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Getting It Right at U.S. Gypsum
The Pallet Alliance Creates a Model for the Pallet Industry That Rewards ‘Great Work’ as the Goal
By Rick LeBlanc
Date Posted: 2/3/2003
(Author’s Note: I first started talking to Paul Messinger in the mid-1990s when we were both working on national level pallet projects in the roofing industry. Although we never met, I was intrigued by the passion he had for the pallet industry and it's potential to reinvent itself. As we've talked through the years, it's been apparent that his passion for reinvention was bearing fruit as he had begun to implement radically different, though resoundingly successful national pallet programs in a number of different industries. In September, he called me with the news that he'd be coming to my home town of Vancouver BC and invited me to sit in on one of these implementations as it was taking place. Over dinner, then through phone calls and e-mails over two months after that, with unprecedented access to both customers and manufacturers, the following story emerged.)
The Pallet Alliance is not your regular pallet company.
Since 1995, the Chapel Hill, NC based pallet services and brokerage firm has been building a reputation as an industry leader in the area of national level corporate pallet programs, and simultaneously as a company with a grander vision than most. It is a vision that involves an "alliance" between customers, pallet manufacturers, and The Pallet Alliance, an approach that oftentimes places it at odds with conventional industry practices as it creates and manages innovative and value-added 'coast to coast' pallet programs. The successes of its national pallet programs for companies such as building-products giant United States Gypsum, has given The Pallet Alliance unique opportunities to practice its diverse approach to pallet program problem solving on a national scale.
Earlier this year, Chicago-based USG significantly extended The Pallet Alliance's contract to manage its forty-five U.S. and Canadian plants. The relationship first began late in the year 2000 when Paul Messinger, 19 years in the pallet industry, was contacted by USG to look at its pallet situation.
Rather than the expected typical pallet procurement scenario, Paul quickly turned it into something quite different. "Quoting pallets is not what we do", Paul explained during a dinner meeting in Vancouver with Jim Fechner, USG Senior Purchasing Agent, Ron Neumann, a structural engineer at USG, and myself. "If that's all there is to it, then our company has no more value than any other company, and corporate level pallet initiatives have no greater value than plant level initiatives."
For me as a pallet industry journalist, this was a rare opportunity to discuss with both customer and supplier how a successful national pallet program has been put together. For Jim, Ron, and Paul, however, it was just one more stop in a giant program roll-out that has taken them to over 40 different USG plants across The United States and Canada, as well as visits to more than 100 pallet manufacturing operations.
Services Offer Control
"What corporate level pallet initiatives get from our company is control," Paul continued, "Companies don't manufacture products or buy packaging by saying, 'Well, we're not really sure exactly what all it is that we're doing out there, but we haven't heard any complaints, so we figure it must be all right.' No, they get professionals to evaluate their processes with recognized industry standards, which they then apply to their current procedures and decide what stays and what goes. "
"They need us to help them get it right, and to keep it that way."
One of the stops that the implementation team made in its journey was to Angelo Manufacturing Company, a pallet manufacturer in Jonesboro, Arkansas. Scott Mixon, President of Angelo Manufacturing, was struck by how well the USG people and The Pallet Alliance worked together. "If you watched Jim Fechner, Ron Neumann and Paul Messinger work together," Scott noted, "you would never dream that they all didn't work for the same company. If you didn't know it, you would think they are all just down here from the USG corporate office trying to get something done. That's just different!" He was awed by the open sharing of information and lack of adversarial tone, and he quickly recognized it as a "better problem solving mechanism and a better way to get things done that's best for everybody."
Angelo Manufacturing has now been working with The Pallet Alliance for about a year and a half. "Everybody talks about partnerships until it is their turn to pull the rope," he said, "but with these folks they really mean it."
Jim Fechner remarked at dinner that Paul's approach is significantly different than any other he had seen. "In my experience," he began, "typical pallet suppliers just want to sell it and be done with it. But that's not nearly enough. We've found that to really get it right, each plant location needs to be assessed individually, but with a national focus in mind; and that takes time and ideas."
Ron Neumann then offered, "With the suppliers I've dealt with on the design side, if you send them a spec, they'll just quote some barely defensible version of it, and that's about it. When I first talked to Paul," Ron observed, "he wouldn't even look at the spec I asked him about until he first visited the plant, saw the machinery being used, the product being manufactured, how it was handled and stored, and met the people there. He also spent time to better understand how our retail customers were handling our products. That was really different, and that really got my attention."
