RANCHO MIRAGE, Calif — The Palm Springs area once again provided the locale for the Western Pallet Association’s (WPA) annual meeting. The gathering at the beautiful Marriott Rancho Las Palmas proved to be a pleasant mix of the predictable as well as the surprising. There were more than 50 participants, and they expressed strong support for the relaxed yet informative format.
In the predictable department, the quality of the meeting format, including the program speakers, food and social activities, has been consistently outstanding the last few years, and this year’s recent annual meeting was no exception. The educational program included sessions covering the new International Plant Protection Convention (IPPC) standards, hiring, workers’ compensation and harassment policy issues, and an update on CORE, the new organization of pallet recyclers, and CHEP.
The WPA meeting did have its surprises, however. It all started with a totally unexpected cloudburst one morning that left people scrambling on their way to the first session. By lunch and then the association golf tournament, the weather was replaced by clear blue skies and 80-degree temperatures. The pleasant change in weather set the stage for a peculiar afternoon of golf, including a ball launched through the window of a home, a bird struck in mid-flight, players who had to swing one-handed or from the opposite side, and even a Pallet Enterprise version of ‘A Miracle in the Desert.’ Ed Brindley, the magazine’s publisher and a career duffer, found himself in the unlikely role of playing on the winning team.
Gary Crane New President
The association elected new officers and members to its board of directors. The officers, elected for a one year term, include Gary Crane, president; Greg Vipond, vice president; and Ken Conklin, secretary-treasurer. Ken was also elected to a three-year term on the board. Re-elected to one-year terms on the board were Jay Brickell, Jeff Calavan, Ian Carter, Mark Garnett and Jim Rickey. They are joined on the board by Tom Thayer, who is serving the second year of a three-year term.
The business portion of the meeting included a discussion about what could be done to increase attendance at the annual event. “We have over 75 members, and getting more than half of them here is really very good,” said Dave Sweitzer, executive vice president. “But we want to get even better.” Members discussed ways to stimulate interest, such as display tables for associate members and a compressed meeting schedule, but these ideas received a mixed response. Some associate members want to maintain the informal atmosphere of the meeting format.
The WPA clarified its position with respect to associate members who distribute literature at the meeting by staking out the middle ground: the WPA is neither for nor against the practice. Publicizing the fact that associate members may circulate literature at the meeting might be of interest to some of associates, suggested Jim Whiteside of Vandermeer Forest Products.
Jeff Calavan won an award for recruiting the most new members and Jack Barss was runner-up. The association signed three new members in 2002, Jeff reported, and two more are expected to join shortly. Six members chose not to renew. Jeff noted that recruiting requires broader participation in order to ensure retention and growth of the membership base.
The group also discussed possible program topics for next year’s annual meeting, such as the listing of airborne wood dust as a carcinogen, imports of forest products from South America, and the global response to the IPPC requirements. Members with ideas about other potential topics should contact the WPA.
Golf and Swordsmanship
The WPA meetings are known for their balance of business and well-received social activities, and the tradition continued this year. Foreshadowing the peculiar golf tournament that would unfold later, the social activities started one evening with attendance at Joey & Maria’s comic Italian wedding. The ‘wedding guests’ enjoyed a gourmet Italian dinner while finding themselves swept up in Joey and Maria’s wacky wedding banquet. The next day’s evening banquet featured a great buffet, followed in the morning by the brief rainstorm prior to the business meeting. Later that afternoon the golf tourney was held.
After the business meeting and a return to sunny skies, members took to the Rancho Las Palmas golf course, and the participants had an enjoyable round. Memorable moments included a shot that went through a sliding glass door of a home adjacent to the fairway. Mike Doyle thought he made the errant shot and provided his name and phone number to the homeowner, but a closer examination of the guilty ball revealed that it belonged to Steve Paladino, another member of the foursome. The homeowner tore up Mike’s information and took Steve’s instead.
Elsewhere on the course, Dave Johnson disproved the rumor that only the sliding glass door was at risk when he sent feathers flying, apparently striking a bird in flight with an otherwise nice drive.
