Earlier in the decade, the Cement Association of Canada (CAC) embarked on its sustainable development program, and the topic of pallets came into the spotlight. At that time, only about 10% of wood pallets used to transport bagged cement in Ontario were being recycled, and the initial goal was to increase that rate to 50%.
Generally, pallets used in the North American construction industry can sometimes pose retrieval challenges. Small concentrations of pallets tend to get scattered across various construction sites, and delivery trucks may not necessarily return to pick them up.
The cement industry uses well over 100,000 new pallets annually in Ontario. One of the factors that previously inhibited recycling pallets for bagged cement shipments was the lack of standardization among the four cement companies that operated in the province. The cement makers used similar pallets, but there were enough differences so the pallets could not be used interchangeably among the companies, which restricted opportunities for recycling.
“Consequently, there was a lot of unnecessary waste,” said Holger Larsen, the administrator of the cement industry pallet program.
During early discussions with the Cement Association of Canada, Stewart Richardson of Thomco Material Handling, former administrator of the Canadian Pallet Council, suggested that recycling could be improved if the cement companies agreed to use a common pallet. A common pallet would make it easier for recyclers, who only would have to recover and process one type of cement pallet instead of four. Recovery and retrieval could be improved by communication with pallet recycling companies, who would benefit from more business.
The standard chosen by the cement makers was a 40×48, double-faced, stringer pallet with 2×4 stringers and seven, flush 4-inch deck boards on each face. It is typically manufactured with SPF lumber although aspen is a good alternative. The outside stringers are painted green with a white stenciled message, ‘Cement Recycles,’ along with a toll-free number that people can call to have pallets retrieved.
The phone calls go to Holger, who has managed the program on a part-time basis since it was launched in 2004. The calls help Holger facilitate the retrieval of about 2,500 cement pallets annually.
“In keeping with the Ontario cement industry’s focus on environmental initiatives, the CAC has developed a comprehensive and effective pallet return, recycling and re-use program that is serving the province well,” said Wayne Dawson, association vice president for Ontario. “Pallets are re-utilized in a cooperative effort between the bagged cement suppliers, distributors and the pallet recycling industry that has resulted in effective waste diversion and reduced wood usage.”
A key reason for the program’s success was obtaining the involvement of the pallet recyclers. “Initially there wasn’t any kind of recycler concept in place,” said Holger. “So what I came up with was this: if you guarantee those recyclers a market, they are going to come up with a way to get those pallets. Recyclers normally have a group of ‘pallet pickers.’ Once you put the word out there that you will buy a certain type of pallet, such as the cement pallet, the pickers are out there looking for them, and they bring them back to the recycler.”
With one standard pallet instead of four different ones, the cement pallets accumulate faster at the recycler. Because the cement pallets are commonly used throughout the province, there are more potential markets for them.
One recycler who has been very supportive of the cement pallet program is Vijay Kones at S&B Pallets, a new and used pallet supplier with operations in Scarborough and Mississauga, Ontario. Vijay has benefited from increased business the cement pallet program has created and noted that there is a steady demand for the green pallets. He recycles 100-200 per month and would like to do more.
One of Holger’s key roles is to perform quality inspections at recyclers, who are inspected twice yearly. Suppliers of new cement pallets typically are not inspected unless it is a new source or if there has been a request from a cement company. “If there is a problem I could be there a lot,” Holger said.
Aside from agreeing on a standard pallet, the companies in the cement association are independent. “All of the companies are totally independent and fiercely competitive,” Holger emphasized. “That is one of the hallmarks of the association. They are very competitive for market share, but they are all willing to follow the guidelines for the industry’s environmental initiative.”
Ironically, the program is a victim of its own success. The pallets are in such demand by cement industry customers, such as companies that make concrete blocks and building material distributors, that only about 20% of the pallets actually make their way back to the cement manufacturers. Typically, the cement companies build the cost of the pallet into the product price, and their customers take custody of them. Concrete block manufacturers and building material distributors usually have well established pallet debit-credit systems in place with their customers. On average, a cement pallet is used for 4.5 trips by building material distributors delivering to their customers after arriving under load with bagged cement, according to Holger’s estimation.
One company that has been very supportive of the cement pallet recycling program is at Blair Building Materials Inc. in Maple, Ontario, which is near Toronto. At Blair, Dante DiGiovanni pointed out that the deposit that concrete block companies pay for a pallet may be greater than the profit that Blair can make from selling the blocks on it, so if the pallet is lost, it is an expensive loss.
Blair has taken a number of steps to improve the return of pallets to suppliers. For example, pallet information is recorded on invoices and in a proprietary pallet tracking computer program. The company also developed an incentive program for delivery drivers to recover pallets. Dante joked that the incentive program is working too well when his shipper complains that drivers are late returning because they are waiting for empty pallets. In recent years Blair has increased pallet recovery to its suppliers from 15%-20% to over 60%, resulting in significant savings.
When distributors require a $15-$20 deposit per pallet, they typically enjoy a return rate of about 95%, according to Holger. Customers sometimes buy used cement pallets from recyclers in order to get back their deposit.
The block companies and building supply businesses — rather than the cement producers — typically buy most of the recovered cement pallets from pallet recyclers. Recyclers also sell a significant amount of the 40×48 cement pallets to customers in other industries that utilize the same size pallet.
Pricing of the cement pallet is purely market driven. New pallets have ranged from $12-$14 (Canadian) while used pallets usually sell for 40%-50% of that amount, according to Holger.
Having monitored the quality of cement pallets now for three years, Holger has concluded that the key factors for quality in pallet recycling appear to be supervision and management. “The guys that are able to manage, to manage their operations well when production levels are at their peak during the summer, and given the difficulty they are having finding people and using students and part-time help — that’s when the supervision level is critical,” he said. “The ones who have good supervision and quality control are the ones who tend to hang onto their contracts. The ones who don’t have the good management system and the good quality control system are the ones who seem to get themselves into trouble.”
Holger was no stranger to the pallet industry when he took the helm of the cement pallet program. He is a former distribution executive for Oshawa Foods and has been active in the Canadian Pallet Council, including a stint as president. He also worked in Canada and the U.S. for Ford Motor Co. and Clorox Co. He is a graduate of the University of British Columbia’s transportation and logistics program and added an MBA from the University of Windsor while working for Ford.
A small proportion of cement production is exported from the provinces, and the pallet recovery hotline has received a few calls from people in Quebec, Detroit and Chicago. When that happens, it is clearly beyond the reach of the recycling network in Ontario, but Holger tries to put the caller in touch with a local pallet recycler.
The Ontario cement pallet pool provides an excellent example of how fierce competitors in the same industry can agree to a standard pallet that will increase pallet recycling efficiencies, provide a valuable service to customers and help meet broader environmental goals.
