1 00:00:11,119 --> 00:00:14,720 Speaker 1: Hello, and welcome to another episode of the Odd Lots Podcast. 2 00:00:14,800 --> 00:00:20,480 Speaker 1: I'm Tracy Alloway and I'm Joe Joe. I am, I'm 3 00:00:20,520 --> 00:00:26,880 Speaker 1: really excited about this episode. Are you always excited about episodes? 4 00:00:27,040 --> 00:00:31,440 Speaker 1: Are we both always really excited? Yes? They are like 5 00:00:31,600 --> 00:00:34,960 Speaker 1: my children, and I love them all, um, But I 6 00:00:35,000 --> 00:00:37,960 Speaker 1: have to say this one we've been trying to set 7 00:00:38,040 --> 00:00:41,800 Speaker 1: up for a while. Uh, and it fits very squarely 8 00:00:42,080 --> 00:00:45,320 Speaker 1: into I made a pun um if it's very squarely 9 00:00:45,520 --> 00:00:50,320 Speaker 1: into our supply chain and logistics episodes from this year. 10 00:00:50,400 --> 00:00:53,880 Speaker 1: We are going to be talking about palettes, so those 11 00:00:54,000 --> 00:00:57,080 Speaker 1: you know, woulden crate like things that you use to 12 00:00:57,240 --> 00:01:02,000 Speaker 1: actually move goods around the world. I'm very excited by 13 00:01:02,080 --> 00:01:04,120 Speaker 1: this one. As you said, Uh, you know, we've been 14 00:01:04,160 --> 00:01:07,920 Speaker 1: talking so much about logistics and supply chains. Obviously everybody 15 00:01:07,959 --> 00:01:11,319 Speaker 1: knows that, but one of the things that sort of 16 00:01:11,840 --> 00:01:15,200 Speaker 1: makes the story fun or interesting is there is an 17 00:01:15,280 --> 00:01:18,039 Speaker 1: infinite amount of depth, and so you know, it's like, Okay, 18 00:01:18,040 --> 00:01:20,800 Speaker 1: you talk about ships, and then you talk about containers, 19 00:01:21,360 --> 00:01:24,119 Speaker 1: and then you talk about warehouses, and then you think 20 00:01:24,160 --> 00:01:27,920 Speaker 1: that like in warehouses there's forklift operators, and forklifts lift 21 00:01:27,959 --> 00:01:30,600 Speaker 1: up wooden things that are on wooden palets, and the 22 00:01:30,600 --> 00:01:33,240 Speaker 1: supply chain for wooden pallets themselves. As we know, it's 23 00:01:33,240 --> 00:01:36,120 Speaker 1: been stressed. There's been a huge surge in the price 24 00:01:36,240 --> 00:01:39,600 Speaker 1: of wooden pallets. Availability is an issue, and as we 25 00:01:39,680 --> 00:01:42,720 Speaker 1: know from many of our episodes, all it takes is 26 00:01:43,160 --> 00:01:45,640 Speaker 1: one little thing to go missing and you can't sell. 27 00:01:45,680 --> 00:01:47,200 Speaker 1: It's like, you know, you like think about a house 28 00:01:47,360 --> 00:01:49,920 Speaker 1: all if you don't have faucets, you can't sell a house. 29 00:01:50,400 --> 00:01:52,200 Speaker 1: You know, if you don't if you have a shortage 30 00:01:52,200 --> 00:01:54,880 Speaker 1: of wooden pellets, that disrupts everything. And that's sort of 31 00:01:55,080 --> 00:01:58,040 Speaker 1: one of the lessons from one thing that you hardly 32 00:01:58,080 --> 00:02:01,400 Speaker 1: ever think about. If there's an issue, it creates problem totally. 33 00:02:01,480 --> 00:02:03,560 Speaker 1: And I don't know about you, but one of the 34 00:02:03,600 --> 00:02:05,760 Speaker 1: great things of doing these episodes is you always sort 35 00:02:05,760 --> 00:02:08,520 Speaker 1: of learn new things. And one thing I learned in 36 00:02:08,560 --> 00:02:11,079 Speaker 1: doing the prep for this episode is that there is 37 00:02:11,120 --> 00:02:15,399 Speaker 1: a sub component of the Producer Price Index for wooden palettes. 38 00:02:15,520 --> 00:02:19,040 Speaker 1: And as you might imagine, given all the anecdotes about 39 00:02:19,160 --> 00:02:22,040 Speaker 1: shortages um and what we saw in the price of 40 00:02:22,120 --> 00:02:25,360 Speaker 1: lumber earlier this year, it's been shooting up. And I 41 00:02:25,400 --> 00:02:29,600 Speaker 1: think our trade correspondent over at Bloomberg Brendan Murray. He 42 00:02:29,680 --> 00:02:33,360 Speaker 1: actually reported that, you know, depending on where you are 43 00:02:33,400 --> 00:02:37,560 Speaker 1: in the world, the usual price tag of a wooden 44 00:02:37,600 --> 00:02:41,000 Speaker 1: palette is something like nine or twelve dollars, and now 45 00:02:41,040 --> 00:02:44,480 Speaker 1: it's it's getting up to fifteen dollars or more. So 46 00:02:45,280 --> 00:02:49,080 Speaker 1: clearly some interesting pricing dynamics going on there, and I 47 00:02:49,120 --> 00:02:52,480 Speaker 1: am very, very pleased to say we we really do 48 00:02:52,639 --> 00:02:56,000 Speaker 1: have the perfect person to discuss this. He has been 49 00:02:56,000 --> 00:03:00,440 Speaker 1: described as the elder statesman of the palette or old 50 00:03:00,720 --> 00:03:03,040 Speaker 1: We're going to be speaking with Marshall White. He's a 51 00:03:03,120 --> 00:03:07,920 Speaker 1: professor emeritus at the Department of Sustainable bio Materials at 52 00:03:08,000 --> 00:03:11,800 Speaker 1: Virginia Tech, which I just learned also has a giant 53 00:03:11,880 --> 00:03:17,799 Speaker 1: statue honoring the pallet industry. So, you know, learning tons 54 00:03:17,840 --> 00:03:20,480 Speaker 1: of new things already. Uh, Marshall, thank you so much 55 00:03:20,520 --> 00:03:25,160 Speaker 1: for coming on my pleasure. So I'm thinking of a 56 00:03:25,240 --> 00:03:28,840 Speaker 1: way to phrase this. But you know, I think a 57 00:03:28,880 --> 00:03:32,360 Speaker 1: lot of people wouldn't necessarily assume there to be a 58 00:03:32,520 --> 00:03:39,720 Speaker 1: specialized palate professor at a university dedicated to technology. So 59 00:03:40,280 --> 00:03:42,160 Speaker 1: why is that, Why, why are you there? What what 60 00:03:42,200 --> 00:03:45,800 Speaker 1: do palates have to do with tech? We have an 61 00:03:45,840 --> 00:03:50,960 Speaker 1: industry and university cooperative that back in nineteen seventy six 62 00:03:51,040 --> 00:03:54,640 Speaker 1: led to the establishment of the Palate and Container Research 63 00:03:54,760 --> 00:04:00,000 Speaker 1: Laboratory at Virginia Tech. And basically the justification when people 64 00:04:00,120 --> 00:04:04,160 Speaker 1: come by this facility and kind of comment you mean 65 00:04:04,200 --> 00:04:07,960 Speaker 1: there is a laboratory dedicated to pallets is that the 66 00:04:08,040 --> 00:04:11,600 Speaker 1: statue indicates the statue reference indicates palates move the world. 67 00:04:12,120 --> 00:04:15,440 Speaker 1: It's the largest consumer of wood, and so it has 68 00:04:15,480 --> 00:04:19,840 Speaker 1: an impact on natural resource and natural resource availability as 69 00:04:19,839 --> 00:04:23,800 Speaker 1: a direct impact on the cost of consumer goods. It is, 70 00:04:24,160 --> 00:04:27,200 Speaker 1: if you will, the critical component in the unit load 71 00:04:27,279 --> 00:04:30,760 Speaker 1: portion of supply chains for product moving around the world. 72 00:04:31,200 --> 00:04:34,440 Speaker 1: It's the interface between all of the handling and shipping 73 00:04:34,480 --> 00:04:39,040 Speaker 1: equipment and the package products. So its performance is critical 74 00:04:39,120 --> 00:04:44,880 Speaker 1: to successive supply chains. So, God, can we go three hours? 75 00:04:44,920 --> 00:04:48,280 Speaker 1: I already have like a billion questions about now. Maybe 76 00:04:48,320 --> 00:04:50,359 Speaker 1: we'll go that long, but I already have tons of 77 00:04:50,480 --> 00:04:54,000 Speaker 1: questions literally based on that first I answer, did you 78 00:04:54,040 --> 00:04:56,960 Speaker 1: say it's the largest consumer of wood. Yes, when you 79 00:04:56,960 --> 00:05:02,320 Speaker 1: look at the total volume of wood, basically the combination 80 00:05:02,400 --> 00:05:06,640 Speaker 1: of corrugated packaging in the wood pallett itself really becomes 81 00:05:06,720 --> 00:05:10,800 Speaker 1: the largest use of wood fiber. Good news is is 82 00:05:10,880 --> 00:05:14,040 Speaker 1: most of its recycled fiber, but it is a huge 83 00:05:14,160 --> 00:05:17,560 Speaker 1: use and it makes an impact on decisions in terms 84 00:05:17,600 --> 00:05:22,040 Speaker 1: of stewardship of our natural resource. You mentioned research and 85 00:05:22,160 --> 00:05:27,360 Speaker 1: development of palettes, and I'm curious what that actually looks like, 86 00:05:27,440 --> 00:05:29,760 Speaker 1: because when I think of palettes, you know, I think 87 00:05:29,760 --> 00:05:32,640 Speaker 1: of some pieces of wood that are stuck together. Um, 88 00:05:32,680 --> 00:05:34,800 Speaker 1: I think I used one of them, like when I 89 00:05:34,880 --> 00:05:37,680 Speaker 1: was ten years old, as the floor of a treehouse 90 00:05:37,720 --> 00:05:39,839 Speaker 1: that I was building. I tend to think of them 91 00:05:39,880 --> 00:05:44,040 Speaker 1: as a very low tech item. But what sort of 92 00:05:44,320 --> 00:05:49,440 Speaker 1: design process or research actually goes into them. It's extensive, obviously, 93 00:05:49,600 --> 00:05:52,520 Speaker 1: that's been the prime mission of this palette and container 94 00:05:52,600 --> 00:05:56,120 Speaker 1: research Laboratory here at Virginia Tech. When you look at 95 00:05:56,120 --> 00:05:59,279 Speaker 1: that palette, you don't recognize, you know, from the ten 96 00:05:59,320 --> 00:06:02,600 Speaker 1: thousand foot view, they all look the same or similar, 97 00:06:03,000 --> 00:06:06,160 Speaker 1: but in fact there are subtle differences in each and 98 00:06:06,279 --> 00:06:11,200 Speaker 1: we custom design palettes to optimize the supply chain for 99 00:06:11,279 --> 00:06:15,279 Speaker 1: which it's intended to be used. For certain products and 100 00:06:15,440 --> 00:06:19,240 Speaker 1: certain