At the awards ceremony, golfing director Ian Carter acknowledged Tom Thayer and Dale Ragel for their dedicated play. Tom golfed one-handed; one arm is in a sling as he continues to recover from an injury in an automobile accident. Dale, a right-hander, impressed the field by playing left-handed; the switch was necessary because of recent surgery. As it turned out, Dale was a member of the highly unlikely winning team, joined by Jim Rickey, Jack Barss and Ed Brindley — who prides himself on playing a round of golf at least every five years or so.
Ed’s keen eye-hand coordination was also showcased during the entertainment portion of the awards banquet that night when he turned his talents toward swordsmanship. The surprise entertainment for the evening turned out to be a young man who chops off the top of champagne bottles with a sword. He gave a demonstration of how to deftly chop off cork and surrounding glass without any debris landing in the bottle. The practice developed in France several centuries ago when thirsty horsemen would use their swords to open bottles while in full gallop. Seven people were selected at random to take a turn with the blade. As it turned out, the task was more difficult than it looked, although a few participants — including Ed — managed to remove the top on the first swing.
Import-Export Requirements
In the educational program, Gordon Hughes, executive director of the Canadian Wood Pallet and Container Association, and Edgar Deomano, technical director of the National Wooden Pallet and Container Association, discussed impending implementation of the IPPC requirements for solid wood packaging, including pallets.
The IPPC requirements initially will be implemented for imports. Canada and the U.S. will begin June 1 to implement the IPPC requirements for solid wood packaging entering from other countries. The European Union and China are expected to follow suit a month later although there will be a six-month ‘grace period.’ The June 1 date will impact imports by North American pallet users, but the latter date will have a more profound effect on exporters and their pallet suppliers.
“We have been told by our Canadian government that as of mid-year, North American governments will have a policy in place proposing that all solid wood packaging imported into North America, both softwood and hardwood, must meet heat treating levels of 56 degrees Celsius for 30 minutes to the core of the timber,” Gordon reported.
In the U. S., 1,300 companies have been approved — by one of 11 certification agencies authorized by the American Lumber Standards Committee — to produce heat treated pallets and wood packaging, according to Edgar. In Canada, 350 companies have been certified by the Canadian Wood Packaging Certification Program, Gordon reported.
Some leading-edge businesses already have requested heat treated pallets, Gordon noted. “Chrysler won’t buy pallets unless they are heat treated,” he said. “With the U. S. military, solid wood packaging also must be heat treated.”
Because of the added cost of heat treating, pallet companies will be looking for price increases. Gordon mentioned an Eastern U. S. pallet supplier that heat treats pallets in a portable kiln. The kiln can treat a little over 300 pallets at once, and the company charges about $1 per pallet. Of course, the cost to the pallet supplier to operate the kiln is the same even for a smaller order, and the company charges for the service accordingly. “He gets $300 per charge,” Gordon said. “It doesn’t matter how many pallets he puts in there.” Less dense hardwoods, such as aspen and alder, have similar drying schedules as softwood and therefore will become increasingly important for heat treated wood packaging, according to Gordon.
There was a discussion of fumigation as an alternative to heat treatment. Only finished pallets may be fumigated – not lumber or cut stock, as in the case of heat treating. The fumigant applicator must be certified, but not the pallet supplier. Don Black of Pallet Services Inc. said that fumigation has proven to be a cost effective alternative for his company; 40,000 recycled pallets may be fumigated at one time under a tent, he said.
If any component is replaced on a certified pallet, the entire pallet subsequently must be treated again, according to IPPC requirements. “You cannot say I am going to put a heat treated board on it, nail it on, and send it out,” Gordon explained. “It must be re-certified.”
Ed Brindley noted that some pallet companies seem to be slow to responding to the IPPC requirements. He asked if there was a slim chance that the IPPC requirements would not be implemented. “They are set in stone,” Edgar replied. “The only question is the date. It isn’t a question of if, only a question of when.”
“Some people have been hiding under a blanket and hoping it is going to go away,” Gordon said. “But its not going to go away. That is why we have been promoting it and promoting it.” Canada and the U.S. have had a head start because of restrictions imposed on them by the European Union in 2001, he noted.
Managing Workers’ Comp
Dave Asivido of TOC Services discussed steps a company can take to reduce its workers’ compensation related costs and also limit exposure to harassment lawsuits. TOC provides human resources services to about 520 businesses in Washington, Oregon and northern California, including pallet businesses and other forest products companies.
