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Partnering to Grow:Two Northeast Pallet Companies Form to Offer One-Stop Shop for Customers, Rely on Mona Tracy of Universal Machinery Sales
Partnering to Grow: Two Tri-state area pallet companies decide to form a new full service recycling company called Greenway Products and Services LLC. Dominick Davi and Tony Fabrizio explain why one company is better than two and provide a module that others may choose to follow.
By Chaille Brindley
Date Posted: 6/1/2015
Partnering to Grow:
Two Tri-state area pallet companies decide to form a new full service recycling company called Greenway Products and Services LLC.
Sometimes one is stronger than two. That is the lesson behind the recent decision by two pallet companies in the Northeast, Pallets Unlimited and Generated Ltd., to launch a new venture. These two companies have joined forces to start Greenway Products and Services LLC, a full service recycler serving the Tristate area of New York, New Jersey and Connecticut with two locations.
Facing a tough core market, high logistics costs and operational challenges, both companies decided that instead of going against each other it would be better to partner up as a strategy to fuel growth.
Tony Fabrizio, president of Generated Ltd. and current CFO of Greenway, stated, “We did business back and forth for over five years. And we both had a different niche in the market…The major reason for our partnership is growth, we can do more things together than separately.”
Fabrizio explained, “There are only two ways you are going to grow in this industry. Either you are going to have to get an infusion of capital, which means you are going to have to borrow money. And right now banks are not lending. Or you are going to acquire business by mergers and partnerships.”
Generated mostly did 48x40 repair while Pallets Unlimited did a lot of specialty pallets. Also, Generated has developed a strong recyclables business helping customers dispose of waste plastic, metal, shrink wrap, corrugated, etc.
Fabrizio added, “We are looking to become a more full service recycling company. At Generated we had done corrugated and plastics recycling. We can offer our customers more services. And from a logistics standpoint, it works out better for customers having two locations.”
Dominick Davi, former president of Pallets Unlimited and current president of Greenway, commented, “The Greenway formation has allowed us to become a lot bigger overnight, and by growing in size, we are able to go after and service bigger accounts. A great part of the formation is that we can offer our customers more services.”
Fabrizio clarified, “Sometimes bigger is better. Pallets are hard to come by; you can’t easily find cores right now. And if you are going to go out to some of these bigger locations, they don’t want to deal with you if you are a small mom-and-pop company.”
The two companies formed Greenway in February 2015. Each company brought strategic skills to the Greenway formation, and the idea is that over time some of those services will be replicated at the other facility. The Pallets Unlimited plant was located on Long Island, New York while the Generated plant was situated on Perth Amboy, New Jersey.
Having the right machinery in place and coordinating the plants with software has been critical for the new venture to work. One of the major suppliers to Pallets Unlimited has been Mona Tracy of Universal Machinery Sales. Her expertise and solid equipment has helped Pallets Unlimited be successful. Also, the use of the Palmate™ enterprise resource planning (ERP) software is critical to run two plants working together as one. More details on these two suppliers and their products will be covered later in the article.
Focus on Your Strengths and Location, Location, Location!
Running a company can be hectic, and the pallet industry is not for the faint of heart. Under Pallets Unlimited, Dominick Davi and his father, Paul Davi, had opened a second location a number of years ago in East Orange, New Jersey. Dominick Davi recounted, “Trying to run two plants was difficult, and it stretched our company leadership pretty thin. My father is 71 years old, and he works hard, long hours. I wanted to give him some freedom to work less and focus on the things that he does really well.”
Fabrizio explained, “Integration allows the key company leaders to focus on what we are good at doing. I am more of an inside guy and do dispatching and manage production. Dominick handles PR, computers, accounting and other business functions. Dave D’Amiano is out there in sales. Bob Chrisman and Paul Davi both work on equipment because we have lots of saws, forklifts, grinders and heavy equipment.” The five owners of Greenway are Dominick Davi, Paul Davi, Tony Fabrizio, Bob Chrisman, and Dave D’Amiano.
One thing that has really helped the integration process is developing job descriptions for each partner/owner. Fabrizio suggested, “The job descriptions helped us divide the major responsibilities; that way we know what each one of us is supposed to cover. This has helped a lot with the transition.”