packaging systems to move through certain supply chains, we 101 00:06:19,360 --> 00:06:24,520 Speaker 1: custom design them. We specifically select wood species, the moisture 102 00:06:24,560 --> 00:06:28,800 Speaker 1: content of those wood species, the dimension of every part 103 00:06:28,960 --> 00:06:34,040 Speaker 1: that goes into a palette to optimize its performance are 104 00:06:34,160 --> 00:06:38,800 Speaker 1: critical decisions in the design process, and so a lot 105 00:06:38,839 --> 00:06:41,560 Speaker 1: of the research we do at Virginia Tech is just 106 00:06:41,640 --> 00:06:47,600 Speaker 1: studying the relationship between these characteristics of palette design and 107 00:06:47,760 --> 00:06:52,240 Speaker 1: their performance as they move through the supply chain. Now, 108 00:06:52,680 --> 00:06:56,640 Speaker 1: we've done a number of episodes on shipping containers, and 109 00:06:56,680 --> 00:06:59,600 Speaker 1: of course shipping containers, one reason that they're perceived to 110 00:06:59,640 --> 00:07:02,440 Speaker 1: be revel luctionary is there, I guess I would say 111 00:07:02,480 --> 00:07:05,200 Speaker 1: funge ability. And they can you know, stack very nicely 112 00:07:05,400 --> 00:07:08,080 Speaker 1: on a cargo vessel, they can go on a truck, 113 00:07:08,160 --> 00:07:09,920 Speaker 1: they can go on a train, et cetera, and they 114 00:07:09,960 --> 00:07:13,480 Speaker 1: all fit together. Do these do the different types of paletts? 115 00:07:13,520 --> 00:07:16,320 Speaker 1: And I want to get into the variations do they 116 00:07:16,320 --> 00:07:19,840 Speaker 1: all are they all like interchangeable from a supply chain perspective, 117 00:07:19,960 --> 00:07:23,120 Speaker 1: such that any given forklift or any given system to 118 00:07:23,720 --> 00:07:28,480 Speaker 1: move materials can move like other basic specs of all 119 00:07:28,480 --> 00:07:31,960 Speaker 1: the different palettes, such that they don't need their own 120 00:07:32,280 --> 00:07:36,880 Speaker 1: uh handling equipment. You know, really, what you're referring to, Joe, 121 00:07:37,080 --> 00:07:43,640 Speaker 1: is is standardization. Yeah, there is this two broad categories 122 00:07:43,680 --> 00:07:47,680 Speaker 1: of pallets in use throughout the world and one of 123 00:07:47,760 --> 00:07:51,880 Speaker 1: those is a general purpose pallet. That is, the pallet 124 00:07:52,000 --> 00:07:55,880 Speaker 1: that's designed to support a wide variety of product and 125 00:07:55,960 --> 00:08:00,680 Speaker 1: packaging systems through a wide variety of supply eye chains. 126 00:08:01,240 --> 00:08:04,640 Speaker 1: Our rental pools such as the CHIP or Paco or 127 00:08:04,760 --> 00:08:08,600 Speaker 1: i GPS in this country reflect that that's a general 128 00:08:08,640 --> 00:08:13,080 Speaker 1: purpose design that's to be used to support many Sorry, 129 00:08:13,120 --> 00:08:14,560 Speaker 1: can you just back up? What were the names of 130 00:08:14,600 --> 00:08:18,840 Speaker 1: the design, the rental the the pallette rental Chip is 131 00:08:18,960 --> 00:08:24,560 Speaker 1: one example, Paco another, I GPS another. Okay, they rent palletts. 132 00:08:24,600 --> 00:08:28,600 Speaker 1: They maintained title to those palets as they're being used. 133 00:08:29,160 --> 00:08:31,960 Speaker 1: But you know, in terms of total shipments, in total 134 00:08:32,040 --> 00:08:36,000 Speaker 1: number of palettes that's less than fift Then we have 135 00:08:36,240 --> 00:08:42,439 Speaker 1: this huge volume of custom design palettes. Those used basically 136 00:08:42,559 --> 00:08:47,839 Speaker 1: in the industrial goods sector and in that regards software 137 00:08:47,880 --> 00:08:52,760 Speaker 1: are used to optimize. Though, does those designs for that 138 00:08:53,000 --> 00:08:56,800 Speaker 1: broader part of the market, which is the industrial sector 139 00:08:56,840 --> 00:09:01,320 Speaker 1: and non standardized sector. So there are those two broad 140 00:09:01,400 --> 00:09:07,319 Speaker 1: categories of palette designs out there. So you mentioned companies 141 00:09:07,440 --> 00:09:11,280 Speaker 1: which produce and rent out palettes. Could you maybe walk 142 00:09:11,360 --> 00:09:15,320 Speaker 1: us through what the typical I guess life cycle of 143 00:09:15,440 --> 00:09:19,440 Speaker 1: a palette would actually be so. If I'm a company 144 00:09:19,559 --> 00:09:22,920 Speaker 1: of some sort or a business and i order my 145 00:09:23,040 --> 00:09:26,960 Speaker 1: palette from one of these rental businesses, could you walk 146 00:09:27,040 --> 00:09:30,480 Speaker 1: us through what what the process looks like from production 147 00:09:30,640 --> 00:09:36,520 Speaker 1: to palette death. I guess the pallet rental organizations will 148 00:09:36,559 --> 00:09:39,720 Speaker 1: often tell you that the life expectancy of the palette 149 00:09:39,800 --> 00:09:44,360 Speaker 1: is infinite, and that is because they continually repair and 150 00:09:44,480 --> 00:09:50,920 Speaker 1: maintain them in the marketplace. UM life cycle would be UM. 151 00:09:51,120 --> 00:09:57,360 Speaker 1: These palettes are aggregated into warehouses either owned or operated 152 00:09:57,400 --> 00:10:03,280 Speaker 1: by the rental organizations or sub contractors. Their sales organizations 153 00:10:03,280 --> 00:10:07,680 Speaker 1: have a contract with their customers to supply pallets. It's 154 00:10:07,720 --> 00:10:10,840 Speaker 1: a supply chain that's very front end loaded for the 155 00:10:10,920 --> 00:10:15,839 Speaker 1: rental industry, and that is that the manufacturer of the product, 156 00:10:16,600 --> 00:10:21,920 Speaker 1: the soap, are or whatever, pays the bulk of the 157 00:10:22,040 --> 00:10:26,199 Speaker 1: rental fee. They basically pay an issue feel fee, they 158 00:10:26,240 --> 00:10:29,440 Speaker 1: pay a paltization fee, and then after a period of time, 159 00:10:29,520 --> 00:10:32,960 Speaker 1: they pay a certain amount of money per day, if 160 00:10:33,000 --> 00:10:36,480 Speaker 1: you will, for using that When that pallet moves through 161 00:10:36,480 --> 00:10:41,240 Speaker 1: the supply chain, after the product is offloaded, then those 162 00:10:41,280 --> 00:10:45,400 Speaker 1: palets are inspected, some have to be repaired and they 163 00:10:45,440 --> 00:10:48,559 Speaker 1: go to a repair facility and then end up back 164 00:10:48,640 --> 00:10:53,120 Speaker 1: in a warehouse ready to be reissued. Some are, of course, 165 00:10:53,400 --> 00:10:57,920 Speaker 1: all not in bad condition and can be reissued right away. 166 00:10:58,559 --> 00:11:02,000 Speaker 1: Some of the big receiver is now such as Walmart, 167 00:11:02,080 --> 00:11:05,800 Speaker 1: receives these pallets. If they're in good shape after inspection, 168 00:11:06,280 --> 00:11:10,800 Speaker 1: they'll be reused immediately within their system, and so that 169 00:11:10,880 --> 00:11:15,640 Speaker 1: repair continues and continues. Now, in reality, there is a 170 00:11:15,720 --> 00:11:21,400 Speaker 1: final once basically treating it as a capital assets. Sorry 171 00:11:21,400 --> 00:11:25,080 Speaker 1: to get technical here now, please, you should retire the 172 00:11:25,120 --> 00:11:29,200 Speaker 1: pallet when it is amortized, right, and and that's the 173 00:11:29,280 --> 00:11:32,679 Speaker 1: point which its average cost per use is a minimum, 174 00:11:32,679 --> 00:11:37,440 Speaker 1: and that includes depreciation and capital asset includes maintenance costs, 175 00:11:38,000 --> 00:11:40,840 Speaker 1: and then it also includes the original price of the 176 00:11:40,880 --> 00:11:43,520 Speaker 1: pallet when it was put into the system. And so 177 00:11:43,600 --> 00:11:46,080 Speaker 1: at the end of the day, yes, even the rental 178 00:11:46,120 --> 00:11:50,280 Speaker 1: palates become fully amortized such that it is better now 179 00:11:50,320 --> 00:11:55,840 Speaker 1: because of its condition, to replace it, okay, and continue 180 00:11:55,920 --> 00:12:00,400 Speaker 1: to maintain the new structure, rather than continuing to maintain 181 00:12:00,520 --> 00:12:05,280 Speaker 1: the old structure. And these rental organizations understand that very well. 182 00:12:05,880 --> 00:12:08,120 Speaker 1: One short question how many years is it or how 183 00:12:08,200 --> 00:12:11,079 Speaker 1: many how long is that? Typically that full amortizations it 184 00:12:11,160 --> 00:12:14,600 Speaker 1: might be a sixty four thous dollar question. You know, 185 00:12:14,920 --> 00:12:19,160 Speaker 1: it varies tremendously. Number one, number two. You're gonna love this. 186 00:12:19,320 --> 00:12:24,560 Speaker 1: It depends, okay, very helpful. You know, seven years, eight years, 187 00:12:24,600 --> 00:12:27,800 Speaker 1: maybe longer, depending on the number of times it is 188 00:12:27,920 --> 00:12:31,600 Speaker 1: reissued and reused. It could be ten years a longer. 189 00:12:32,120 --> 00:12:35,800 Speaker 1: Can you talk a little bit further about why the 190 00:12:35,880 --> 00:12:40,640 Speaker 1: industry emerged with this market structure of a handful of 191 00:12:41,200 --> 00:12:45,200 Speaker 1: rental players as opposed to say, like, why doesn't Walmart 192 00:12:45,280 --> 00:12:47,920 Speaker 1: just own a bunch of pellets? Uh? It takes money 193 00:12:48,000 --> 00:12:50,360 Speaker 1: to get into that business. You have to capitalize it. 194 00:12:50,360 --> 00:12:53,360 Speaker 1: It is not an easy business to get into because 195 00:12:53,760 --> 00:12:58,720 Speaker 1: initially you have to purchase a lot of general purpose poets, which, 196 00:12:58,760 --> 00:13:02,680 Speaker 1: by the way, are expensive. Okay, these palets are expensive. 