Jim then continued, "When Paul takes a look at our plants, he'll often offer up to 5 or 6 different options with complete explanations, with all the whys and hows, and that really changed our opinion about pallets and what kind of national pallet protocol we could establish. We've since developed what Paul calls 'pallet eyes' and our approach has now become one of: first seek the best solution, then figure out how to make it work, and then figure out the cost."
Pallet Performance, Safety
In its continuing effort to focus on high-level customer service, USG had been investigating how to develop a consolidated program initiative to improve pallet performance and safety at the plants and at customer's facilities. USG needed to ensure that its pallets met the load requirements necessary for its products. Like many large corporations, USG hadn't controlled pallet procurement at the individual plant level. The plants had been buying pallets on their own for many years, in some cases up to two decades.
"You would be surprised how many plants told us that they had never had a problem with their pallets," Ron Neumann continued. "In fact, they all said that. But we told them the problem wasn't necessarily at the plant, it was after it left the plant." Many of them were surprised to hear that there had been downstream problems or perceived problems with pallets. Complaints about any pallet problems were being primarily handled at corporate, and this information was not always filtering back to decision-makers at the plants.
In January 2001, Jim was assigned the responsibility to develop a corporate pallet initiative at USG. "Previously, we really didn't have the manpower to properly pursue it," Jim recalled, "and as a result we weren't getting anything accomplished. So my manager told me to focus on it and get it done."
Jim sensed that a national program would be the answer, but quickly saw that it would be difficult to do, and that they had typically been unsuccessful. "The pallet industry, whether fair or not, is perceived as an industry that supplies products that don't meet the specs," he commented, "and that perception probably accounts for why most attempts at national programs haven't worked."
The initial pallet meeting Jim attended at USG included senior level people from manufacturing, marketing, several vice presidents, and others. The room was full, with the gathering run by the Safety Director. Concerns about pallet safety were coming back from large retail customers. They wanted solutions to the problems, not excuses why the problems couldn't be solved.
Jim then came forward with a presentation about the progress he had made in working with The Pallet Alliance seeking solutions first, which resulted in a supply contract with The Pallet Alliance. With the national program in place, pallets became Jim's second largest corporate commodity (behind corrugated) of those he manages annually for USG as a Senior Purchasing Agent. The USG pallet program has since been recognized as one of USG's highest profile national projects to date.
"The program has been very successful," Jim said. "Are we paying lower prices for pallets at all of our plants? No, but we're solving the problems, getting control, and we're getting it right. We've learned that the right solution is the best and most cost-effective solution."
Material Handling Environment
Jim explained how USG now looks at the entire material handling environment of their unit loads, and designs pallets with an adequate safety factor to provide a safe pallet in the distribution system as well as at the retail outlet. "If the cost for doing it right turns out to be higher than we'd previously paid, then maybe we weren't spending the right amount of money to start with."
He then concluded, "We've found that if we don't solve the problem the right way, right now, we're just paying at the other end with loss of productivity, product damage, or customer dissatisfaction."
With the USG Pallet Program, any pallet issue can be addressed by a defensible paper trail that traces every decision made at corporate or the plant level, establishing the why and how behind every pallet decision and design, including rationale for both manufacturer and manufacturing process selection. "You can't imagine or underestimate the value this has in today's industrial supply chain management environment," Jim said.
Critical to the success of the pallet program roll out has been the support of USG upper management, as well as having access to the resources needed to achieve an orderly implementation. Those resources included being assigned Ron Neumann, a highly qualified structural engineer, as well as a commitment to visit the USG plants and prospective pallet suppliers across the U.S. and Canada with Paul. This has afforded them the opportunity to observe the issues first-hand, and then step by step solve them together.
"Just because you have a contract in your hand, it doesn't mean you are going to get the support you need from the corporation or its plants, and you can't get it done without that support," Paul explained. "You can't just snap your fingers and expect the right things to happen. You have to do the work, and the work needs to get done by everyone involved, including your corporate Program Manager and his or her upper management."
The essential challenge," Paul continued, "is developing support at the plant level and getting the plant people to take ownership of the process, and that can't be accomplished unless they see that corporate upper management is equally committed to making it happen, and equally committed to taking ownership and responsibility as well."
