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Back to Basics: Prepping for Emergency, Odd-Sized Orders Can Secure Specialized Business, Decent Profits
Columnists Clarence Leising and Dick Burns explain how you can save the day for your customer and make a decent profit off odd-sized pallets. It all starts with the proper strategies for sourcing scrap lumber.
By Clarence Leising & Dick Burns
Date Posted: 11/1/2011
††††††††††† Everybody knows that service is the name of the game in the non-pooled pallet market. Customers define service primarily by being able to bail them out of a jam. If you can put together odd-sized pallets to fill emergency orders at the last second, you can secure major customer good will as well as decent profits. Customers in need are less likely to argue over price, especially if you can meet the demand at what seems like a fair price.
††††††††††† Just because you get an emergency call from a customer doesnít mean that you can really meet the demand unless your operation is setup to be nimble and respond to odd-sized requests. It all starts with having plenty of scrap lumber to cut into whatever size you need. This material can be obtained from the non-48x40 pallets that you obtain from industrial, contracting or building supply type accounts. If you can find pallets that have limited use, you can source good-looking material that can easily be broken down and rebuilt into a new pallet.
††††††††††† Various sizes can be disassembled for parts, sorted and stored out back. It is good idea to keep a couple of bins on the line that are always filled with uncut materialĖwhether it is all five-eighths, three-quarter or half-inch random length. You donít have to save everything. But it is generally best to keep as much scrap lumber as possible from disassembled pallets. That material can be used on bottoms of new pallets as long as it is all the same thickness.
††††††††††† If a customer needs something odd-sized in a hurry, you can go back to your scrap bins, find material that is the same thickness and cut it all down to the right size. Itís the same amount of procedures, itís the same amount of handling, so it doesnít matter about the waste pieces youíre cutting off. Well, at least it doesnít matter as much with scrap as it does with new material, especially cants.
††††††††††† This process allows you to maximize the use of scrap material. If you donít maximize what some others think of as throw-away material, youíre crazy. Our operation would save forty-two inch brand new boards on pallets that were used maybe only once. In a minute, we would cut them down to a thirty-six or something like that and use them on a brand new pallet and sell a brand new thirty-six square pallet made from mostly scrap material. Even if you are using new runners, you canít beat the profit margin.
††††††††††† Scrap material may come from your own operation or by cutting apart odd-sized pallets or material that comes in the door that you canít immediately resell. A key part of the equation is not to lose money in the procurement process. You have got to be paid to pick up the scrap, thatís an absolute must. If youíre getting the pallets for nothing and they are dropping them off, thatís fine. But if youíre spotting trailers at certain companies, you need your transportation and handling costs covered at a bare minimum. Although there may hardly be a GMA found in the trailer, if you are equipped to disassemble and efficiently use the scrap material, it can still be valuable as scrap. Letís say you are paid $200-300 per trailer to pick up and dispose of the waste material. That helps you cover procurement costs and provides some financial cushion to account for varying levels of lumber quality in the pallet load. Look for loads that have quality lumber even if they have few GMAs that can be easily resold without processing.
††††††††††† Another major factor to consider is the handling and storage of odd-sized pallets and lumber that you will never resell nor use as is. You canít afford to spend too much time on handling or warehousing lots of odd-sized pallets. You might think, ďWe have to save this for later.Ē But sooner or later, youíre starting to pay for space that will eat up your efficiency and profitability. If you donít need that size and you realistically donít expect to use it, cut it down and use it for half sizes or smaller-sized pallets.
††††††††††† It is important to manage the pace of your scrap inventory. Somebody has to be responsible for it to keep costs down while ensuring you have what you need when you need it.
††††††††††† Taking these basic steps can help you prepare in advance to be the superhero to save your customer in their moment of need. And it can position you to profit from those occasions because you are using good quality, scrap material to do it.