197 00:13:03,520 --> 00:13:08,720 Speaker 1: There have been attempts to set up similar programs where 198 00:13:08,840 --> 00:13:12,679 Speaker 1: people or companies buy in with a certain number of 199 00:13:12,720 --> 00:13:18,080 Speaker 1: pallets and they're the title is not maintained and such, 200 00:13:18,120 --> 00:13:22,200 Speaker 1: the responsibility of repair is not maintained, and those have 201 00:13:22,360 --> 00:13:26,080 Speaker 1: not been successful. So we come back to the companies 202 00:13:26,120 --> 00:13:30,359 Speaker 1: that have been able to find the money to capitalize 203 00:13:30,360 --> 00:13:34,000 Speaker 1: this and who have the expertise, and there are very 204 00:13:34,000 --> 00:13:37,160 Speaker 1: few of them. So this leads into the next question 205 00:13:37,240 --> 00:13:40,280 Speaker 1: quite nicely. But what are the cost inputs that actually 206 00:13:40,440 --> 00:13:44,000 Speaker 1: go into making pallets? So I imagine would would be 207 00:13:44,040 --> 00:13:47,160 Speaker 1: one of them. And then it sounds like, given the 208 00:13:47,160 --> 00:13:50,320 Speaker 1: fact that you're repairing these things continuously, it sounds like 209 00:13:50,400 --> 00:13:53,640 Speaker 1: labor would be the other big one. Well, we have 210 00:13:53,720 --> 00:13:58,920 Speaker 1: to separate rental and reuse from pallets that are owned 211 00:13:59,480 --> 00:14:02,920 Speaker 1: and title changes. You know, there is this whole world 212 00:14:02,920 --> 00:14:07,320 Speaker 1: where you buy a palette generally not standard custom design 213 00:14:07,440 --> 00:14:10,040 Speaker 1: for your product, for the supply chain it moved through, 214 00:14:10,520 --> 00:14:14,280 Speaker 1: and that title gets transferred to the customer essentially, and 215 00:14:14,480 --> 00:14:18,000 Speaker 1: that's one world. And then there's the rental world. But 216 00:14:18,559 --> 00:14:23,000 Speaker 1: you have in the manufacture of palettes, over fifty of 217 00:14:23,040 --> 00:14:25,560 Speaker 1: the cost is raw material, and that's the wood that 218 00:14:25,600 --> 00:14:29,680 Speaker 1: goes into it, probably closer to sixty to seventy percent, 219 00:14:29,840 --> 00:14:33,400 Speaker 1: depending on the design. Okay, you have, of course all 220 00:14:33,440 --> 00:14:36,560 Speaker 1: the direct and indirect labor, which could be on the 221 00:14:36,680 --> 00:14:42,080 Speaker 1: order of and and then finally you have things like fasteners, 222 00:14:42,520 --> 00:14:45,360 Speaker 1: which is really only about five percent of the cost. 223 00:14:45,680 --> 00:14:49,440 Speaker 1: But as I'm telling everybody, the quality of the nail 224 00:14:49,520 --> 00:14:52,280 Speaker 1: you used to assemble a wood palette has as much 225 00:14:52,320 --> 00:14:56,120 Speaker 1: impact on performance as does the wood, but it's only 226 00:14:56,160 --> 00:14:58,800 Speaker 1: five percent of the cost. Don't get me started on 227 00:14:58,800 --> 00:15:02,720 Speaker 1: that subject. What kind of wood goes into it? Everything 228 00:15:02,760 --> 00:15:06,840 Speaker 1: that's generally available, but it's low grade. We do not, 229 00:15:07,080 --> 00:15:10,720 Speaker 1: and this is important. There's a lot of misleading information 230 00:15:10,800 --> 00:15:15,160 Speaker 1: out there in the marketplace that we cut down trees 231 00:15:15,200 --> 00:15:18,600 Speaker 1: to make palletts. You couldn't afford to do that. We 232 00:15:18,680 --> 00:15:23,760 Speaker 1: cut down trees for housing purposes. In the whole softwood sector. 233 00:15:24,160 --> 00:15:27,760 Speaker 1: We cut down hardwood for mill work, We cut down 234 00:15:27,800 --> 00:15:33,680 Speaker 1: hardwood for furniture. This is high grade. You you want 235 00:15:33,720 --> 00:15:38,520 Speaker 1: to extract. A sawmill needs to extract a maximum amount 236 00:15:38,560 --> 00:15:42,600 Speaker 1: of value out of that log, Okay, to justify cutting 237 00:15:42,640 --> 00:15:46,160 Speaker 1: it down and sawing it. You cannot do that by 238 00:15:46,240 --> 00:15:50,440 Speaker 1: selling to the pallet sector. So the pallet sector, every tree, 239 00:15:50,640 --> 00:15:55,280 Speaker 1: every log has quality wood on the outside of that log, 240 00:15:55,760 --> 00:15:59,000 Speaker 1: and then the inside the quality is lower. And so 241 00:15:59,240 --> 00:16:04,000 Speaker 1: after the mills sell off the high grade material, then 242 00:16:04,240 --> 00:16:07,640 Speaker 1: the lower grade ends up going into the palette market. 243 00:16:07,720 --> 00:16:11,520 Speaker 1: And that's important. But in terms of species, it's whatever 244 00:16:11,600 --> 00:16:15,720 Speaker 1: is available. In the Pacific Northwest, it's douglas fur, it's hemlock. 245 00:16:16,360 --> 00:16:19,680 Speaker 1: In the East, it tends to be more hardwood in 246 00:16:19,720 --> 00:16:24,680 Speaker 1: the central US you'll find the aspens uh. It's whatever 247 00:16:24,800 --> 00:16:28,640 Speaker 1: tree grows in that region that is used by the 248 00:16:28,640 --> 00:16:33,240 Speaker 1: pallette sector. Marshall, you mentioned the importance of nail quality 249 00:16:33,640 --> 00:16:37,120 Speaker 1: in addition to the quality of the wood, And I'm 250 00:16:37,160 --> 00:16:40,440 Speaker 1: curious again, going back to the sort of life cycle 251 00:16:40,680 --> 00:16:45,280 Speaker 1: or purpose of a pallette, what are the stresses on 252 00:16:45,600 --> 00:16:49,560 Speaker 1: the actual pallette structure that are most likely to occur? 253 00:16:49,760 --> 00:16:54,160 Speaker 1: Is it stuff like damp storage conditions leading to wood 254 00:16:54,280 --> 00:16:59,000 Speaker 1: rot or you know, just planks basically breaking from the 255 00:16:59,120 --> 00:17:01,520 Speaker 1: load of stuff that they're actually carrying. Like what is 256 00:17:01,600 --> 00:17:04,639 Speaker 1: most likely to happen um to these pallets such that 257 00:17:04,680 --> 00:17:07,879 Speaker 1: they might need to be repaired or replaced. As I 258 00:17:07,960 --> 00:17:11,520 Speaker 1: explained to my students every semester, if we could get 259 00:17:11,640 --> 00:17:17,159 Speaker 1: rid of forkliffs, palettes would last forever. It's the impacts 260 00:17:17,200 --> 00:17:24,640 Speaker 1: primarily of the pallette to handling with devices like forklifts 261 00:17:24,680 --> 00:17:27,520 Speaker 1: that do most of the damage not all of it, 262 00:17:27,840 --> 00:17:32,880 Speaker 1: but most of the damage pallets after they're unloaded, generally 263 00:17:32,920 --> 00:17:36,280 Speaker 1: they can be manually handled and carried around and prepped 264 00:17:36,320 --> 00:17:40,280 Speaker 1: for the next use. They're dropped, and that breaks pallette 265 00:17:40,520 --> 00:17:44,719 Speaker 1: as well. It is not necessarily the load level on 266 00:17:44,840 --> 00:17:48,440 Speaker 1: top of the pallett that breaks the palette. It's the 267 00:17:48,560 --> 00:17:52,440 Speaker 1: rough handling it receives as it moves through the supply 268 00:17:52,600 --> 00:17:56,800 Speaker 1: chains that causes most of the damage. Interestingly enough, though, 269 00:17:56,840 --> 00:18:00,280 Speaker 1: to get back to your point, fast nurse have the 270 00:18:00,320 --> 00:18:05,399 Speaker 1: biggest impact on resistance to damage because why because most 271 00:18:05,680 --> 00:18:10,040 Speaker 1: palettes when they're impacted, fail at those connections between the 272 00:18:10,119 --> 00:18:13,359 Speaker 1: parts of a palette. And so if we use more 273 00:18:13,440 --> 00:18:17,879 Speaker 1: and higher quality fasteners, such as the rental companies do 274 00:18:18,240 --> 00:18:22,560 Speaker 1: write to lower their repair costs and lower their damage, 275 00:18:22,960 --> 00:18:27,560 Speaker 1: it reduces the overall costs significantly of using a palette, 276 00:18:27,800 --> 00:18:30,359 Speaker 1: while the cost of the fasteners only five of the 277 00:18:30,400 --> 00:18:33,720 Speaker 1: cost of the pallet. I want to ask you question, Um, 278 00:18:33,760 --> 00:18:35,439 Speaker 1: you know you talk about at the end, you know 279 00:18:35,640 --> 00:18:39,439 Speaker 1: there's the rental company owns owns the pellet. Sort of 280 00:18:39,440 --> 00:18:42,959 Speaker 1: a two part question, but A how does one know 281 00:18:43,040 --> 00:18:45,560 Speaker 1: who owns it? Is there an identifier on every palette 282 00:18:45,600 --> 00:18:48,480 Speaker 1: that makes it very clear who the rightful legal owner 283 00:18:48,520 --> 00:18:51,040 Speaker 1: is or which rental company is behind it? And B 284 00:18:51,560 --> 00:18:54,560 Speaker 1: I'm not maybe it's kind of related to this, but 285 00:18:54,640 --> 00:18:57,480 Speaker 1: can you talk a little bit about um the role 286 00:18:57,840 --> 00:19:01,400 Speaker 1: or how r F I D and chips that sort 287 00:19:01,440 --> 00:19:04,160 Speaker 1: of you know, could could track an item or a palette. 