Paul emphasized that a successful program implementation had to be sensitive to established plant processes. "Plants have no use or patience for suppliers that show up with a contract in their hand and suggest ideas that will get in the way of the job that needs to be done," he said.
Ultimately, the road was made easier by the fact that Jim had already developed numerous successful national level procurement projects, and had real working relationships with key people at all the plants ranging from managers and office staff to fork lift operators. As Paul concluded, "By committing to send talent like Jim Fechner and Ron Neumann on the road, USG has created a new standard in these types of national pallet protocols."
‘Get It Right’
With the USG program's success and scale, Paul has developed an even greater understanding about what it takes to make a prospective national pallet program work. Now, he emphasized, his questions prominently include, "What are you as a company willing to commit to get this right? Because without a real commitment with people that really know how to get things done within the context of your company's culture," he noted frankly, "it's just another flag-waving exercise that's just another waste of time for all involved."
As we continued to dialog by e-mail and telephone over the next several weeks, it became apparent to me that Paul's consistent and resounding theme with both customers and pallet manufacturers is the absolute necessity of approaching all issues with the singular intent to "get it right," offering real solutions that truly solve the customer's problems. He insists that while offering piecemeal solutions that are easy for the customer to digest may win business in the short term, it will surely lose that business as well because they're not real solutions, and we as an Industry will continue to lose credibility.
Jacob Weaver, a veteran industry presence based in Western Pennsylvania, had this to say when interviewed about dealing with The Pallet Alliance: "Most people in the Industry do what they need to get by. They think that if they get their pallets off the truck and delivery slip signed without a customer complaint, then their responsibility ends."
"Paul's vision is a lot different than a lot of brokers," Jacob offered, "and a lot of pallet manufacturers as far as that goes. He has a very clear vision of what he needs to get the job done right, and if someone can't or won't do it, he'll find someone that will."
Jacob continued, "Paul's thinking is more along the lines of 'what do we need to do to get it right.' The customers he's looking for are the ones who are committed to getting it right, and who are willing to pay for getting it right."
A few weeks later as I typed my notes and played back interviews I had taped, I got back in touch with Paul. "Solving the problem," and "Getting it right" sounded well and good, and had obviously resonated with the Pallet Alliance customers and suppliers that I'd talked to, but what about the other customers out there?
My question then simply put: How does our industry convince the customer to buy into it?
"You don't need to convince the customer to buy into getting it right," he replied, "you only need to convince yourself." Speaking from an airport, again with Jim and Ron somewhere in Texas, he then continued. "Once you've convinced yourself that getting it right is the way to go, you'll find the right customers or the right customers will find you, and together you'll find a way to get it done. Believe me, the customer is just waiting for someone to walk through the door with the solution to his or her problems."
He then concluded, "We just can't keep offering fixes that don't fix anything."
Several weeks later, talking to Jim Fechner on a follow-up phone interview, I mentioned to him that in my opinion and experience, The Pallet Alliance was just not your typical pallet company. His response was an emphatic, "Not even close." Scott Mixon then told me, again in a follow-up phone interview discussing the Pallet Alliance solution-centered approach, "I don't know what your background is, but if you have been in the pallet business, that's just not how it usually runs." It was very clear that both men, experienced professionals on two very opposite sides of the Industry's spectrum, agreed that something really different is happening here.
On our next phone call, I asked Paul if there had been some sort of breakthrough experience that had convinced The Pallet Alliance that 'getting it right' was the way to go. His reply was that yes there had been, but surprisingly that the insight had come from a customer, not the other way around.
"This customer," he explained," manufactured a refractory brick that was so unstable, it would vaporize if as much as a nail came into contact with it. As they stacked their product 7 pallets high with 22,000 pounds resting on the bottom pallet, it was a serious problem that needed a real solution."
‘Perfect Pallet Every Time’
The plant buyer then took up the story. "For years, we went through so many different pallet suppliers that just weren't getting it. They would come in with the price they thought we were willing to pay, but they never got us the product we were willing to pay for. They didn't get the point that we wanted and needed in effect a perfect pallet every time, constructed entirely of dense hardwood, completely square with no splits, nail pops, or any other defects that would cause the pallets to fail and destroy our product or injure our employees or our customer's employees."
Paul's breakthrough came when he realized that he too was part of the problem.
