Contraction in the lumber market spells challenges for the future. Every week there is another news announcement about mills shutting down or curtailing operations.

Older mills that are less efficient may never come back when the market rebounds. Sawmills that have a geographic disadvantage could face the permanent chopping block. Be alert for changes in your regional market. Have environmental regulations made it more difficult to log in your area? Are log resources tapped out in your area? How far do you have to pull logs from to supply your facility? These are all important indicators to watch. Even though you may feel like you are swimming in lumber offers now, when the economy rebounds, the reverse could become true. Many mills that have downscaled or completely gone out will not come back. This will likely make obtaining lumber difficult for pallet companies when the market rebounds. For now, lumber is aplenty. That likely won't be the case as global wood consumption increases.

Another issue on the horizon is domestic heat treating of wood packaging. Don't be surprised if heat treating becomes a requirement for domestic wood packaging in the next year or two. The U.S. government is currently studying the economic and environmental impact of such a requirement, a necessary step before any national standard is imposed. Nobody knows for sure how long it will take for domestic treatment to become a reality. There are enforcement concerns as wells as the impact on the industry. And the Obama administration has more pressing concerns. But a national requirement is still on the government's to-do list. If a domestic treating requirement is imposed, I would expect the level of certification cheating to increase. Companies that follow the rules will need to keep on the watch for others that try to skirt the rules.

Quality may once again be making a comeback for some pallet purchasers. After years of efforts to beat down price with minor quality concessions, increased automation in warehouses may force some pallet customers to accept only higher quality pallets.

The lead story from the June issue of Modern Materials Handling highlights a new distribution center at Kroger that is highly automated. Humans only touch the loads twice, which underscores the focus on automation in warehouses for major retailers and consumer goods product manufacturers. Kroger's new facility is building store-ready mixed pallets in an automated environment. Products are touched by operators only twice - once at the receiving dock and once at the shipping dock.

In the long run, this trend is likely to mean more stringent pallet quality standards. Some pallet customers may no longer accept companion stringers, damaged deckboards, protruding nails, etc. It is important to do more than just take orders over the phone. Get to know your major customers and their customers. Find out how automation is affecting their long-term pallet needs. You can read more on this revolutionary approach to grocery DC design at

The exact opposite is true in the short term. Customers are looking to cut costs even if it is only a few cents per pallet. Suppliers are cutting corners and doing whatever it takes to shave a few cents per pallet. This means that the overall quality of the white wood pallet pool continues to deteriorate at a time where competitors are investing millions on quality and infusing new pallets into their systems. It appears that the long-term and short-term goals are working against each other. But this is nothing new. The only real new twist is the degree to which companies are going to cut costs.