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A Behind the Scenes Look at RM2 and Its Pultrusion Pallet Manufacturing Process
RM2 Innovation: Discover how the unique pultrusion pallet manufacturing process works for RM2 and what makes this pallet company distinct in the market
By Rick LeBlanc
Date Posted: 6/1/2016
Discover how the unique pultrusion pallet manufacturing process works for RM2 and what makes this pallet company distinct in the market
As a publicly traded manufacturer and pool provider of its sleek composite BLOCKPal pallets, RM2 has caught the attention of the investment community and the material handling world alike. The Luxembourg-based company raised over $214 million in its 2014 initial public offering, wiping the slate clean of its existing corporate debt, and providing the funds to establish its sophisticated manufacturing facility in Ontario. Recently, the company announced that it was shifting much of its production to China in a joint venture which will dramatically reduce its cost per unit.
To date, RM2 has invested more than US$60 million in research and development on pallet manufacturing technologies, pallet design and “pallet pool supply chain economics.” BLOCKPal pallets have a life expectancy of 150 trips, based on testing at Virginia Tech.
“The company looked initially at rotationally molded pallets,” David Kalan, senior vice-president of marketing and business development explained. Rotational molding was the inspiration for the RM brand. “But they came to the conclusion that a pallet would be built stronger with the pultrusion process.” Hence, RM2 was born.
Importantly, the pultrusion technology creates profiles which can be milled and fastened, providing the flexibility to make pallets of various sizes, as is done with wood and by certain niche extruded plastic pallet providers. Kalan noted that with molds worth a half million dollars each, the flexibility to build a range of sizes without molds was an important consideration for the company in choosing pultrusion as a production process. Additionally, the design allows for repair through replacement of damaged components.
RM2 Enters Alliance with Zhenshi
RM2 announced in early April that it had entered into a strategic cost-saving manufacturing agreement with Zhenshi Holding Group Company Limited of China. Zhenshi is a major shareholder of China Jushi Co. Ltd., one of the largest manufacturers of fiberglass in the world. RM2 production will take place in Tongxiang in a Zhenshi-owned facility, and adjacent to the principal Jushi fiberglass manufacturing plant.
The move was made to reduce production costs, as well as to position itself in the Chinese market. According to Kalan, manufacturing at a lower cost in China will make the RM2 pallet attractive to a larger number of customers.
The relocation offers many strategic advantages, Kalan noted, a move that will bring substantial savings in its mission to continue to drive down CPU.
The transition benefits RM2 in the local and global markets. The new plant will eliminate inbound glass transportation, and allow RM2 to ship pallets into the North America market at an attractive price, according to Kalan. Overall, the cost reduction opportunities dramatically outweigh incrementally larger shipping charges.
While the Chinese relocation offers a more attractive labor market, Kalan is especially excited about the potential for additional automation in the RM2 pallet manufacturing process. Their new partner relies heavily on robotics and advanced technologies in its other operations.
RM2 is also exploring opportunities for shipping RM2 pallets to North America under load as a tactic to avoid the cost of shipping containers full of pallets.
The group is also bullish on prospects for sales within China. “We believe that large parts of the Chinese logistics chain will become palletized over the coming years,” commented President Zhang, Chairman of Zhenshi and President of Jushi, in a statement. “We are convinced, after our own extensive research, that the BLOCKpal is the optimum product in the market. Partnering with RM2 allows us to seize first mover advantage as China moves to palletize its economy in a region of the world with limited forestry resources for the manufacture of wooden pallets.”
Initial production from the factory in China is expected to be deployed in Q1 2017.
The Pultrusion Process and Pallet Assembly
The RM2 pallet production process includes four steps. These include pultrusion, milling, assembly, and the gelcoat application designed to deliver an appropriate coefficient of friction.
The manufacturing process starts with the flow of materials into the pultrusion equipment. Before relocation to China, there were 26 pultrusion lines at RM2’s Woodbridge, Ontario plant, all located side by side on one side of the building. The following description is based on my visit to the Ontario operation earlier this year, however production at the new location will be very similar.
