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Recycler’s New Direction Pays Off: Power Pallet Expanding into Recycling Other Materials
Leading pallet recycling company in upstate New York finds added success in venturing into recovery and recycling of other materials.
By Tim Cox
Date Posted: 3/1/2013
AMSTERDAM, New York – When Sam Donadio began working in his father’s fledgling pallet recycling business, he literally dug used pallets out of the dirt. In those days during the infancy of pallet recycling, typically used pallets were sent to landfills for disposal.
“We had to go to the landfill and dig them out,” recalled Sam Donadio, president of the company. “Those were the days.”
Today, Sam and his brother, Gary, vice president, are still digging, but they’re digging for ideas and strategies to continue to build Power Pallet. The time of scrounging around in landfills is long in the past. The greatest challenge today is to find new ways to expand into related recycling businesses. This strategy not only brings in additional revenue it also makes Power Pallet more intertwined with its customer base.
Power Pallet is located in Amsterdam in upstate New York. Amsterdam is on the Mohawk River a mere 15 miles northwest of Schenectady and about 35 miles northwest of the capital, Albany. All of the company’s pallet operations are housed under one roof in a 170,000-square-foot building.
Power Pallet processes three million pallets annually and employs about 155 people. The company serves manufacturing customers and distribution centers within a radius of up to 250 miles.
Expansion through Diversification
As large and as important as its pallet recycling operations are, the Donadios have been expanding their business in a new direction in recent years, a direction they view as being critical to their future success. They leveraged the company’s fleet of about 400 trailers, spotted at factories and distribution centers to collect used pallets, and entered the arena of recycling other materials, such as corrugated, plastic, glass and metal.
Power Pallet offered to collect and buy recyclable materials from its customers. In essence, Power Pallet became a “one-stop shop for everything,” explained Sam, 60. “Customers didn’t have to deal with one business for used pallets, another vendor for corrugated, another company for plastic, another for metal. Our customers did not want to accumulate their materials in their costly distribution centers, either.”
Power Pallet made the process easy for customers. It put in baling equipment at no cost to customers and allowed them to load different recyclable materials in the same trailer.
The strategy provided an important benefit for Power Pallet. “It secured the account for us,” said Sam. Although their pallet prices are competitive, “some customers will leave you for a nickel or a dime,” he noted. “Now…they’re going to lose the whole package.” A customer that moves to a different pallet supplier would face the prospect of having to set up new relationships to handle all the other waste materials being recycled by Power
“That’s why our service offering is so attractive to customers,” observed Sam. “They don’t have to deal with four or five different recycling companies.”
The strategy has worked out well, helping lock in existing customers and adding a new source of revenue. Sam believes the future prospects for the new part of the business are excellent. “That’s the area we want to grow,” said Sam.
“I am concentrating more on recycling (other materials). And the pallets will follow.” Eventually, he expects the materials recycling part of the business to outstrip the company’s pallet operations.
It is a strategy that may be worth pursuing by other pallet recyclers, suggested Sam. The advantage that a pallet recycling company has is that it already has trailers staged at customer locations, he noted.
“Where there’re recyclables, chances are there are pallets. Where there are pallets, chances are there are recyclables…It works hand in hand with what we do. It all ties together,” said Sam.
Upgrading to Better Tackle Recycling Opportunities
Deciding to expand services required capital investment of additional equipment and facilities expansion. The company had to invest in baling equipment due to inefficiencies in its operations. Robert Shepardson, recycling coordinator for Power Pallet, said, “We had been getting by with five vertical balers, which could produce approximately 90,000 lbs. of baled recyclables per week using five operators and 120 man hours. We can do that same amount in under four hours if we have the material staged and ready to load onto the conveyor.”
Last year Power Pallet built a $1.2 million, 4,000-square-foot addition devoted to handling recyclable materials, including eight more loading dock doors. The company recently purchased a new America Baler NB Series Ram II unit. It can process 20,000-30,000 tons per hour.
Shepardson said that the new baler allows the company to bail more and larger, denser scrap loads. Since scrap is sold on a per ton basis, heavier bales means more money and less shipping costs compared to loose material shipments. He added that the new machine also makes it possible for Power Pallet to directly export bales of corrugated and plastics.
“We are more diversified now. We can sell to foreign markets when domestic prices are down and vice versa,” said Shepardson. He estimated the payback time on the new baler would be 18 months or less.