288 00:19:04,240 --> 00:19:07,600 Speaker 1: Have changed the palette industry by making it so that 289 00:19:07,680 --> 00:19:10,280 Speaker 1: you can look up on software, were any or is 290 00:19:10,320 --> 00:19:12,040 Speaker 1: it the case that you could look up anywhere and 291 00:19:12,560 --> 00:19:15,880 Speaker 1: know exactly where a palett is. Well. First of all, 292 00:19:15,920 --> 00:19:20,000 Speaker 1: the identifying characteristics on the rental palettes are very clear, 293 00:19:20,160 --> 00:19:23,880 Speaker 1: their color coded so that you know which rental company 294 00:19:23,880 --> 00:19:28,360 Speaker 1: you're dealing with. And there is printing on that palette 295 00:19:28,440 --> 00:19:32,639 Speaker 1: that declares ownership and title of those paletts. And the 296 00:19:32,720 --> 00:19:36,760 Speaker 1: users of those palettes are well aware of this because 297 00:19:37,760 --> 00:19:40,959 Speaker 1: if in the paperwork they lose a palette, the rental 298 00:19:41,080 --> 00:19:45,639 Speaker 1: organizations can issue a reconciliation which means you lost this 299 00:19:45,760 --> 00:19:49,400 Speaker 1: many palettes, this is what you owe me, so they 300 00:19:49,480 --> 00:19:55,680 Speaker 1: will keep track of them. With regard to tracking the asset, okay, 301 00:19:55,840 --> 00:19:58,840 Speaker 1: you've got two issues in the world of I D 302 00:19:59,280 --> 00:20:03,680 Speaker 1: whether they barcodes or whether they be tags passive or active, 303 00:20:04,440 --> 00:20:07,919 Speaker 1: and that is are you tracking the capital asset of 304 00:20:07,960 --> 00:20:11,399 Speaker 1: the palette itself or are you tracking the product on 305 00:20:11,520 --> 00:20:17,560 Speaker 1: it that's being shipped. Right now, that technology as applies 306 00:20:17,680 --> 00:20:22,640 Speaker 1: to palletts is in its infancy. We have a lot 307 00:20:22,760 --> 00:20:26,840 Speaker 1: more tagging going on the packaging and bar coding going 308 00:20:26,880 --> 00:20:30,639 Speaker 1: on the packaging than we do on the pallets. Okay, 309 00:20:30,880 --> 00:20:35,879 Speaker 1: but it is clear that the growth in that sector 310 00:20:36,400 --> 00:20:42,880 Speaker 1: of tracking these assets using electronic technology based on the palette, 311 00:20:43,080 --> 00:20:45,760 Speaker 1: whether it be the product on it or whether it 312 00:20:45,840 --> 00:20:49,960 Speaker 1: be the asset palet itself, is growing and it is 313 00:20:50,040 --> 00:20:53,679 Speaker 1: inevitable that will come, but that is in its infancy 314 00:20:53,720 --> 00:20:57,880 Speaker 1: at this point. Has anyone proposed blockchain for pallets yet? 315 00:21:00,040 --> 00:21:18,439 Speaker 1: I've heard it said, and that's all I know. So 316 00:21:18,520 --> 00:21:22,000 Speaker 1: why don't we get into um what's been happening over 317 00:21:22,320 --> 00:21:24,320 Speaker 1: the past year. I feel like we have a pretty 318 00:21:24,320 --> 00:21:28,159 Speaker 1: decent lay of the palette land, so to speak. So 319 00:21:28,280 --> 00:21:32,280 Speaker 1: we've been hearing these anecdotal reports of a palette shortage. 320 00:21:32,520 --> 00:21:36,480 Speaker 1: I mentioned our Bloomberg colleague Brendan Murray reported a story, 321 00:21:37,000 --> 00:21:39,400 Speaker 1: a good story on this UM a couple of months ago. 322 00:21:39,960 --> 00:21:43,000 Speaker 1: And we do know that prices have been going up 323 00:21:43,320 --> 00:21:47,200 Speaker 1: per the sub component of the ppe I that I mentioned. 324 00:21:47,720 --> 00:21:50,800 Speaker 1: So what exactly is going on here? And in your opinion, 325 00:21:51,280 --> 00:21:54,399 Speaker 1: is there a palette shortage and have prices been going up? 326 00:21:56,680 --> 00:22:00,119 Speaker 1: There is an imbalance between supply and demand and who 327 00:22:00,119 --> 00:22:04,320 Speaker 1: can trace that back to the winter of twenty one 328 00:22:05,200 --> 00:22:09,800 Speaker 1: and the COVID and the shutdown or turned down of 329 00:22:09,800 --> 00:22:13,719 Speaker 1: our supply chains, all components of our supply chains, and 330 00:22:13,760 --> 00:22:18,480 Speaker 1: then the resurgence in the spring, and and the perfect 331 00:22:18,480 --> 00:22:26,359 Speaker 1: storm of Number one, labor shortages. Maybe the unemployment add 332 00:22:26,400 --> 00:22:30,600 Speaker 1: ons were good ideas, but they certainly made it difficult 333 00:22:30,720 --> 00:22:34,919 Speaker 1: for companies to tool back up with labor. Okay, Number 334 00:22:34,920 --> 00:22:38,639 Speaker 1: two climate factors in here. The fires on the West 335 00:22:38,640 --> 00:22:41,840 Speaker 1: coast shut down mills. Uh we We had a lot 336 00:22:41,920 --> 00:22:45,679 Speaker 1: of timber that was unavailable for harvesting out there, and 337 00:22:45,760 --> 00:22:49,000 Speaker 1: that's a huge amount of timber. And that came on. 338 00:22:49,440 --> 00:22:51,800 Speaker 1: Then all of a sudden in the spring. Guess what 339 00:22:52,160 --> 00:22:55,959 Speaker 1: agriculture comes back in the harvest is coming. It was 340 00:22:56,040 --> 00:23:01,520 Speaker 1: a perfect storm of m would all material a lack 341 00:23:01,560 --> 00:23:05,199 Speaker 1: of availability because the mills tooled down over the winter 342 00:23:05,480 --> 00:23:09,639 Speaker 1: because demand was low. The only pallette sector that really 343 00:23:09,760 --> 00:23:14,560 Speaker 1: did well during that critical period of the pandemic was 344 00:23:14,600 --> 00:23:17,359 Speaker 1: the food sector, and of course that happens to be 345 00:23:17,440 --> 00:23:22,439 Speaker 1: the largest user of pallettes, so those folks continued well. 346 00:23:22,760 --> 00:23:27,240 Speaker 1: But all other sectors, construction sector, et cetera phased way 347 00:23:27,280 --> 00:23:31,000 Speaker 1: down and it came on gang busters in the spring, 348 00:23:31,600 --> 00:23:35,800 Speaker 1: and so we had these huge increases in pallette prices, 349 00:23:36,000 --> 00:23:41,280 Speaker 1: which you mentioned earlier, h indices on pallettes doubling in 350 00:23:41,359 --> 00:23:44,680 Speaker 1: the spring and in the summer. It was even more 351 00:23:44,760 --> 00:23:48,399 Speaker 1: critical on the West coast with softwood wood availability and 352 00:23:48,440 --> 00:23:51,600 Speaker 1: the pallettes on the West Coast being made out of softwood. 353 00:23:51,960 --> 00:23:56,560 Speaker 1: Indices more than quadrupled on the lumber sector, and that 354 00:23:56,680 --> 00:24:01,399 Speaker 1: reflected all the way down. Now in the softwood sector, 355 00:24:01,480 --> 00:24:07,439 Speaker 1: they've come back considerably. Pricing has moderated, but in the 356 00:24:07,520 --> 00:24:12,199 Speaker 1: hardwood sector, the pricing at best is stabilized and still 357 00:24:12,280 --> 00:24:16,240 Speaker 1: remains very, very high. And what we're trying to do 358 00:24:16,560 --> 00:24:20,199 Speaker 1: is get back to a balance. Okay, most of the 359 00:24:20,240 --> 00:24:26,240 Speaker 1: prognosticators are fingers crossed sometime in the mid to late 360 00:24:26,320 --> 00:24:29,080 Speaker 1: two thousand twenty two before we get back to the 361 00:24:29,119 --> 00:24:32,679 Speaker 1: balance there. But it was a perfect storm in the 362 00:24:32,720 --> 00:24:37,560 Speaker 1: spring and summer. You have actually noted that previously in 363 00:24:37,720 --> 00:24:42,800 Speaker 1: the writings. I have seen no labor, no wood for 364 00:24:42,880 --> 00:24:47,080 Speaker 1: the pallette sector demand going through the roof. One of 365 00:24:47,080 --> 00:24:51,760 Speaker 1: the reasons softwood came down over the summer and into 366 00:24:51,800 --> 00:24:55,439 Speaker 1: this fall was because housing starts came back up. But 367 00:24:55,680 --> 00:24:59,000 Speaker 1: now you're gonna see the price of even softwood lumber 368 00:24:59,040 --> 00:25:02,440 Speaker 1: and palettes start to come back up gradually into next 369 00:25:02,520 --> 00:25:06,360 Speaker 1: year and over the winter. So it was that perfect storm. 370 00:25:06,440 --> 00:25:09,560 Speaker 1: My crystal ball is no better than anyone else's, I believe. 371 00:25:09,840 --> 00:25:11,960 Speaker 1: So when you say I just want to walk through 372 00:25:12,000 --> 00:25:14,320 Speaker 1: some of these factors. The labor shortage, that means just 373 00:25:14,440 --> 00:25:19,560 Speaker 1: literally the workers at the factories to build pellets, right, yes, 374 00:25:19,640 --> 00:25:23,080 Speaker 1: and also the lumber industry. And again during the turndown, 375 00:25:23,200 --> 00:25:27,520 Speaker 1: mills shut down and people were laid off, and of 376 00:25:27,560 --> 00:25:31,080 Speaker 1: course the government came in and ordered an unemployment stimulus. 377 00:25:31,119 --> 00:25:34,960 Speaker 1: I think that's great, but people were slow to return 378 00:25:35,040 --> 00:25:38,399 Speaker 1: to the workforce. I think that's well documented. So and 379 00:25:38,440 --> 00:25:40,760 Speaker 1: then you mentioned the fires on the West coast, and 380 00:25:40,760 --> 00:25:44,000 Speaker 1: then you said something about agriculture as big a factor, 381 00:25:44,080 --> 00:25:46,040 Speaker 1: but I missed that. What was what's the element of 382 00:25:46,080 --> 00:25:50,639 Speaker 1: agriculture in this story. Agriculture comes back online seasonally in 383 00:25:50,640 --> 00:25:53,840 Speaker 1: this country. You know, over over the winter, we are 384 00:25:53,920 --> 00:25:58,159 Speaker 1: importing from the South South America predominantly, but all of 385 00:25:58,200 --> 00:26:01,320 Speaker 1: a sudden in the deserts of Arizona in the early spring, 386 00:26:01,480 --> 00:26:05,800 Speaker 1: harvest start in the very early spring, and that migration 387 00:26:05,880 --> 00:26:10,679 Speaker 1: occurs from the deserts into southern California and throughout the 388 00:26:10,720 --> 00:26:15,120 Speaker 1: summer moves north up to the Pacific Northwest gradually as 389 00:26:15,160 --> 00:26:19,280 Speaker 1: harvest come in. That was all coming online when all 390 00:26:19,400 --> 00:26:24,000 Speaker 1: the other demands, non food demands for pallets and the 391 00:26:24,080 --> 00:26:30,600 Speaker 1: construction industry was increasing dramatically. That seasonal aspect of agriculture 392 00:26:31,359 --> 00:26:36,359 Speaker 1: further pressured pricing. You you've noted some of the stories 393 00:26:36,400 --> 00:26:41,600 Speaker 1: of the produce industry scrambling to find pallets, check its 394 00:26:41,640 --> 00:26:46,879 Speaker 1: inability to supply pallets to its customers scrambling. It was 395 00:26:46,960 --> 00:26:52,280 Speaker 1: a massive scramble, imbalance between supply and demand that was 396 00:26:52,400 --> 00:26:58,040 Speaker 1: just a little bit crazy. So this is also something 397 00:26:58,080 --> 00:27:00,640 Speaker 1: I wanted to ask you. But you know, when there 398 00:27:00,880 --> 00:27:04,600 Speaker 1: is a shortage of pallets or a scramble for them 399 00:27:04,600 --> 00:27:07,080 Speaker 1: as you just described it, and prices are going up, 400 00:27:07,480 --> 00:27:11,400 Speaker 1: what can companies actually do to cope? And what did 401 00:27:11,400 --> 00:27:16,080 Speaker 1: we see users of pallets actually do over the past year. Yeah, 402 00:27:16,119 --> 00:27:19,240 Speaker 1: First of all, they switch wood supplies, they find they 403 00:27:19,280 --> 00:27:22,600 Speaker 1: import would or lumber that's available to make up for 404 00:27:22,640 --> 00:27:28,000 Speaker 1: the deficits domestically, So it's it's basically the pallet industry 405 00:27:28,040 --> 00:27:34,120 Speaker 1: trying to find raw material, dealing with labor automating as 406 00:27:34,200 --> 00:27:38,760 Speaker 1: best it can to replace labor. But it's that scramble 407 00:27:38,880 --> 00:27:42,160 Speaker 1: for wood now as far as their customers are concerned, 408 00:27:43,320 --> 00:27:48,040 Speaker 1: they also scramble for pallets supplies that they start moving 409 00:27:48,080 --> 00:27:52,280 Speaker 1: between vendor suppliers. You know, they have incumbent vendor suppliers 410 00:27:52,280 --> 00:27:56,520 Speaker 1: and pallets. They have to change around and find it. 411 00:27:57,280 --> 00:28:01,200 Speaker 1: But there's no magic there there. They're no magic. Are 412 00:28:01,240 --> 00:28:05,480 Speaker 1: you saying, oh, they're going to start using a palateless 413 00:28:05,560 --> 00:28:09,399 Speaker 1: system and their supply chain. No supply chains are designed 414 00:28:09,520 --> 00:28:12,200 Speaker 1: around palletts. You can't all of a sudden switch to 415 00:28:12,280 --> 00:28:15,199 Speaker 1: slip sheets which might be available, which is a so 416 00:28:15,320 --> 00:28:19,720 Speaker 1: called palateless system. You can't do that. You certainly can't 417 00:28:19,720 --> 00:28:23,480 Speaker 1: do that overnight. Could you switch to clamploaders because there 418 00:28:23,480 --> 00:28:27,199 Speaker 1: are no pallets available, very little opportunity to do that 419 00:28:27,240 --> 00:28:31,359 Speaker 1: because your packaging is not designed for clamploaders. So it 420 00:28:31,560 --> 00:28:37,200 Speaker 1: was a fantastic scramble for palletts, going into bone yards, 421 00:28:37,720 --> 00:28:43,160 Speaker 1: salvaging broken palette and repairing paletts that we would not 422 00:28:43,280 --> 00:28:47,680 Speaker 1: have repaired before because it was uneconomical, But now it 423 00:28:47,800 --> 00:28:52,000 Speaker 1: became economical, and so that helped fill some of the 424 00:28:52,600 --> 00:28:55,200 Speaker 1: some of the gap there where we saw this, These 425 00:28:55,400 --> 00:28:59,400 Speaker 1: piles of palettes which historically would never be repaired, we're 426 00:28:59,400 --> 00:29:01,800 Speaker 1: starting to be repaired and put back into the market. 427 00:29:02,000 --> 00:29:04,320 Speaker 1: That's what was going on. You know, when we talk 428 00:29:04,400 --> 00:29:09,160 Speaker 1: about supply chain issues overall, I mean that, and people 429 00:29:09,200 --> 00:29:12,360 Speaker 1: talk about supply chain logistics problems stress. You know, it 430 00:29:12,720 --> 00:29:15,600 Speaker 1: encompasses a few different things. There's maybe high demand for 431 00:29:15,680 --> 00:29:18,320 Speaker 1: goods as you've said, that put stress on the system. 432 00:29:18,360 --> 00:29:21,880 Speaker 1: There's obviously just sort of issues with production as you described, 433 00:29:21,960 --> 00:29:25,640 Speaker 1: with the shortage of labor and the fires and so forth. 434 00:29:26,080 --> 00:29:28,760 Speaker 1: One of the other elements, though, that comes up in 435 00:29:28,800 --> 00:29:34,320 Speaker 1: some other episodes, is the goods the logistics material being 436 00:29:34,320 --> 00:29:36,240 Speaker 1: in the wrong place at the wrong time, and so 437 00:29:36,400 --> 00:29:38,640 Speaker 1: there are stories of you know, the ship's going back 438 00:29:38,640 --> 00:29:40,840 Speaker 1: to China without containers because they didn't want to wait 439 00:29:40,880 --> 00:29:43,520 Speaker 1: around because there weren't many exports, or there might be 440 00:29:43,560 --> 00:29:46,360 Speaker 1: a bunch of truck chassiss that wind up at one 441 00:29:46,400 --> 00:29:49,160 Speaker 1: port outside Chicago, but that's not where they're needed right now. 442 00:29:49,680 --> 00:29:53,480 Speaker 1: Has the palette industry seen some anything similar such that 443 00:29:53,600 --> 00:29:58,080 Speaker 1: because of changing consumption patterns, that there are palettes that 444 00:29:58,120 --> 00:30:01,520 Speaker 1: are idle at the same time, there is extreme demand 445 00:30:01,560 --> 00:30:04,360 Speaker 1: for them somewhere else in the country. I haven't seen that. 446 00:30:04,680 --> 00:30:10,320 Speaker 1: It's interesting. It's an interesting point again for the industrial sector. 447 00:30:10,880 --> 00:30:16,640 Speaker 1: Pallets are generally not where housed and reused. They're they're 448 00:30:16,680 --> 00:30:22,040 Speaker 1: often just one way. Why because those palettes are a 449 00:30:22,160 --> 00:30:26,720 Speaker 1: unique design which cannot be used in any other supply chain. 450 00:30:28,240 --> 00:30:33,200 Speaker 1: The rental folks, sure they had inventory of palettes, but 451 00:30:33,320 --> 00:30:37,400 Speaker 1: those are located strategically around the country. So to the 452 00:30:37,440 --> 00:30:42,520 Speaker 1: extent they had palettes, they were available. I don't note 453 00:30:42,960 --> 00:30:48,400 Speaker 1: that there were any regional issues. Now, one fact you 454 00:30:48,480 --> 00:30:52,560 Speaker 1: need to be aware of. We do not palletize much 455 00:30:52,640 --> 00:30:56,560 Speaker 1: product and freight containers. Freight containers are what we call 456 00:30:56,760 --> 00:31:01,560 Speaker 1: floor loaded predominantly. Why because that pallette takes up space 457 00:31:01,640 --> 00:31:04,560 Speaker 1: and that space is very expensive. In fact, right now 458 00:31:05,080 --> 00:31:11,000 Speaker 1: it's extremely expensive. And so when that container reaches its destination, 459 00:31:11,480 --> 00:31:15,840 Speaker 1: it's at that point it is palletized. And that could 460 00:31:15,840 --> 00:31:19,280 Speaker 1: be east coast, west coast, anywhere in the country, and 461 00:31:19,440 --> 00:31:22,880 Speaker 1: generally there are going to be pallets in those regions 462 00:31:23,360 --> 00:31:27,360 Speaker 1: in order to palletize the floor loaded material upon arrival. 463 00:31:27,760 --> 00:31:30,840 Speaker 1: I didn't realize that previously. In my mind, I was envisioning, 464 00:31:30,920 --> 00:31:34,640 Speaker 1: like say, like a bunch of iPhones or teddy bears 465 00:31:34,760 --> 00:31:37,440 Speaker 1: or whatever is in a container sitting on pallets and 466 00:31:37,480 --> 00:31:39,920 Speaker 1: then being removed from the containers. And I hadn't thought 467 00:31:39,920 --> 00:31:42,600 Speaker 1: about the being floor loaded, So this might be a 468 00:31:42,600 --> 00:31:44,920 Speaker 1: good tup. Can you just actually walk once again, like 469 00:31:44,960 --> 00:31:47,760 Speaker 1: through like the very basics of like where in the 470 00:31:47,840 --> 00:31:51,600 Speaker 1: supply chains the pallets sit and move and so the 471 00:31:51,640 --> 00:31:54,560 Speaker 1: ship comes to the port, and then what happens when 472 00:31:54,640 --> 00:31:56,920 Speaker 1: does the palette enter the picture and where does it 473 00:31:57,000 --> 00:32:00,320 Speaker 1: go and where does it wind up? Well, that's not 474 00:32:00,440 --> 00:32:02,920 Speaker 1: the right place to start. What you do is you 475 00:32:03,000 --> 00:32:07,520 Speaker 1: start at the manufacturing site for the phone. And I 476 00:32:07,560 --> 00:32:10,760 Speaker 1: won't mention names, but let's say a phone, and quite frankly, 477 00:32:11,080 --> 00:32:13,880 Speaker 1: let's face it, it's China. And so we have at 478 00:32:13,920 --> 00:32:17,840 Speaker 1: the manufacturing site. The product is packaged there, it is 479 00:32:17,880 --> 00:32:21,360 Speaker 1: put on pallets and it will be moved to the 480 00:32:21,480 --> 00:32:26,280 Speaker 1: port on pallets preparation for export. But it's at that 481 00:32:26,360 --> 00:32:29,920 Speaker 1: point that the product is floor loaded into the container 482 00:32:30,440 --> 00:32:34,600 Speaker 1: for shipment to whatever the destination country is. And then 483 00:32:34,720 --> 00:32:39,440 Speaker 1: once that container arrives at a port, of course it's 484 00:32:39,480 --> 00:32:42,120 Speaker 1: not going to be unpacked at a port. It then 485 00:32:42,200 --> 00:32:44,760 Speaker 1: has to leave the port on trucks, and we all 486 00:32:44,800 --> 00:32:49,280 Speaker 1: know the availability issue on trucks has had a huge 487 00:32:49,320 --> 00:32:53,560 Speaker 1: impact on our supply chains. Here, that chassis with the 488 00:32:53,640 --> 00:32:58,720 Speaker 1: free container on it goes to a destination. Generally it's 489 00:32:58,760 --> 00:33:02,920 Speaker 1: going to go to a distribution center or a regional 490 00:33:03,000 --> 00:33:07,960 Speaker 1: distribution center of the retailer or the distributor. It's