Workers’ compensation rates are escalating, he said, and in an industry where profit margins are tight, it is even more important to manage workers’ compensation effectively. “Today the landscape is rapidly changing,” Dave said. In Washington, the average rate increase is 29%; for pallet manufacturing, the average rate increase is 42%. Washington ranks 38th in workers’ compensation costs and Oregon, which did not experience a rate increase, is 34th. “In California,” Dave said, “Governor Gray Davis just signed a bill that is going to increase benefits by 2.4 billion dollars.”
Research has shown that the cost of workers’ compensation claims is dramatically higher than the cost of the insurance when all ‘hidden’ costs are considered. The need for managing workers’ compensation costs has never been greater, Dave said. Businesses can do three things to manage these costs effectively: prevent accidents, manage claims, and implement an effective return-to-work program.
Accident prevention begins with a sound hiring program. Tom Thayer recounted the case of a California business that was having trouble retaining employees. TOC recognized that the company was attempting to recruit highly ambitious, motivated people for jobs that were very programmed and tedious.
“How many companies have actually sat down and said, ‘What skills do we really need for that person to be successful and for us to retain that person?’ ” Dave asked. “What has been their previous work history and so on? All those different factors go into it.”
Try to bypass a personnel officer, Dave suggested, and attempt to obtain a written release from the applicant to contact his former supervisor. He also recommended checking references and screening for illegal drugs.
Adequate orientation for new employees helps to reduce accidents. One recent study found that 44% of injured workers had received no safety training. “If safety training is just learning from the person beside him on the production line, how much control do you think we have over what is being learned?” Dave asked. “They may be telling him all of the short-cuts they’ve learned over the last two years, and those short-cuts could potentially lead to injury.” Formal training helps companies control what employees learn. Too often, though, training programs emerge as a response to problems rather than as a pro-active way to prevent them.
Investigate accidents in order to identify hazards and correct them. Dave frequently sees reports that describe the cause of an accident as simply employee error; corrective action may be nothing more than noting that the employee needs to be more careful, and no further steps are necessary. “There is no value in this type of superficial investigation,” said Dave.
“In some of these cases when we get into a nasty claim,” he said, “we’ll go back and interview that claimant, and we start finding out what really happened. And we find out that he never received any training. When you get in there and start doing a thorough job, it is amazing what you can learn. Then you can take that information and take corrective action.”
For example, guard rails may need to be replaced or moved, or hazardous areas such as slippery floors or forklift collision points may have to be redesigned. “Sometimes you can go into a facility and you see a wall with so much paint and rubber marks on it that it looks like a freeway from equipment hitting it,” said Dave, “but no corrective action has been taken.” Some managers are unwilling to act in situations because no one has been injured yet. “It’s basically about taking a serious look at identifying hazards and implementing those controls.”
When a workers’ compensation claim is filed, communication with the injured worker and health care providers is critical. For example, a worker may exaggerate his job requirements to his physician, but his biased account may become the basis for a doctor to decide when he may return to work. “Often there is no intervention attempted by the employer,” Dave said. “There has been no attempt to give a good job description to the doctor.”
Various strategies may be used to facilitate communication with physicians. If they have difficulty getting a doctor on the phone to discuss the case, some companies will actually schedule an appointment to meet with him. Another strategy is to make a video recording of the tasks and activities associated with the employee’s job so the doctor may view it. In smaller communities, employers may have success in inviting the physician to visit the work site to make an assessment. In any event, communication with medical professionals is important, as is providing written documentation of the physical requirements of a job.
A successful return-to-work program for employees who have been injured can provide a seven to one return on funding such programs, according to a number of studies. Dave’s favorite return-to-work story involved a truck driver who had fallen out of the cab and hurt his back. When he was ready to return to work, the company put him in the office to help make some extra sales calls. Within a day or two the company recognized that he had a knack for sales. He became part of the sales force on a permanent basis and turned out to be the best salesman.
“We have lots of those kinds of successful stories,” Dave said. “What we need to do is have top management understand why return-to-work programs are important and to have them aggressively support those types of programs. Find positions that create some value for the employer.”