Shepardson said, “We will see our processing efficiencies increase dramatically while actually cutting man hours. We will reassign the current baler operators to other positions in the plant, so no jobs will be lost as a result of the baler installation.”
Power Pallet will take any recyclables from its customer locations. This includes corrugate, glass, plastics, metal, electronics, etc. The items it is not equipped to process, such as electronics, Power Pallet sends onto recycling partners.
Of course, taking the company in a new direction meant changes. Now a trailer being returned to Power Pallet might contain a mixture of used pallets, corrugated, plastic and other materials. The company’s operations had to be adjusted accordingly. “It threw a monkey wrench into our processes here,” said Sam, “but we were able to do it.”
When the Donadios entered the arena of recycling other materials, they ran into competition with companies already engaged in those businesses. As much as possible, Sam chose to try to partner with those companies instead of working at odds with each other. “We would much rather work with somebody than fight with somebody,” he said.
In some cases, Power Pallet sells materials to other recycling businesses; it made more business sense to work with these companies as opposed to doing their own trucking and picking up small loads from the distribution centers.
“It made it easier for them to work with us,” commented Sam. Power Pallet also supplies some recyclable materials directly to customer plants as well as exporting them.
Tackling Tough Challenges Since Its Inception
The Donadios’ father, Greg, who died at age 83 in 2011, was a pioneer in pallet recycling. A husband and father to six, he was a driver for a trucking company when he began a shoestring operation on the side, repairing pallets. The year was 1975; he made deliveries to the distribution center of a regional grocery chain. It was overloaded with used pallets, and someone suggested he repair the broken ones and sell them back to the company. He began repairing broken pallets in his spare time on nights and weekends.
Sam joined his father in the business after it had three accounts. He was in his early 20s. The company had a few part-time employees, and Greg continued working full-time as a truck driver.
“Recycling was not popular,” recalled Sam. “It was very difficult times.”
One thing that made it so difficult was the ease with which companies could dispose of scrap pallets at landfills. Some manufacturing businesses operated their own landfills to dispose of solid waste. Because of union contracts, workers would not separate used pallets from other waste material; they simply threw them into dumpsters to be hauled away and put in a landfill.
All the tasks associated with pallet recycling – from handling used pallets to dismantling pallets to reclaim lumber, cutting used lumber to length, and removing damaged boards and nailing repair stock – were done by hand.
They repaired custom specialty pallets that were used to ship 55-gallon drums. The pallets weighed 125 pounds, made with 3x4 stingers, full top and bottom faces made from 7/8-inch boards. They didn’t even have a forklift at the time. “It was tough,” said Sam.
Gary, 47, joined his father and brother in the business 20 years ago. The only member of the family to obtain a college education, he worked outside the business for six years before coming on board full time in the early 90’s.
Sam’s duties lean more to business strategy, development and networking while Gary is more directly involved in overseeing day-to-day operations.
“We have a great team of people,” said Gary, one that has undergone a significant transformation in recent years. “We’ve gotten good people…That’s been a key to our success.”
Today all the company’s pallet operations are housed under one roof in a 170,000-square-foot building situated on 30 acres. The company has been at its current site for eight years, relocating after being in a previous location – and outgrowing it – about 20 miles away for 30 years.
The expansion to the new property cost $6 million, which was more than they expected. It was a difficult transition because of a number of factors. One was a shortage of cores. Another was competition. They encountered problems getting the new plant up and running efficiently and for a time were operating both sites.
“Between all that…We went to our knees,” said Sam. “They were difficult times.”
“But we survived,” he added. “With some hard work, we survived.”
Power Pallet’s customer base includes various manufacturing plants, particularly grocery manufacturing and distribution operations. Some Fortune 500 companies, such as GE and IBM, rely on Power Pallet.
“As we built the business…I never thought that I would have such a problem getting employees,” said Sam. “Still, to this day, it’s difficult.”
For that reason, he and his father always looked for machinery to make the work easier, more productive, and efficient. They bought one of the first pallet dismantling machines that was developed for the industry, a Roger Associates rotary disc-type un-nailer. “When they first came out…just being able to dismantle a pallet with a machine – that was amazing,” said Sam.
Automation Eases Labor Burden
Power Pallet also was one of the first pallet recycling companies to begin using equipment from SMETCO, whose earlier focus was supplying grocery manufacturing and other businesses that used pallets, not pallet recycling companies.