Three main inputs combine to form the durable pallet material that is pultruded. These include glass string, glass roving, and polyurethane resin, which enter the die and are subjected to heat. The glass string comes spooled on bobbins, which are placed side by side on shelves in metal carts. The string from one bobbin is tied to the next, throughout the cart, and onto the next cart, so there is no disruption in production as the string is drawn into the pultrusion die. There are numerous strings that are drawn at the same time, and they converge into the die. The roving looks somewhat like a strip of gauze. It unravels from a roll and is also drawn into the die. The glass is impregnated with resin and heat is applied. The pultrusion equipment pulls the profile from the outbound end of the die, and the profile slowly emerges. After a length is drawn out, it is cut to approximate length and accumulated in a cart.
The extruded profiles are then rolled to the nearby milling area where they are cut to precise length and notched as necessary. One of the things that sticks out to the visitor is the number of robots involved in the process – both in milling and assembly. ABB robots provide precise waterjet cutting of the components, which are then manually stacked and moved to the assembly area. The waterjet process prevents the creation of excessive glass dust during milling.
The assembly is widely automated with the aid of ABB robots and Kuka robots for automated placement of components and application of adhesive. There is still some manual placement of elements in jigs required in the current system, although there is the potential to automate this task as volume increases.
Completed pallets are taken to the gelcoating room for application of the anti-slip gelcoat to top deck boards, as well as the underside of some components to ensure good contact is established with fork tines. The gelcoat provides a superior coefficient of friction, Kalan stated, although initially, people sometimes make the incorrect assumption from the high gloss appearance that it will be slippery.
Responding to Customer Feedback
Initially, the company used a powder coating to prevent pallets from being too slippery, but in September 2015, announced that it had switched to a gelcoat product in response to customer feedback. It was a move that temporarily impacted production and revenue as the changeover was made. Other aspects of customer feedback from printing industry participants included concerns about fiberglass splinter exposure from damaged deck boards, as well as frustration about the extra storage space required for stackable rather than nestable plastic pallets that are offered by a competitor.
Kalan assured me that those original customer items have been successfully addressed. He explained that pultrusion is as much art as science, and it took a little time to fine tune the material mix to eliminate the problem. Likewise with empty pallet storage, the company has increased its pickup schedule to alleviate empty pallet storage pressure.
“Several printing industry customers have limited storage space, so we had to pick up more frequently,” explained Kalan. “It is something we are more than willing to do.”
RM2 currently has 15 customers ac- cording to one financial review and are an approved pallet vendor for Loblaw, the leading Canadian grocery chain. Kalan stated the company is working with the top pallet users in the world to implement the Total Pallet Solution, where RM2 identifies opportunities in existing supply chains to improve production, cut costs and meet sustainability goals. Beyond North America, the company also has a European sales team and is looking at China as an enormous potential market.
Kalan admits freely that as an expensive pallet, the sales cycle can be longer. “Things have not moved as fast as we would have liked,” he said, “although we are close to closing a few deals which would suck up all of our production for the next two years.” Luckily, he added, the company’s investors understand the time required to get established and have been very patient.
RM2, according to Kalan, is looking for closed loops and more controlled settings than a national pool in the sense of CHEP or PECO. “There is enormous risk involved in opening up a national pool,” he stated. As a veteran of the first version of iGPS, he speaks from experience. Supplying private label programs is one option the company is exploring.
Kalan believes that retailers will be increasingly looking at establishing their own pools to help reduce their pallet costs versus current rental programs. While the cost of rental is paid by the shipper, he stated that the rental fee is rolled into the cost of goods. “And I guarantee there are vendors who put a markup on their pallets,” he said.
“I can foresee the day when there are more company-owned pools,” Kalan observed, “either retailer owned, or dedicated 3rd party on behalf of the retailer.”
For any publicly traded entrant into the alternative pallet market, there is always the challenge of tempering the expectations of shareholders while taking the time to find profitable opportunities. In cost-per-trip models, Kalan acknowledges that there are “a lot of moving parts” in terms of logistics costs, and it is important to get them right.
Kalan is optimistic about the future for RM2 but suggests that they are no threat to the wood pallet market. “Wood pallets aren’t going away, not in my lifetime,” Kalan stated. “There are too many needs. There are plenty of opportunities for everyone.”