at 491 00:33:08,040 --> 00:33:11,160 Speaker 1: that point that it's at a loading dock. It is 492 00:33:11,240 --> 00:33:16,800 Speaker 1: unloaded and palletized again, and then it is moved into 493 00:33:16,880 --> 00:33:20,160 Speaker 1: storage in that d C or if it's a cross dock, 494 00:33:20,720 --> 00:33:23,400 Speaker 1: on that pallet, it just moves from one side of 495 00:33:23,400 --> 00:33:26,800 Speaker 1: the cross dock to the other and ships to the 496 00:33:26,800 --> 00:33:30,400 Speaker 1: brick and mortar store if you will, or in the 497 00:33:30,440 --> 00:33:34,560 Speaker 1: case of Amazon, to a fulfillment center. And of course 498 00:33:34,640 --> 00:33:38,480 Speaker 1: the last mile typically is store door, and that is 499 00:33:38,520 --> 00:33:42,959 Speaker 1: not palleticized. It's a very typical supply chain. I just 500 00:33:43,080 --> 00:33:48,240 Speaker 1: described real quickly the palleticization process of moving an item 501 00:33:48,280 --> 00:33:51,680 Speaker 1: onto the palet. How manual is that? Is that something 502 00:33:51,720 --> 00:33:54,600 Speaker 1: that like takes a certain number of workers like get 503 00:33:54,600 --> 00:33:57,480 Speaker 1: it right on the pallet or is that fairly is 504 00:33:57,520 --> 00:34:01,000 Speaker 1: that somewhat automated or is there a range of that process? Well, 505 00:34:01,040 --> 00:34:06,560 Speaker 1: obviously it it depends on number one, the country we're 506 00:34:06,560 --> 00:34:12,440 Speaker 1: talking about and the availability of labor. Okay, Historically in 507 00:34:12,719 --> 00:34:15,759 Speaker 1: China they've had huge availability of labor, so there was 508 00:34:15,800 --> 00:34:19,680 Speaker 1: a lot of manual palletization in their supply chains where 509 00:34:19,760 --> 00:34:24,040 Speaker 1: somewhat manual. That's changing very, very rapidly. Even in Asia. 510 00:34:24,800 --> 00:34:28,120 Speaker 1: Korea has always been that way, where now instead of 511 00:34:28,200 --> 00:34:32,680 Speaker 1: manual because of the cost of labor, they are automating palletization. 512 00:34:32,880 --> 00:34:37,120 Speaker 1: And in this country it's becoming pervasive and in generally 513 00:34:37,200 --> 00:34:42,000 Speaker 1: we have what's called row strip palletizing, where we push 514 00:34:42,280 --> 00:34:46,279 Speaker 1: layers of package product onto a palette and then we 515 00:34:46,719 --> 00:34:49,600 Speaker 1: change the elevation of the palette, push another a layer on, 516 00:34:49,680 --> 00:34:53,280 Speaker 1: and another layer on, etcetera, etcetera, until we fully palletized. 517 00:34:54,040 --> 00:34:57,120 Speaker 1: Those are highly automatic. We even use robotics. Where you 518 00:34:57,160 --> 00:35:01,280 Speaker 1: want to miss excuse on a palette, you'll use robotic 519 00:35:01,400 --> 00:35:05,040 Speaker 1: picker stations and these are literally robots that we see 520 00:35:05,760 --> 00:35:09,920 Speaker 1: on television all the time. That is in this country 521 00:35:09,920 --> 00:35:16,560 Speaker 1: and most countries rapidly replacing manual palletization. So this relates 522 00:35:16,600 --> 00:35:18,719 Speaker 1: to something else that I wanted to ask you, which 523 00:35:18,760 --> 00:35:23,080 Speaker 1: is what are the economic decisions or factors that go 524 00:35:23,360 --> 00:35:28,640 Speaker 1: into a customer deciding whether or not to actually use palettes, 525 00:35:28,800 --> 00:35:31,640 Speaker 1: and I'm guessing for a lot of them palletts would 526 00:35:31,680 --> 00:35:34,080 Speaker 1: be the de facto way to move things. But you 527 00:35:34,120 --> 00:35:38,440 Speaker 1: did mention that there are paltless systems in the world, 528 00:35:38,520 --> 00:35:41,120 Speaker 1: and I imagine you could probably also go the other way, 529 00:35:41,239 --> 00:35:43,759 Speaker 1: where instead of putting things on palletts, you're putting them 530 00:35:43,800 --> 00:35:48,080 Speaker 1: in full on wooden crates or something like that. So 531 00:35:48,480 --> 00:35:53,560 Speaker 1: how do companies that make and ship goods actually make 532 00:35:53,680 --> 00:35:57,840 Speaker 1: the decision to use pallets or not? Yeah, set aside crates. 533 00:35:57,920 --> 00:36:02,919 Speaker 1: That's going to be unique structure for fairly unique if 534 00:36:03,000 --> 00:36:08,000 Speaker 1: you will package product or product heavy equipment for example, etcetera. 535 00:36:08,239 --> 00:36:13,520 Speaker 1: If we set that aside, the decision is along these lines, 536 00:36:14,320 --> 00:36:18,560 Speaker 1: what is the cost of storing in moving my product 537 00:36:19,120 --> 00:36:25,680 Speaker 1: palletized or not palletized? For example, on slipsheets, the cost 538 00:36:25,840 --> 00:36:30,080 Speaker 1: is the rate at which I can move product from Actually, 539 00:36:30,280 --> 00:36:33,799 Speaker 1: if the customer wants it on a pallette to use 540 00:36:33,840 --> 00:36:37,000 Speaker 1: the slipsheet, to move it to a palette and remove 541 00:36:37,080 --> 00:36:40,759 Speaker 1: the slipsheet or leave it on there. Okay, that's a 542 00:36:40,840 --> 00:36:45,320 Speaker 1: slow process. Number Two, With slipsheets, it's the weight limiting 543 00:36:45,440 --> 00:36:48,759 Speaker 1: you can't put very very heavy loads on a slipsheet 544 00:36:48,800 --> 00:36:53,279 Speaker 1: which is corrugated sheet or sometimes a plastic sheet. So 545 00:36:53,360 --> 00:36:57,279 Speaker 1: you have the slow cost of movement and you have 546 00:36:57,440 --> 00:37:02,080 Speaker 1: limitations on what you can put on slipsheet. Clamploaders another 547 00:37:02,200 --> 00:37:05,920 Speaker 1: non palletized. You have to invest more in your packaging 548 00:37:06,000 --> 00:37:10,480 Speaker 1: system to withstand the compression of clamp loaders, and you 549 00:37:10,600 --> 00:37:15,120 Speaker 1: don't want to use or move fairly fragile products. Although 550 00:37:15,440 --> 00:37:19,880 Speaker 1: a lot of widescreen TVs are moved around with clamploader systems. 551 00:37:20,800 --> 00:37:25,360 Speaker 1: Also you have to retrofit your forklips with slipsheet devices 552 00:37:26,160 --> 00:37:30,759 Speaker 1: or clamp loading devices. And again clamploading is slow. We 553 00:37:30,840 --> 00:37:34,560 Speaker 1: can move product a lot faster on pout. How are 554 00:37:34,600 --> 00:37:38,720 Speaker 1: you storing your product? If you're going to use drive 555 00:37:38,840 --> 00:37:42,680 Speaker 1: in racks or rack storage, you can't use a slipsheet 556 00:37:43,000 --> 00:37:46,720 Speaker 1: and it has to be palletized to withstand the bending 557 00:37:46,840 --> 00:37:50,799 Speaker 1: stresses within a rack of the load on top of it. 558 00:37:51,600 --> 00:37:54,960 Speaker 1: So those are the factors that go into the decisions. 559 00:37:55,000 --> 00:37:59,480 Speaker 1: And so what we find is that by far the 560 00:37:59,560 --> 00:38:06,040 Speaker 1: product being shipped and moved unitized are on pallets very 561 00:38:06,120 --> 00:38:10,840 Speaker 1: small percent, one two percent maybe in the world of 562 00:38:10,960 --> 00:38:17,080 Speaker 1: clamp loading and in the world of slipsheeting, appliances are 563 00:38:17,120 --> 00:38:21,920 Speaker 1: moved with the baseload system that is a non palletized system. 564 00:38:21,960 --> 00:38:24,960 Speaker 1: So there are a few out there, but they're very small. 565 00:38:24,960 --> 00:38:29,719 Speaker 1: Why the cost and the limitations of the capability of 566 00:38:29,800 --> 00:38:33,399 Speaker 1: non palateless systems. Can you say what was the name? 567 00:38:33,719 --> 00:38:36,360 Speaker 1: How we're h how did you say? Appliants are moved 568 00:38:36,560 --> 00:38:41,600 Speaker 1: baseload b A S A L O a D. Basiload 569 00:38:41,760 --> 00:38:46,560 Speaker 1: is a unique, patented process where you lift a corrugated 570 00:38:46,760 --> 00:38:50,560 Speaker 1: crate from the top with a special device on the forklift. 571 00:38:51,560 --> 00:38:55,480 Speaker 1: A lot of appliance companies use that. It's palateless let. 572 00:38:55,560 --> 00:39:13,239 Speaker 1: Some of them use pallets as well. I'm going to 573 00:39:13,360 --> 00:39:15,399 Speaker 1: use their I already know I'm gonna spend the rest 574 00:39:15,480 --> 00:39:19,319 Speaker 1: of the day just look at YouTube videos of these 575 00:39:19,360 --> 00:39:21,920 Speaker 1: different kinds, because these are all new ideas to me, 576 00:39:21,960 --> 00:39:24,319 Speaker 1: and I have to visualize them, and I already see 577 00:39:24,360 --> 00:39:27,040 Speaker 1: on YouTube there's a bunch of they show that they 578 00:39:27,040 --> 00:39:29,360 Speaker 1: show the different versions. Let me just get another question. 579 00:39:29,680 --> 00:39:33,080 Speaker 1: I looked at one of these palet rental places and 580 00:39:33,280 --> 00:39:36,440 Speaker 1: they also offer plastic palets and one of the i 581 00:39:36,560 --> 00:39:38,920 Speaker 1: gps which you mentioned. They have a big thing on 582 00:39:38,960 --> 00:39:42,040 Speaker 1: their website. Plastic palets are strong and durable. What is 583 00:39:42,080 --> 00:39:44,839 Speaker 1: the limitation on there, how big of the market is there, 584 00:39:44,840 --> 00:39:47,480 Speaker 1: and what is the opportunity for going something other than 585 00:39:47,520 --> 00:39:53,120 Speaker 1: would the opportunity is there to justify and and my 586 00:39:53,239 --> 00:39:55,799 Speaker 1: friends at i GPS will be first to tell you 587 00:39:56,719 --> 00:39:59,480 Speaker 1: they can't afford that's a more expensive palt They can 588 00:39:59,600 --> 00:40:03,359 Speaker 1: afford to have it idle and sit in warehouses. So 589 00:40:03,440 --> 00:40:06,600 Speaker 1: if you look at where the the I GPS or 590 00:40:06,640 --> 00:40:09,920 Speaker 1: plastic pallette fits, it's where you have a lot of turns. 