The pallet recycling operations are equipped with a host of machines supplied primarily by Automated Machine Systems (AMS), SMETCO, Smart Products, and Trace Equipment. The company has six bandsaw dismantlers and also a portable bandsaw dismantler, four trim saws and an under-cut saw. It has about a half-dozen AMS DeckMaster machines, which remove damaged leading edge deck boards and depress nail stubble, and about 15 stackers.
“We have a little bit of machinery from everybody and have been very happy with our suppliers,” said Sam.
Power Pallet has one primary repair line as well as a couple of other, smaller repair lines. Its staff did the engineering and layout and design of the repair lines.
On one line, four workers operate DeckMasters to prep damaged pallets, which then move along a conveyor past other workers who repair them ‘on the fly.’ At one section workers on either side of the conveyor nail on repair stock to refurbish the bottom face. The pallet reaches an in-line flipper that turns it over, and as it continues along the conveyor other workers repair the top face. The pallets never stop moving. The pneumatic nailing tools are suspended at various points above the conveyor so a worker can easily maneuver a tool to fasten on replacement deck boards.
Pallets that cannot be repaired are dismantled to reclaim usable lumber that is used for repairs and assembling new pallets. The company has optimized the facility through the years and even removed some automation when it wasn’t adding value to the operation. Sam said, “We eliminated some unnecessary conveyors when we discovered that pallets were taking extra trips that added no value.”
Most of the company’s pallets are made from 100% recycled material reclaimed from its operations. The company buys a small quantity of cutstock for combination pallets – pallets made of new and recycled material. Power Pallet also supplies new pallets, which represent about 5-10% of its pallet production, but relies on a few pallet manufacturing companies to make them.
Pallets are assembled by hand with pneumatic nailing tools. The company also has a Third Man nailing system acquired from Trace Equipment.
The company works with over 30 pallet sizes. Some common footprints are 30x30, 36x36, 42x42, 44x44 and 48x48.
A little over half of its production is GMA pallets, but that is down significantly from a point when GMAs represented about 80% of pallet production. The trend is deliberate: the company is seeking to reduce its reliance on the GMA market and focus more on custom pallets. “I don’t want all our eggs in the GMA basket,” said Sam. “I never did.”
Material that cannot be used for pallets is processed by grinding operations. The grindings are sold for animal bedding and supplied to a company that makes wood fuel pellets, but most of the material is used in Power Pallet’s mulch production operations. The company makes ‘natural’ mulch and colored mulch. The company is equipped with a CBI grinding machine to grind scrap pallets. Grindings are colored with a Colorbiotics Sahara system and mulch colorants.
Sam said, “Colorbiotics offers a top quality colorant that lasts longer than other products on the market. It may even be a bit more expensive. But the color looks great and has never had a problem of the colorant leaching off in the rain.”
Sam added, “We produce a lot of colored mulch and seldom have a complaint thanks to Colorbiotics.”
Recyclables account for about 10% of the company’s revenues, a percentage that is growing. Residuals make up about another 10% of revenues
while pallets account for the other 80 percent.
About 12-15% of the company’s employees work in trucking, about 8-10% in recyclables, and a small handful in residuals. The rest work in the pallet recycling operations, and about 10% of those work off-site providing pallet management services.
Along with its fleet of 400 trailers, Power Pallet has 20 semi-tractors to haul them.
It relies on Saw Service and Supply for replacement blades. Gary Donadio said, “Gary Snyder at Saw Service is a gentleman who is a man of his word, and he has always treated us well.”
Power Pallet just recently switched to a new supplier for pneumatic nailing tools and nails – NuMax. The company also buys nails from Metropolitan Staple Corp.
The Donadios, members of the National Wood Pallet and Container Association, also are exploring the feasibility of providing depot-type services to pallet rental companies.
Why Broaden the Company’s Focus?
Power Pallet’s competition eventually led the company in the direction of recycling other materials. One thing about competition, Sam noted: it makes business people think creatively – to use the popular parlance, ‘think outside the box.’ In the case of Power Pallet, it forced the Donadios to think of what they could do better, what could they provide that their chief competitor was not?
“That was one thing we did that our competition was not doing,” said Sam.
“We were looking to diversify,” he added. “We were looking for other sources of income.”
Power Pallet has a website at www.powerpalletinc.com; as its website proclaims, ‘We recycle everything!’
“More pallet recyclers…are getting into recycling other products. I think it’s a good thing that recyclers are doing that,” said Sam. “I think in order to survive you’re going to have to expand your service offerings.”