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Iowa Pallet Recycler Taking New Route to Profitability;
Automated Repair Line from Pallet Systems Mfg. Aids Krajicek Pallet Inc.
By Tim Cox
Date Posted: 5/3/2002
DENISON, Iowa – When disaster strikes, it can be a time for taking stock. On a personal level, it may be time for life-changing decisions. For a company, it may be a time to reconsider how business gets done. Out of a catastrophe can come decisions that will change the direction of a business and put it on a new road to improved operations and profitability.
Krajicek Pallet Inc., predominantly a pallet recycling company, had been doing business for nearly 20 years when a fire destroyed its operations in 1999. The company rebounded by quickly leasing a building and pallet recycling machinery, and it was supplying its customers again within days.
When it eventually rebuilt, however, owner Ed Krajicek decided to make two significant changes in his company’s operations. He decided against replacing the company’s cut-up operations and switched instead to buying pre-cut components for new pallets and other products. He also decided to automate the company’s pallet recycling operations. Both decisions have helped the company to improve.
Ed was working at Farmlands Food in Denison, Iowa in 1981 when he began recycling pallets in his spare time, including repairing pallets for Farmland. At the time, his job duties for Farmland included taking inventory and taking care of the loading dock area.
His experience on the loading dock at Farmland gave Ed a bird’s eye view of what was going on with respect to pallets. A lot of broken wood – damaged pallets – was discarded to landfills, he noticed. Even new pallets with some damaged lumber were thrown away. He started analyzing the numbers – how many damaged pallets were going out the door, the price of lumber, the price the company paid for new pallets, and so on. Repairing those damaged pallets could save his employer money, he reasoned. He discussed the idea with Farmlands officials, and his part-time business was born. Three brothers joined him in the venture, and his father, a farmer, let them use some of his trucks. "We worked hand-in-hand to help each other," he recalled.
As the company gradually grew, Ed added equipment, including saws to cut lumber and pallet recycling equipment. "Anything that would work in our system, we tried to add it to our business," he said.
He later expanded into trucking. By adding the trucking business, Ed’s company could haul freight for paying customers on return trips instead of ‘dead-heading’ back with an empty rig after delivering pallets.
Krajicek Pallet now has 32 employees, and the trucking business -- Krajicek Inc. -- employs another 35. Krajicek Pallet produces about 22,000-25,000 recycled pallets per week beside new products, such as pallets and freezer racks.
"The pallet business is up and down," Ed observed. Prices have not changed much, he noted. In addition, pallet companies have to compete with small entrepreneurs working out of back yards. "Big operations need to turn the numbers or have the contracts," said Ed.
The company prefers to deal in orders for truck-load quantities. Krajicek Pallet’s customers represent such industries as meat packing, cold storage, dry warehouses, feed businesses and cement manufacturing. It builds and stocks pallets in inventory for customers. "We keep about 18,000 to 20,000 pallets on hand at all times," said Ed.
After the fire, Ed found a building to lease the next day. Within a few more days, it was equipped with pallet recycling machinery. In the brief transition to starting up again, the company had enough pallets in inventory – stored in trailer vans – that it could continue to supply its customers. It took about a year to rebuild.
Prior to the fire, Krajicek Pallet had its own cut-up operations. It was fully equipped to manufacture deck boards and stringers from cants and made nearly all its pallet components. After the fire, Ed decided not to rebuild the cut-up operations and instead to purchase cut stock. There were several reasons for his decision. The company’s equipment was getting quite a bit of use. One of his brothers, who oversaw the equipment, decided to start another business. "Equipment is a big issue if you don’t have the right help to care for it," Ed noted. Changing to cut stock allowed the company to eliminate some of the challenges to the business and focus on assembling pallets.
Now, the company buys mainly hardwood pallet components from sawmills and pallet companies in Missouri, Arkansas, Nebraska and Iowa, plus some softwood cut stock from Western suppliers.