591 00:40:10,520 --> 00:40:15,160 Speaker 1: You're gonna use that palette more often. That then can 592 00:40:15,280 --> 00:40:18,759 Speaker 1: justify the added expense of a plastic palette. It is 593 00:40:18,840 --> 00:40:24,720 Speaker 1: more durable, some are repairable, some are not, okay, and 594 00:40:24,920 --> 00:40:27,719 Speaker 1: your repair costs go way down if you if you 595 00:40:27,800 --> 00:40:32,640 Speaker 1: look at it rental companies on wood palletts UH and 596 00:40:32,880 --> 00:40:35,160 Speaker 1: by the way, I GPS, what's their highest cost. It's 597 00:40:35,160 --> 00:40:39,400 Speaker 1: moving empty pallets around, Okay. The second highest cost on 598 00:40:39,440 --> 00:40:42,800 Speaker 1: the woodside is going to be repaired repair and maintenance costs. 599 00:40:42,840 --> 00:40:46,000 Speaker 1: And in the world of I GPS, there's much less 600 00:40:46,040 --> 00:40:49,800 Speaker 1: of that because the palettes are more resistance to shocks 601 00:40:49,800 --> 00:40:53,640 Speaker 1: and impacts in the field. But it's a significantly more 602 00:40:53,680 --> 00:40:57,360 Speaker 1: expensive pallet. And please understand, you know the price of 603 00:40:57,400 --> 00:41:00,279 Speaker 1: wood went up, well, the price of plastic is high 604 00:41:00,280 --> 00:41:03,280 Speaker 1: as well, so they're dealing with the same raw material 605 00:41:03,400 --> 00:41:06,880 Speaker 1: issues that the wood paladar and that's the majority of 606 00:41:06,880 --> 00:41:10,800 Speaker 1: the cost in these palets. But plastic pallets are growing 607 00:41:11,400 --> 00:41:14,239 Speaker 1: in terms of their use in this country, still a 608 00:41:14,280 --> 00:41:18,680 Speaker 1: small percentage. Quite frankly, there's not enough plastic reson. If 609 00:41:18,719 --> 00:41:22,160 Speaker 1: we wanted to make any wholesale switch, there's just not 610 00:41:22,280 --> 00:41:26,040 Speaker 1: enough reson around to do it. So that's another limitation 611 00:41:26,239 --> 00:41:29,440 Speaker 1: as well. Let me give a plug to uh to 612 00:41:29,680 --> 00:41:32,439 Speaker 1: our blog here because anyone who was reading it, any 613 00:41:32,480 --> 00:41:36,520 Speaker 1: A subscribers would know about the plastic shortage and what's 614 00:41:36,520 --> 00:41:38,799 Speaker 1: been going on in resin prices a couple of months 615 00:41:38,840 --> 00:41:42,560 Speaker 1: ago because I wrote about it. But this also brings 616 00:41:42,600 --> 00:41:46,160 Speaker 1: me to another question, you know, in terms of weighing 617 00:41:46,600 --> 00:41:52,440 Speaker 1: plastic versus would there is this interesting Australian company called 618 00:41:52,640 --> 00:41:56,600 Speaker 1: Brambles that I think is supposed to be partnering with 619 00:41:56,840 --> 00:42:01,160 Speaker 1: Costco to make plastic pallets. And you can imagine that 620 00:42:01,280 --> 00:42:05,719 Speaker 1: Costco would be a very very big customer of pallets 621 00:42:06,000 --> 00:42:09,440 Speaker 1: given their business model. But my understanding is that Brambles 622 00:42:09,560 --> 00:42:12,239 Speaker 1: has yet to make a decision on whether or not 623 00:42:12,320 --> 00:42:16,320 Speaker 1: it's going to do a full conversion from wood to plastic. 624 00:42:16,520 --> 00:42:21,319 Speaker 1: And I'm curious, like why that the hesitancy. I know 625 00:42:21,360 --> 00:42:25,520 Speaker 1: you mentioned the cost, but it kind of feels like 626 00:42:25,760 --> 00:42:30,000 Speaker 1: for a big customer like Costco, it might make sense, 627 00:42:30,080 --> 00:42:33,880 Speaker 1: and yet there seems to be some reluctance to do it. Well, 628 00:42:34,160 --> 00:42:38,560 Speaker 1: they have to prove that in that supply chain the 629 00:42:38,640 --> 00:42:42,920 Speaker 1: pallets will not be lost, and and that's a critical issue. 630 00:42:43,080 --> 00:42:46,960 Speaker 1: This is a very expensive palette and losses which do occur, 631 00:42:47,560 --> 00:42:51,239 Speaker 1: it's just a question of what percent losses occur. Look, 632 00:42:51,440 --> 00:42:56,680 Speaker 1: Costco sees for their supply chain a significant advantage of 633 00:42:56,719 --> 00:43:01,640 Speaker 1: a plastic pallet, and chap is Check, which is a 634 00:43:01,680 --> 00:43:05,000 Speaker 1: division of Brambles. Obviously, you know it's going to respond 635 00:43:05,120 --> 00:43:08,560 Speaker 1: to that because Costco uses a lot of their wood 636 00:43:08,600 --> 00:43:12,160 Speaker 1: rental palets. Okay, they are a big customer. When you 637 00:43:12,400 --> 00:43:15,439 Speaker 1: get into pulling a plastic palette, you have to track those. 638 00:43:15,480 --> 00:43:18,560 Speaker 1: You can't lose them because of the cost of replacing 639 00:43:18,600 --> 00:43:22,520 Speaker 1: that asset. So Costco, which is a significant chunk of 640 00:43:23,080 --> 00:43:28,160 Speaker 1: Chef's business, obviously wants to respond to their customers desire. 641 00:43:28,480 --> 00:43:31,200 Speaker 1: What is it about Costco's business model, per Sam and 642 00:43:31,280 --> 00:43:34,359 Speaker 1: you mentioned that plastic paletts they kind of are only 643 00:43:34,400 --> 00:43:38,400 Speaker 1: economical when there are a lot of turns. Um, what 644 00:43:38,560 --> 00:43:41,239 Speaker 1: is it about Costco, particularly where they might view this 645 00:43:41,320 --> 00:43:46,720 Speaker 1: as their future. I'm gonna say it simply, the the store, 646 00:43:46,920 --> 00:43:50,239 Speaker 1: the Costco entity you go to as a warehouse, that 647 00:43:50,440 --> 00:43:54,840 Speaker 1: supply chain is collapsed, if you will. There are dcs, 648 00:43:55,239 --> 00:43:58,880 Speaker 1: but most of it's direct unitize directly to the store 649 00:43:59,120 --> 00:44:02,359 Speaker 1: from which you buy from the palate and so they 650 00:44:02,480 --> 00:44:06,320 Speaker 1: can turn more quickly. Number one. Number two, it's a 651 00:44:06,360 --> 00:44:09,319 Speaker 1: little more of a closed loop because you have one 652 00:44:09,400 --> 00:44:11,680 Speaker 1: less stop if you will, along the way in their 653 00:44:11,719 --> 00:44:16,719 Speaker 1: supply chain. So it could work. Chep's idea is that 654 00:44:17,520 --> 00:44:21,360 Speaker 1: as the supply of a plastic palette, if it does work, 655 00:44:21,400 --> 00:44:25,640 Speaker 1: the test is successful, exceeds, maybe cost goes demand. They 656 00:44:25,640 --> 00:44:29,959 Speaker 1: could start to filter that outside of Costco. Gets risky though, 657 00:44:30,320 --> 00:44:33,760 Speaker 1: it gets very risky because then the potential for losses increase. 658 00:44:34,440 --> 00:44:37,160 Speaker 1: But the test is ongoing and we'll see the result, 659 00:44:37,320 --> 00:44:40,920 Speaker 1: hopefully in in a few months. So I guess I 660 00:44:40,960 --> 00:44:43,760 Speaker 1: just have one last question. I mean, what's what's exciting 661 00:44:43,800 --> 00:44:45,120 Speaker 1: to you what's the future. I mean you were to 662 00:44:45,160 --> 00:44:48,359 Speaker 1: talking a little bit about plastic palette, but in terms 663 00:44:48,400 --> 00:44:50,640 Speaker 1: of areas of research and one of the things that 664 00:44:50,680 --> 00:44:52,440 Speaker 1: price the prices both of us is that you know 665 00:44:52,480 --> 00:44:54,840 Speaker 1: the idea of like the whole Institute for the Study 666 00:44:54,920 --> 00:44:58,239 Speaker 1: of palettes. The institute goes on what is like the 667 00:44:58,280 --> 00:45:00,760 Speaker 1: hot new thing or the thing that in this space 668 00:45:00,760 --> 00:45:04,640 Speaker 1: are excited about for the next generation the future of palets. 669 00:45:05,480 --> 00:45:11,719 Speaker 1: Don't just focus on the palette that's the future. We 670 00:45:12,440 --> 00:45:17,920 Speaker 1: what we need to do is design the packaging and 671 00:45:18,120 --> 00:45:24,480 Speaker 1: the palette and the equipment used to move unit loads 672 00:45:24,520 --> 00:45:30,400 Speaker 1: together as a system of interacting components. I call that 673 00:45:30,560 --> 00:45:34,920 Speaker 1: systems based design of the global supply chain. It's more 674 00:45:35,000 --> 00:45:39,160 Speaker 1: important to understand how does the palette mechanically interact with 675 00:45:39,239 --> 00:45:44,440 Speaker 1: the package product and mechanically interact with all of the 676 00:45:44,560 --> 00:45:49,200 Speaker 1: unit load handling equipment, including trucks and trailer floors. It's 677 00:45:49,320 --> 00:45:55,719 Speaker 1: understanding those mechanical interactions and using that understanding to go 678 00:45:55,920 --> 00:45:59,600 Speaker 1: from component based design, where where we're just focused on 679 00:45:59,640 --> 00:46:02,839 Speaker 1: reduced seeing the cost of a conveyor in a d 680 00:46:02,960 --> 00:46:06,120 Speaker 1: C without thinking about how it interacts with the palette, 681 00:46:06,400 --> 00:46:09,239 Speaker 1: and we're all focused about reducing the cost of that 682 00:46:09,360 --> 00:46:13,600 Speaker 1: plastic bottle without thinking about how does the palette design 683 00:46:13,800 --> 00:46:19,319 Speaker 1: affect that design. We have three design communities that are 684 00:46:19,400 --> 00:46:24,960 Speaker 1: not interacting enough and and therefore we need to move 685 00:46:25,080 --> 00:46:28,520 Speaker 1: from component based design to systems based design of our 686 00:46:28,560 --> 00:46:31,920 Speaker 1: global supply chains. Yeah, this kind of feels like a 687 00:46:32,000 --> 00:46:35,520 Speaker 1: recurring theme with supply chains where one aspect of