First, what does your business need out of a pallet supplier?
Each unique organization needs to start by creating an outline of evaluation criteria
Prior to beginning your research on candidates for your pallet needs it’s important to first outline your unique pallet requirements. There are many pallet manufacturers you will be able to evaluate to support your business. To streamline your evaluation, and to utilize your time efficiently, it’s important to slow down in order to ultimately speed up.
The first question you need to ask, is why is this a priority in the first place? It’s possible your existing pallet and crates supplier is having service issues, with quality or availability disrupting your operation. Or perhaps your executive leadership team is mandating cost reductions across the board and your pallets category has been flagged to meet new targets. Alternatively, you could be starting at the ground level as your organization is opening a new operation in the area and this is one of numerous supply chains you are working to establish before production goes live.
Regarding service, do you only need pallets or have you leveraged added services historically (or want to leverage added services) along with the procurement of pallets. There are various value-added services (often complimentary) that differ across pallet options.
Here’s some recommended key areas you will need to internally evaluate prior to beginning your pallet search:
- What type of pallets or wood products will I need? What is the annual pallet volume, how complex are your pallets (are they standard GMAs, or will this be a custom fit product)? Do you have all the engineering specifications or dimensions to get accurately quoted?
- Lead time requirements, how do you manage inventory, how long can you store supply within your facility?
- Where does your product ship to? International shipments require ISPM-15 certified pallet suppliers
- What are you price targets, and how will you evaluate pricing along with the wholistic factors within your evaluation (opportunity costs, downtime, etc, should be considered heavily in your decision)
- Have you leveraged value-added services such as VMI (Vendor Managed Inventory), on-site packing, or supplemental warehousing from your existing provider? If not, is there value in receiving these services?
- Do you have multiple sites or operations within your site sourcing pallets separately that could be consolidated to obtain the benefits of scale?
- Who all will be involved in this decision and managing the pallet category operationally? Does everyone agree with your weighted requirements?
What shortfalls from your existing provider or process is initiating this search?
Identifying the core issues with your existing vendor should be prioritized during your evaluation
One of the most common reasons we have seen industrial clients approach us to evaluate us as a new pallet provider is due to existing business disruption because of inconsistent quality and/or service. We’ve heard from clients who’ve quantified their downtime as much as 5-6 figures per minute. While important, cost savings on this category can quickly be cannibalized when quality and service are sacrificed. As a first step, the quickest path of resolution is to engage your existing supplier and work through a root cause analysis and remediation plan to get your pallet issues resolved. If issues persist, your team must move quickly to avoid further operational disruption and impacts to your own customers’ experience and satisfaction. Our recommendation is that while you are taking the first step to remediate issues with your existing provider, begin gathering your evaluation requirements from our first section to be able to transition quickly into an evaluation phase if necessary.
Alternatively, we’ve also seen instances in which pallet pricing has spiraled out of control. There’s a few steps your team can take to reel these costs back in or make sure they are justified:
- Engage your supplier, gain clarification on why you are seeing these increases (this industry is heavily and frequently impacted with the variability in the lumber market)
- Obtain a benchmark quote on your highest volume SKU for comparison
- Open up a formal RFI and RFQ procession, bringing a few qualified suppliers to submit their proposals across your established weighted criteria
In summary, your fastest path to resolution is to see if your existing partnership can be salvaged. While these efforts are made, don’t delay in gathering your evaluation criteria. There could be a better fit for you by committing the efforts to establish a new pallet supplier.
Lastly, if a switch is made, make sure your team is basing their decision on a prepared evaluation criterion. Even if your current pallet issue is resolved, you need to ensure that no new issues arise from a different area. For example, a new supplier beats your existing supplier’s pricing by 10%. After bringing them aboard, you realize they are able to meet these prices because of shortcuts within their manufacturing processes. As a result, quality has slipped, and now these cost savings have been absorbed and you are now facing a larger supply problem.
Do you need a pallet provider or a partner?
There are many pallet suppliers and brokers in the market, it’s important to determine what type of relationship and services you require from your future supplier
It’s important to understand what type of pallet provider is the best fit for your team. Given the various specializations made within the industry, range of services unique to each pallet supplier, and the unique requirements of each buyer organization; here’s some considerations you need to evaluate to finalize a short list:
- Quality/customized pallets, delivered at a fair price with added services? Or do you just need to move products with low grade recycled pallets, delivered predictably at the lowest price?
- What logistics services do you need?
- Would VMI help streamline your process?
- Would supplementing your operation with on-site final assembly/packing be useful?
- Do you need a partner to help your team design tailored pallets from scratch?
- Do you have wood packaging products other than pallets?
- What lead time and quality standards can be guaranteed?
Identify options
Use your evaluation criteria to assemble a shortlist of possible suppliers
Now that your team has determined your qualitative and quantitative criteria, here are some avenues you can take to begin your research and shortlist:
- Google pallet providers within your region, review their websites to match your key requirements
- Engage local manufacturer to obtain pallet supplier recommendations
- Ask for recommendations from your freight provider (if outsourced)
- If applicable, identify options that support other locations within your organization to include in your evaluation (this could alleviate paperwork and approval requirements)
After assembling possible candidates, utilize your evaluation criteria to move the top 2-3 options forward that appear to offer pallets and services that align the closest to your criteria.
Engage with your targets and understand their product scope, pricing, and service capabilities
Ensure they can meet your pallet requirements, while also learning about what value-added services they can provide
At this stage, you have officially moved into your RFI/RFQ phase. In short, this is where you are:
- Making contact and requesting responses across all your pallet evaluation criteria
- Understand how else these suppliers envision supporting your organization (perhaps they’ve supported similar organizations and have ways that they can support you that haven’t been included in your criteria)
- Obtain pallet quotes for your requirements
- Determine your preferred provider
Perform your due diligence on your preferred pallet manufacturer
Steps you can take to build confidence in your decision
At this stage, you’ve determined the best fit for your organization on paper. However, it’s important to take a few verification steps to gain the final boost of confidence in your decision:
- Set up an on-site to visit the vendor’s facility (explore manufacturing site to review finished product, quality assurance procedures, etc)
- Obtain pallet samples specific to your requirements to make sure quality is up to standard and ensure the product meets specifications
- Ask for a reference, so that you can speak directly to one of their existing customers
Selecting a pallet supplier, and ways to get started
Analyzing your evaluation, choosing a manufacturer, and ramping up your new partnership
At this point, you have done your due diligence and you have officially moved forward into partnership. As a last safeguard to ensure a smooth transition and testing period, establish a ramp period.
During this ramp period, you will start your new pallet supplier at a lower volume to continue testing quality, service, etc. It’s helpful for both parties to establish a timeline in which volume will steadily increase until you’ve fully transitioned to your new supplier.
In addition to ramping up your new partner, it’s at this point that the difficult discussion needs to take place with your incumbent. In good faith, they will need to know why they are being replaced as well as the opportunity to utilize the ramping period to clear out any built-up stock they have set aside for you. This will help end the relationship amicably, while ensuring they aren’t stuck with leftover obsolescent stock (especially if it’s customized). Word of mouth is important, and you can never be sure of residual impacts of a fractured end to a business relationship.