Davi suggested, “The whole reason for the formation is diversification. Generated does cardboard, plastic and metal recycling in addition to mulch, and my company brought specialty pallet, computer and manufacturing expertise to the partnership.”
Both facilities have their strategic capabilities. In some cases those functions may be copied at the other location. A lot depends on the logistics, shipping costs and customer demands. Even though the two facilities are not that far from each other, heavy traffic congestion makes shipping in the area very difficult. Currently, Greenway sells pallets in New York, eastern Pennsylvania, New Jersey and southern Connecticut.
Davi put the logistical challenge in perspective when he said, “It’s a big area to cover. And it is an extremely tough challenge. In tolls alone we were paying almost $20,000 per month going back and forth between New York and New Jersey. If you send a driver from Long Island across into the Bronx, you basically won’t see him for the rest of the day. The logistics and traffic challenges of transporting pallets in this area is costly and time consuming. By having two facilities we can optimize our delivery network to the nearest location.”
The Formation Process
Combining two companies together is a lot like a marriage. You have to reach a mutual commitment and share a common goal to make it work. There will be differences and learning to celebrate those and use them as a strategic advantage is a must for the integration to be successful.
How do you combine two pallet companies? It all started with a basic partnership agreement and reconciling the books. The owners worked out a formation agreement with the assistance of a lawyer and accountant. Davi said they had to reach a level of compensation and shared responsibility that all the managers could accept. Once the ownership agreement was reached, the owners and managers had to work to synergize basic operations.
The Generated facility operated based on a combination of piece rate and hourly pay depending on the job done by the employee on the floor. By contrast, Pallets Unlimited paid 80% of all production workers on a piece rate basis only. Fabrizio explained, “We decided to change from paying on an hourly basis for some pallet functions to completely a piece rate basis for all production workers at both plants. We also took some of each other’s controls and procedures to make a better overall system.”
Then the two companies had to combine sales, accounting, delivery and order information to ensure that customers noticed no dip in service. This involved reconciling the data and deciding which facility would be best to service which accounts for various services and products. Fabrizio recalled, “The first two weeks were a little hectic getting scheduling down. But overall, there have been a lot fewer headaches and problems with the integration than I expected.” Greenway currently employs 153 people and uses 17 tractors and over 200 trailers.
Persistent snow storms in February presented challenges, but the company didn’t receive any customer complaints because the combined resources and closer proximity allowed them to serve customers better.
A key resource for coordinating the integration is the use of the Palmate ERP software by Automated Machine Systems (www.palmateerp.com). This software is designed to run the business operations for a pallet manufacturer or recycler including billing, production, sales, shipping and much more. Davi stated, “Palmate has definitely been a big help as we have integrated the two companies. It has helped streamline everything and we can see what both plants have to do to better serve customers.”
He added, “We are only using 30% of Palmate right now. The reports are great in terms of inventory, deliveries, etc.” The next step in the process for Greenway is to begin using the plant floor module of Palmate to better track inventory and production. And then the company will give truck drivers handheld devices so that customers can electronically sign for deliveries. Davi said, “This way paperwork doesn’t go missing and everything gets billed immediately. It will be more streamlined and help our cash flow.”
Having moved from a company where everything was tracked in a more manual, low-tech process, Fabrizio raved, “From a management standpoint Palmate is fantastic, as somebody who didn’t have this in the past, the software has made our job much easier.”
Choosing the Right Equipment Makes All the Difference
Both of the companies before the Greenway formation had worked to develop a strong collection of equipment that allowed them to efficiently handle their operations. You want dependable machinery that won’t break down.
One of the key suppliers for Pallets Unlimited has been Mona Tracy of
Universal Machinery Sales (www.universalmachinerysales.net). Davi stated, “The equipment that Mona Tracy supplies is great. We have never had to purchase parts for any of her equipment.” Dominick raved about the Nail-Ease jig. He said, “One operator can make 300 or more pallets per day, which is pretty amazing.”
The Nail-Ease can easily be adjusted to make different sizes, and it can produce sizes as large as 50”x50”.
“If you are going to produce one or two sizes, the Nail-Ease is a great little machine to boost production over what an operator can do with a nail gun alone,” claimed Davi.