it 688 00:46:35,600 --> 00:46:40,360 Speaker 1: is just not talking or efficiently interacting with another aspect 689 00:46:40,400 --> 00:46:43,759 Speaker 1: of it. It's true. Can you just give just to 690 00:46:43,800 --> 00:46:47,080 Speaker 1: help conceptualize this, Can you just give an example of, 691 00:46:47,120 --> 00:46:50,520 Speaker 1: like I mean, it sounds very good how the product 692 00:46:50,680 --> 00:46:53,040 Speaker 1: interacts with the palette, but can you give an example 693 00:46:53,120 --> 00:46:55,880 Speaker 1: of an industry or a product that has sort of 694 00:46:55,920 --> 00:46:59,560 Speaker 1: like there's a unique solution that's different, like just lock us. 695 00:46:59,560 --> 00:47:02,520 Speaker 1: We're gonna apple of what you're thinking about the O 696 00:47:02,680 --> 00:47:05,440 Speaker 1: E M supply chain. And the automotive industry has been 697 00:47:05,480 --> 00:47:10,080 Speaker 1: pretty good to implement systematic design. They have done a 698 00:47:10,200 --> 00:47:13,759 Speaker 1: very excellent job. And I've been involved through ai a G, 699 00:47:14,080 --> 00:47:17,560 Speaker 1: the Automotive Industry Action Group and assisting the industry to 700 00:47:17,640 --> 00:47:22,400 Speaker 1: implement this philosophy. And they've done that by using a 701 00:47:22,440 --> 00:47:25,640 Speaker 1: returnable packaging system as part of the O e M 702 00:47:25,719 --> 00:47:32,160 Speaker 1: distribution supply chain. Many of the returnable packaging systems are plastic, 703 00:47:32,239 --> 00:47:36,759 Speaker 1: and the palette is plastic as well, and they've modified 704 00:47:36,960 --> 00:47:41,440 Speaker 1: how they handle this through the portions of the supply chain. 705 00:47:41,600 --> 00:47:47,439 Speaker 1: That's an example of a pretty significant success of implementing 706 00:47:47,480 --> 00:47:51,640 Speaker 1: this very strategic approach. And it's a closed loop, so 707 00:47:51,719 --> 00:47:54,480 Speaker 1: it's easy to do it, isn't it. Between O e 708 00:47:54,680 --> 00:47:59,000 Speaker 1: M and the assembly plans the beverage industry to some extent, 709 00:47:59,160 --> 00:48:04,719 Speaker 1: and the brewers have the similar capability because um, we're 710 00:48:04,760 --> 00:48:08,160 Speaker 1: not going down to retail. We basically have a shorter 711 00:48:08,280 --> 00:48:12,040 Speaker 1: supply chain where we can just focus on the brewer 712 00:48:12,480 --> 00:48:17,359 Speaker 1: down to distribution centers and the brewer distributor and then 713 00:48:17,880 --> 00:48:21,480 Speaker 1: the packaging components go back. In the case of the palette, 714 00:48:21,960 --> 00:48:26,680 Speaker 1: the automotive industry has expanded that to go towards reusable 715 00:48:26,719 --> 00:48:29,920 Speaker 1: packaging systems as well. You know, unless we've got a 716 00:48:29,920 --> 00:48:33,000 Speaker 1: bottle bill, we don't do much of the brewing sector 717 00:48:34,320 --> 00:48:36,840 Speaker 1: pr So I think that's a great place to leave it. 718 00:48:36,920 --> 00:48:41,440 Speaker 1: Really appreciate you coming on and explaining the palette industry 719 00:48:41,560 --> 00:48:45,840 Speaker 1: in so much depth and detail, but really fascinating conversation. 720 00:48:45,880 --> 00:48:48,880 Speaker 1: Thank you. Yeah, that was fantastic. Thank thank you so 721 00:48:48,960 --> 00:48:52,200 Speaker 1: much as my pleasure. As you can tell, I enjoy 722 00:48:52,320 --> 00:48:56,960 Speaker 1: these forms a teacher at heart, and so don't hesitate 723 00:48:57,000 --> 00:49:11,600 Speaker 1: to call upon me again if it's appropriate. So I'm 724 00:49:11,680 --> 00:49:15,520 Speaker 1: so glad that we finally got to do that episode. 725 00:49:15,600 --> 00:49:19,319 Speaker 1: And it does feel like I don't know, I'm just 726 00:49:19,320 --> 00:49:22,719 Speaker 1: thinking we sort of started with the shipping industry, and 727 00:49:22,760 --> 00:49:27,040 Speaker 1: then we got into containers specifically, and it's only now 728 00:49:27,080 --> 00:49:30,680 Speaker 1: that we're sort of getting into even smaller subcomponents, which 729 00:49:30,680 --> 00:49:33,400 Speaker 1: would be palettes, and I kind of I'm wondering what 730 00:49:33,480 --> 00:49:36,080 Speaker 1: comes next. There must be another thing. I mean, you 731 00:49:36,160 --> 00:49:39,520 Speaker 1: talked about connectors in the metal connectors and of course 732 00:49:39,600 --> 00:49:42,480 Speaker 1: that came up the steel. Trust plates of course came 733 00:49:42,560 --> 00:49:45,560 Speaker 1: up with stincon Dean on lumber. So I don't know 734 00:49:45,560 --> 00:49:47,560 Speaker 1: whether we want to go fasteners or trust plates. But 735 00:49:48,160 --> 00:49:50,719 Speaker 1: I did speak to uh someone in the trust plate 736 00:49:50,800 --> 00:49:54,000 Speaker 1: industry who was like head two, very strong, very strong 737 00:49:54,040 --> 00:49:56,680 Speaker 1: thoughts on the phone, So I think maybe the next 738 00:49:56,719 --> 00:49:59,520 Speaker 1: one is a trust plate one. On the other hand, 739 00:49:59,680 --> 00:50:02,680 Speaker 1: someone on Twitter said there's like some nozzle that they 740 00:50:02,719 --> 00:50:05,320 Speaker 1: can't get for like a gas thing that's like messing 741 00:50:05,440 --> 00:50:08,360 Speaker 1: up like all home gas heating, and it's just like 742 00:50:08,400 --> 00:50:11,120 Speaker 1: one little piece. So there's a million of there's a 743 00:50:11,160 --> 00:50:14,480 Speaker 1: million stories uh still to do on just all the 744 00:50:14,560 --> 00:50:16,640 Speaker 1: little things that we're supposed to that we usually never 745 00:50:16,680 --> 00:50:20,120 Speaker 1: think about. But this year we're all very aware of yeah. 746 00:50:20,200 --> 00:50:23,719 Speaker 1: And I guess the theme that keeps emerging is a yes. 747 00:50:23,840 --> 00:50:26,279 Speaker 1: This is the year that we all suddenly became aware 748 00:50:26,320 --> 00:50:28,800 Speaker 1: of supply chains and how normally they work, and we 749 00:50:28,840 --> 00:50:31,440 Speaker 1: don't really think about it, but this year we are 750 00:50:31,480 --> 00:50:34,280 Speaker 1: thinking and talking about it a lot. But then secondly, 751 00:50:35,040 --> 00:50:40,520 Speaker 1: all of these things are sort of isolated industries unto themselves. 752 00:50:40,880 --> 00:50:45,200 Speaker 1: And again to Marshal's last point, that seems to be 753 00:50:45,600 --> 00:50:49,439 Speaker 1: problematic when there is an issue, it doesn't feel like, 754 00:50:49,840 --> 00:50:53,560 Speaker 1: you know, the guy that's making trustplates is necessarily talking 755 00:50:53,680 --> 00:50:57,200 Speaker 1: to the lumber company or the home builders, and it 756 00:50:57,239 --> 00:51:01,239 Speaker 1: doesn't feel like maybe the palette makers are talking to 757 00:51:01,960 --> 00:51:04,920 Speaker 1: I don't know, like the forklift drivers about how to 758 00:51:05,280 --> 00:51:08,799 Speaker 1: ring better efficiencies out of the entire system. I thought 759 00:51:08,800 --> 00:51:12,360 Speaker 1: that was really interesting. The idea of like the future 760 00:51:12,520 --> 00:51:15,879 Speaker 1: is not necessarily like changing the palette per se, though 761 00:51:15,920 --> 00:51:19,440 Speaker 1: there are is evolution and palette design, but in UH 762 00:51:19,560 --> 00:51:22,960 Speaker 1: communication and that is like the right like as you said, 763 00:51:23,000 --> 00:51:25,480 Speaker 1: and you know, we had that episode with John Parkari 764 00:51:26,040 --> 00:51:28,520 Speaker 1: uh the White House Ports Envoy, and he made the 765 00:51:28,560 --> 00:51:32,359 Speaker 1: case that like communication alone is maybe you know not 766 00:51:33,280 --> 00:51:37,360 Speaker 1: can increase throughput even if you're sort of like physical 767 00:51:37,400 --> 00:51:40,360 Speaker 1: stock of capabilities is fixed and granted you want to 768 00:51:40,360 --> 00:51:43,640 Speaker 1: improve the physical stock of capabilities, but sometimes there's gains 769 00:51:43,680 --> 00:51:47,200 Speaker 1: to be made from communication. So like long term, just 770 00:51:47,239 --> 00:51:49,960 Speaker 1: the idea that like, well, instead of just thinking about 771 00:51:50,000 --> 00:51:53,520 Speaker 1: making a better palette, thinking about how the bottle companies are, 772 00:51:53,560 --> 00:51:56,919 Speaker 1: the TV companies or whatever food companies can think about 773 00:51:56,960 --> 00:51:59,719 Speaker 1: integrating the products with the palette as like the next thing. 774 00:51:59,760 --> 00:52:04,960 Speaker 1: That communication is a very like a very fascinating thing 775 00:52:05,000 --> 00:52:08,680 Speaker 1: to think about. I think, yeah, totally and definitely a 776 00:52:08,760 --> 00:52:12,359 Speaker 1: recurrent theme on these episodes. Um, shall we leave it there. 777 00:52:13,239 --> 00:52:16,280 Speaker 1: Let's leave it there? All right? This has been another 778 00:52:16,320 --> 00:52:19,360 Speaker 1: episode of the Odd Thoughts Podcast. I'm Tracy Alloway. You 779 00:52:19,400 --> 00:52:22,560 Speaker 1: can follow me on Twitter at Tracy Alloway. And I'm 780 00:52:22,640 --> 00:52:25,880 Speaker 1: Joe Wisenthal. You can follow me on Twitter at the Stalwart. 781 00:52:26,200 --> 00:52:30,160 Speaker 1: Follow our producer Laura Carlson. She's at Laura M. Carlson. 782 00:52:30,560 --> 00:52:34,040 Speaker 1: Follow the Bloomberg Head of podcast Francesca Leavi at Francesca 783 00:52:34,120 --> 00:52:37,200 Speaker 1: Today and check out all of our podcasts at Bloomberg 784 00:52:37,640 --> 00:53:05,879 Speaker 1: under the handle at podcasts. Thanks for listening to year 785 00:53:07,440 --> 00:53:07,480 Speaker 1: to