competitors, but other sister companies in other states and other countries, and it is hard to get capital from headquarters to expand a New Jersey operation, adding another layer of complexity to the state’s manufacturing landscape.
The Rise of Recycled and Alternative Solutions
As new pallet costs have soared, many New Jersey businesses have turned to recycled alternatives. As new pallet prices soared, many businesses saw cost effective alternatives and became more reliant on recycled pallets. The data he presented highlighted that recycled pallets increased from 42 million in 2020 to 83 million in 2022, which was a major factor in the overall oversupply of pallets.
Companies across the pallet supply chain have adapted to these market shifts. For instance, businesses working with nj pallet companies have diversified their offerings to include not just traditional wooden pallets, but also liquidation and recycled options to meet changing customer demands and budget constraints.
COVID has been a catalyst for change in the world of plastic pallets due to supply chain disruptions, wood pallets being expensive and not available, high desire for hygienics and cleanliness in food customers, and increased automation because of labor shortages. She says plastic pallets have become the go-to for many customers because of the availability and lifespan when compared to wood.
Technology and Automation as Survival Tools
New Jersey pallet manufacturers have increasingly turned to technology to maintain competitiveness. Some companies were able to capitalize on the situation by investing in automation, which allowed them to maintain high output even as labor shortages persisted. By streamlining production processes, these businesses not only met surging demand but also positioned themselves for long-term efficiency gains.
A key finding: larger pallet companies expanded aggressively during this period, investing in automation to boost output per employee and mitigate labor shortages. This trend toward automation has become essential for survival in an increasingly competitive market.
Building Supply Chain Resilience
The disruptions have taught New Jersey manufacturers valuable lessons about supply chain resilience. Without a clear understanding of where raw materials and critical components come from, businesses cannot build any kind of resiliency into their supply chain. Connolly says that relying on a single supplier for critical materials, components, or services sets a business up for disaster.
When considering supply chain resiliency, having a supplier network closer to home is always easier to monitor and strengthen. Connolly suggests that when a manufacturer is on the same continent as its critical business partners, it is much easier to manage or anticipate disruptions compared to overseas partners.
Market Outlook and Adaptation Strategies
Despite ongoing challenges, there are signs of stabilization in the pallet market. Pallet prices have continued to soften, albeit at a much lower rate, and seem to be bottoming, according to the Producer Price Index. The rate of decrease has continued to flatten, falling another 2.27% between January and April 2024.
However, The lumber market is improving, resulting in modestly higher lumber input prices for pallets. This will push pallet producers to pass along increases. Variables such as weather conditions that impede logging, uncertainty about a CN rail strike in Canada, and summer forest fires will push lumber prices upward, ultimately leading to higher new pallet prices.
The Path Forward for New Jersey Pallet Manufacturing
As New Jersey’s pallet manufacturing industry continues to navigate these challenging waters, successful companies are those that have embraced flexibility, invested in technology, and diversified their supply chains. The lessons learned from recent disruptions are reshaping how the industry operates, with a greater emphasis on resilience, sustainability, and adaptability.
For businesses seeking pallet solutions in New Jersey, working with experienced providers who understand these market dynamics has become more crucial than ever. The companies that will thrive are those that can offer reliable supply, competitive pricing, and the flexibility to adapt to changing market conditions while maintaining the quality standards that New Jersey’s diverse manufacturing sector demands.
The supply chain disruptions that began during the pandemic have fundamentally altered the pallet manufacturing landscape in New Jersey. While challenges remain, the industry’s response has demonstrated remarkable resilience and innovation, positioning it for sustainable growth in an increasingly complex global marketplace.