Accident prevention, claims management and return-to-work programs are more than good business, Dave concluded. They are essential to a profitable bottom line in a business climate of thin margins and rising worker’s compensation insurance rates. “There is a lot of economic incentive there,” he said.
CORE, CHEP
Ed Brindley offered his observations on the recent events surrounding third-party pallet management, and in particular the roles of CHEP and CORE. A lot of trial balloons were flown in the 1990s when it came to attempts at third-party management, he noted. PRANA, Pallet Pallet, FNPR, NPLS, and other business organizations have come and gone. “They weren’t particularly successful,” said Ed, “but there was a reason for what they did. They recognized that they had to hold the customer’s hand a little better. They had to look after customer needs more completely.”
“I am not anti-CHEP,” Ed added “I am not against the concept of pallet rental. I am not against customers getting better value.”
However, he has had concerns with the way CHEP has been managed. “Over the years,” he said, “when we have asked competitors to CHEP why they think they can go up against them, they say, ‘Because their customers aren’t happy with them.’ ” The beginning of anti-CHEP sentiment surfaced after a few years, he remarked, when the pallet rental company sent a letter to pallet recyclers, advising them that it owned the blue CHEP pallets.
Some of the Pallet Enterprise staff recently met with a supplier and a CHEP executive who wanted to understand recyclers better, Ed recalled. The CHEP executive apparently did not understand that many recyclers pay for inbound CHEP pallets plus incur handling costs. “Their program to compensate for cores so far has been weak in my opinion,” Ed observed, “but they are trying to improve it.”
If CHEP can tighten its pooling system, it likely will look at plastic pallets, according to Ed. “They are not married to wood,” he suggested. “They are married to the pallet.” CHEP is currently testing such innovations as radio frequency identification (RFID) and plastic deck boards, he noted.
The stock price of Brambles, CHEP’s parent company, is depressed due to millions of lost pallets in Europe, Ed added; he pondered how many pallets the company has lost in the U. S. and what impact such information would have on the stock price.
Another complaint the pallet industry has is that CHEP some times and virtually without warning has halted new pallet production at its various suppliers. “It is fairly common to have operations people in the field having suppliers go full bore, but then after a sudden meeting to completely stop production,” Ed said. There seems to be inadequate forecasting to help suppliers optimize their production schedules, he added.
Ed remarked briefly on the legal case of the young man from Ohio who sold CHEP pallets on eBay while working at a public warehouse. After being initially charged by CHEP, a lawsuit subsequently filed by the young man was settled out of court. Under the terms of the settlement, he was not allowed to discuss the case with Pallet Enterprise or to participate in the magazine’s Internet chat room, the Pallet Board.
“Until now there has been no formal opposition (to CHEP) from pallet recyclers,” Ed noted. “Individual companies are too small, but if you are a stubborn bulldog, you can have a splash in the pond.” Such has been the cases of Edgar Lozano of Atlas Pallet in Texas and Sam McAdow of Buckeye Wood Products in Ohio, who have been embroiled in legal disputes with CHEP.
Sam is a respected lawyer and hired the best legal firm in Ohio to represent him in a lawsuit brought by Buckeye against CHEP, Ed noted; meanwhile, CHEP hired another top law firm to defend itself against Buckeye. The case is scheduled to go to trial in May. Buckeye has received attractive offers to settle the lawsuit out of court, according to Ed.
“Sam’s law firm is very confident of his chances of winning,” Ed said. “If it wins, what does that mean? CHEP will have to negotiate more, play ball in a bigger way.”
Don Black, representing CORE, added that a court order prevents either law firm in the dispute from releasing information while pre-trial proceedings continue.
“A lot of it comes down to ownership of the pallet and compensation,” said Ed. “What can we do to make the white pallet system better and so that it doesn’t subsidize CHEP?”
“As for CORE, it is the only group that has said that it is going to do something,” Ed said. Core does not intend to compete against other trade associations, he noted. CORE will facilitate strategy sessions, bi-monthly conference calls and other services.
“I’m not against CHEP,” Ed concluded. “If it had managed its business in a professional manner, we could be kissing cousins.”
Next year’s WPA annual meeting is scheduled once again for Martin Luther King Day weekend in February at the Marriott Rancho Las Palmas. My prediction: it will be another good one.