"I'd periodically visit the plant to try to convince the buyer that he wasn't really getting what he insisted he needed, which of course accomplished nothing, when the real problem was that neither I nor anyone else believed that the pallet could really be built that way, and more importantly none of us believed that the customer would 'pay' for building it that way. And of course where there was no will, there was no way."
Once Paul understood that about himself and the Industry, he went back to the buyer with a different attitude, and everything changed. They then began to have frank and honest exchanges about what it would take to get what the buyer really needed, and why the industry had resisted those needs. Together, they broke down the issues step-by-step, and then brainstormed prospective solutions.
To start, they decided that they needed a manufacturer that ran a well-maintained machine where all the boards were placed by hand so they could maintain control of lumber quality. After Paul sourced a manufacturer with a Viking Champion who was willing to give it a try, they then brought their production people into the plant to understand why they needed what they needed, and to learn the step by step inspection procedure used at the plant.
"I was finally able to convince someone in the pallet Industry that I was willing to pay for the specification that had been designed," the buyer said, "because in the long run we'd determined that it would be less costly to get the product that did the job the way we needed it done."
Paul continued, "Each time we built that pallet, the manufacturer learned more about what it would really cost, how much waste it would really require, and how much time it would really take to build, and each time we came back to the buyer and raised the price, and each time he accepted the increase."
Challenge: Lumber Quality
From the pallet manufacturer's perspective, the biggest challenge in building the refractory brick pallet was sourcing and maintaining the lumber quality. "We couldn't just cull high grade material from our regular lumber supply, because that would lessen the quality for all the other pallets we did," the supplier said.
"We had to go out and source material especially for that pallet," he continued, "and then have the operators fingerprint every piece of lumber as they placed them in the Champion to continuously re-grade the material during assembly. All in all, we developed about four different quality inspections before we got it right."
"A lot of people just want to put their lumber through their saws, send it through their nailers, and ship it," the manufacturer observed. "Well anyone can do that. But when it comes down to this type of work, anyone can't do it. This type of work has become our bread and butter. Sure, it's difficult and there are a lot of set-ups, but it's very steady week in and week out, and it has been very satisfying to build such a great pallet, and get paid fairly to build it."
"Roger Christiana, Pallet Alliance production manager, reflected upon the challenge of maintaining such a high level of quality: "We just keep the very specific things that make it a great pallet front and center, and we never deviate." Roger then concluded with emphasis, "Our manufacturers know what they have to do, and they just do it."
The plant buyer added, "If you looked at the number of rejections we'd gotten through the years, and if you looked at the resultant internal costs versus the consistency of design we've now achieved, you would see that we've actually seen overall reductions in real costs. Although the up front cost of the pallet was higher, the overall total cost to the company has been lower. People just don't get that."
The buyer then continued, noting that industry is in an environment today, "where you have to lower overall cost all the time. But in order to do that," he said, "you have to start with a product that does the job it was designed to do before you can establish a true benchmark cost basis. Once you've done that, then both supplier and buyer can work together to lower both of your costs, and it will work for all parties involved."
The last phone call I had with Paul Messinger caught him traveling to meetings back on the West Coast. I thanked him for his time and access to all the different customers and manufacturers that have helped tell this story, and asked him if there were any last thoughts he wanted to share.
"People tell me all the time," he mused as the noise and hubbub from the airport crackled through the cell phone connection," that the goal in business is to make money. In my mind, the only thing that really works and really gets it done whether it's in business, or in life, or in anything is the desire to simply do great work. I've found that if the focus is simply to do great work, then the money part will take care of itself because your values will have value."
"To me," Paul continued, "great work in the pallet business is the shared outcome of a process where the customer gets the right product at the right price, where the manufacturer builds the product right for the right price, and where we as facilitators are able to have our value recognized and fairly compensated as well."
"It all starts with collectively challenging ourselves to do great work, and accepting nothing less."
For me as an Industry journalist, the two months spent talking to customers and suppliers of The Pallet Alliance offered a powerful glimpse at how the Industry can redefine itself to add greater value for customers, and become indispensable to them in the process - a process steeped in cooperation and optimism between customer, manufacturer, and facilitator alike. I guess it all comes down to what Paul says about the task of reinventing the customer's expectations: We don't need to convince the customer; all we need to do is convince ourselves.