After the fire, the company also put in an automated pallet recycling line and other pallet recycling equipment that was supplied by Oklahoma-based Pallet Systems Mfg. Inc. Daily production on the line, which operates two shifts, has reached about 5,000 pallets, according to Ed.
The company works with about 15-20 different pallet sizes or types. They are graded to two quality classes, A and B or No. 1 and No. 2. No. 2 pallets are rebuilt with recycled components while No. 1 pallets are repaired with new lumber. The company dismantles about five to eight truck-loads of used pallets per week to recover used lumber.
The Pallet Systems Mfg. line begins with a belt conveyor that brings incoming pallets to a tipper. The tipper feeds the pallets to a sorting station staffed by two men. They sort No. 1 pallets one way and No. 2 pallets the opposite way.
The two repair lines are adjacent to the sorting station, configured 90 degrees and parallel to one another, so the entire system is U-shaped. The pallets travel via powered conveyor down the line. There are three repair stations located on the outside of the line and two more between them for a total of eight. The repair staff normally works in teams of two.
Each line consists of two powered conveyors that move pallets in the same direction. Pallets to be repaired are conveyed on the top line. At a repair station, the worker slides the pallet onto the work table. After the pallet is rebuilt, it is slid onto the bottom conveyor tier. At the end of the line for finished pallets, there are two stackers, one for each grade.
The system significantly reduces manually picking up and moving pallets. "It works really well," Ed said of the new repair line, which is operated two shifts. Automated movement of pallets and reduced manual labor has enabled the company to wave on workmen’s compensation insurance costs, according to Ed.
Back injuries and the company’s high workmen’s compensation costs were important considerations in his decision to automate, said Ed. As in other recycling shops where automation is lacking, workers were regularly picking up and carrying pallets. The stress and fatigue of the heavy lifting made them prone to injuries, he noted.
At one point, the company realized it had to make changes for the benefit of its workers and eliminate the high risk of injuries. After the addition of the automated line, workmen’s compensation insurance costs declined more than 40%, according to Ed. The employees appreciate the change and like the working conditions much better.
Pallet Systems Mfg. also supplied several other pieces of pallet recycling machinery and equipment. Krajicek Pallet has a bandsaw dismantling machine for taking apart pallets and recovering used lumber. The recovered lumber is fed via conveyor to an automated cut-off saw that trims used deck boards and stringers to the correct length; trimmed pieces travel via conveyor to an automatic stacker.
Krajicek Pallet also has a plating station for plating damaged stringers. The company plates about 10% of its recycled pallets, Ed estimated.
Finally, the recycling operations have a Pallet Systems Mfg. RotoShear for replacing a single stringer in a pallet. The disc-type machine spreads the pallet slightly, and the discs sever the nails, allowing the stringer to be removed and replaced.
The company uses all cut stock for manufacturing new pallets and other products, which are assembled by hand with Carlson power nailing and stapling tools. Pallets are assembled with nails but some products, such as freezer racks, may be assembled and repaired using staples. The company’s customers require a significant quantity of new GMA pallets and new custom pallets, said Ed.
Krajicek Pallet keeps trailer vans stored at customer locations in order to retrieve used pallets. It keeps vans at about 15 different customers sites. In all, the company has about 50 trailer vans for shipping and receiving pallets. Krajicek Pallet also provides contract repair services for some customers.
In working with customers, Ed said, he is constantly striving to "see what we can do better for them."
"We’re always looking for new ideas to make the product better for them," he added. One customer, he noted, requires a lot of specialty pallets. Krajicek Pallet has worked with the customer to help them design specialty pallets that meet their specifications for strength and other factors, such as improved cube utilization.
Business has been good lately, Ed said, although the company has weathered some rough times over the years, most notably when its workmen’s compensation insurance costs escalated. However, after a while, "It all evens out," Ed said, "and business is good again."
"If you do a good job for people," he added, "you will be rewarded in the end," he added.