The flow of the Long Island plant starts with four bays where used pallets are brought into the facility and sorted into four categories. All the pallets to be dismantled are sent to the tear down department. Currently, the plant runs three dismantlers during the day and one at night. Two are Run-A-Gade systems supplied by Mona Tracy of Universal Machinery Sales and the third unit is a Smart bandsaw.
Some of the equipment supplied by Mona of Universal Machinery Sales includes Revo revolving work stations, Nail-Ease nailing stations, and Run-A-Gade bandsaw systems.
Revo revolving work stations, whether being used for new pallet construction, repair of pallets, or remanu-facturing, allow operators to increase production by as much as 30% even though less physical exertion is used. The process of air gun nailing is greatly increased since top rotation provides ready access to all sides. The Greenway operators really like working with these tables.
The Nail-Ease nailing station is a stand-alone unit that provides excellent production for all pallet sizes and specialty pallets. With a gantry to support the nail gun, there is less weight for the operator to handle all day long. Little space is required due to the up-right stance of the table, and two tables can work right off the same inline of material. A pallet can be produced in less than one minute.
The Run-A-Gade bandsaw system is a heavy-duty pallet disassembler. This “tank of a system” handles even heavy-duty pallets. The take away conveyor saves the cost of one operator. As Greenway continues to grow, it plans to add an additional machine to work in tandem with the first. Mona said, “The savings in blade cost alone pays for the machine. The Run-A-Gade makes money for its customers every day.”
Davi added, “We use the pry bars that Mona supplies; all my repairers love them. They are sturdy and remove the boards easily.”
Then dismantled boards move into the cutting room where workers use two chop saws and a notcher that are provided by Mona Tracy. Three trim saws are provided by Saw Services.
Dominick says “Mona’s equipment is very reliable. Whenever we look for machinery we look to her first.”
All the dismantled pallet lumber goes to their 14 pallet builder stations to make customized pallets or to repair standard sizes. Pallets that cannot be reclaimed are ground up and sent to the Perth Amboy facility to be converted into mulch. Currently, the Long Island facility employs about 60 people. It runs both a day and a night shift.
The Perth Amboy plant runs almost the same except it has five breakdown machines, three trim tracks, and three chop saws to cut wood down to size. Fabrizio said that this facility will also bring in new lumber if it is going to make a combo or new pallet for a customer. This facility has 22 workers repairing and/or building customized pallets.
In terms of heavy equipment, the facility has a Vermeer tub grinder and a Vermeer horizontal grinder. In the season Greenway can produce five trailer loads of mulch a day. In addition to manufacturing mulch, Greenway provides a full service mulch supply business by shipping mulch to customers and spreading it for their convenience.
Increase Production by Adding a Night Shift
Pallets Unlimited has always run a night shift although the number of employees depends on the season. Running a night shift is something that Generated did also although many pallet companies report difficulties making one work.
Fabrizio suggested, “The key to effectively running a night shift is to have the right foreman in place to manage everything. We take some of our senior guys and give them an opportunity to advance and lead that shift.”
Davi agreed, “Our night foreman has been with us for a long time. We have the one key person who helps manage everything on the night shift. It all comes down to the efficiency of your supervisor. The night crew allows us to have more inventory and respond quicker to customer requests.”
And with the traffic congestion, having a night crew allows for deliveries and production to be made at off-peak time periods.
If you need to boost capacity, a night crew might be the answer without having to add much extra cost in terms of land or machinery. The key is to find the right managers and workers, which can be easier said than done.
The Greenway formation began with a single vision to become a one-stop shop recycler capable of servicing any need in the Tristate area. Both allows customers to simply put all their recyclables, such as cardboard, shrink wrap, plastic, metal and plastic pallets, in one trailer as an added convenience.
Fabrizio commented, “It is the service that you are going to give the customer that differentiates your business.” By offering greater levels of service, Greenway is making itself indispensable for customers and much harder to replace. And this service allows Greenway to tout its environmental credentials.
Fabrizio claimed, “We are a 100% recycling company. We recycle everything from wood to plastic to corrugate to even the aluminum cans in our break room.”
Although the Greenway formation hasn’t been easy, both sides agree it is worthwhile. And the big winner in the end is the customer. Fabrizio proclaimed, “Our customers will notice improved service thanks to the strengths of the combined companies. And this will only get better with the software rollout and more integration.”