How do pallet recyclers manage their inventory and operations on their yard to maximize efficiency? How do they balance efficiency with having sufficient inventory on hand for those customers who order on a regular, periodic or seasonal basis?
To answer those questions and others, we turned to a couple of large pallet suppliers that deal with a lot of customers and handle a large volume of used pallets.
Pallet Consultants, with headquarters in Pompano Beach, Florida, has three facilities in Florida and two in Georgia. The company also partners with other pallet companies throughout the United States to serve customers.
Pallet One is based in Bartow, Florida, but has facilities in Florida, Alabama, Georgia, Indiana, Maine, North Carolina, Texas, Virginia and Wisconsin. It is the largest new pallet manufacturer in the country although it also has a large used pallet business.
Executives from both companies shared some of the insights their companies have into managing pallet inventory and managing yards.
At Pallet Consultants locations, inventory is typically stored by size, grade and type of pallet, according to Brian Groene, president of operations. Inventory is grouped in blocks, so each block contains pallets the same size, grade and-or type. GMA pallet inventory is stored by grade. Certain specialty size pallets are stored together.
Many customers use GMA style 48×40 pallets, so they are always kept in stock – raw materials and finished goods. Custom pallets are kept in stock for customers who order them on a recurring basis; smaller orders or infrequent orders of custom pallets will be assembled as needed. The company also has some customers for whom it provides repair and return services for custom size pallets. Pallets for those customers are always in stock and kept segregated from other inventory.
“All inventory is stored so that it is easy to rotate and keep all of the pallets as fresh as possible,” said Groene. “For quick-turning inventory, the pallets may never leave the docks and are loaded directly into trailers.”
The company follows local and state fire regulations that may impact pallet storage, and facilities get an annual visit from the local fire marshall. Inventory stored outside is kept 30 feet or more from buildings, and the yard is configured with lanes so fire trucks would have access in the event of a fire.
The company also takes additional steps to prevent fire, noted Groene. “We have a fire walk at the end of every day to check for any evidence of smoldering at all locations. Machinery is checked and signed off that it has been inspected and completed by area.”
The company strives to minimize handling of incoming cores, said Groene. “We try to process incoming cores as they come in. In the best-case scenario, the cores go from the inbound trailers straight to the repair lines. If we have excess inbound cores, they will be stored on the yard and rotated into the repair lines.”
In addition, the company tries to store as much inventory as possible inside, which helps minimize handling and makes loading easier. Some customers, particularly those that ship on food-grade pallets, require their pallets to be stored inside and kept dry at all times, explained Groene. “We also will pre-load trailers with finished goods for delivery over the next few days, knowing which customers will be ordering due to their purchase orders and arranged deliveries or their past ordering habits.”
Taking incoming cores directly to repair lines for processing is a key to operating efficiently, according to Groene. This approach cuts down on handling and also produces finished goods faster. Storing as much finished inventory inside as possible and pre-loading trailers also is important. Groene said, “Avoid, as much as possible, setting the pallets outside and then having to bring them back in – excessive handling.”
Inventory should be stored so it can be rotated, and a company should maintain enough finished inventory to meet customer requirements.
At Pallet One, inventory may be stored in various ways, depending on the location, indicated Reed Esarove, corporate sales manager. Factors that impact storage and management of inventory include the location and region of the country, inside and outside storage space, pallet grade, and customer requirements.
“Some customers require pallets be stored under roof, and some customers require a specific type of recycled pallet that is more unique than the standard A or B grade,” said Esarove. “The type of storage also may have an impact on the overall pricing of certain pallets.” Weather also may require indoor storage of pallets based on snow or rain.
“Recyclers always need to manage their inventory in relation to their customer base, committed and uncommitted inventory,” said Esarove. Non-committed inventory are pallets that can go out to the open market to compete for new business.
The seasons can affect management of pallet inventory due to changing customer needs. For example, some customers in the agriculture or food processing industries may require pallets in conjunction with their harvest season. “Seasonality is something that comes into play in markets when you’re specifically talking about recycled pallets,” noted Esarove, “but it also is influenced by the type of customers a recycler might have. Not all recycled pallet customers have a seasonality to their business or follow the retail seasonality.”
Seasonality can also be the normal cycle off retail business and how it impacts sales of GMA pallets, including the influence of holidays on retailers.
New pallet inventory is focused on customer needs and can vary simply on a case-by-case basis, said Esarove. “There are quite a few more variables that come into play when the discussion moves to new pallet inventory and storage.”
Each Pallet One plant has its own inventory plan unique to its location and its customers.
“There are always a number of aspects considered when inventory is placed,” explained Esarove. “Time, travel, trailer availability, and quantity are certainly considerations. It’s always optimal to move pallets as few times as possible.”
Like Pallet Consultants, Pallet One abides by its own guidelines, as well as any local or state fire regulations that may impact pallet storage.
Esarove suggested one way of storing inbound cores is in their respective trailers until it is time to unload them and process the cores. “It saves a lot of wasted movements.”
However, trailer dwell time and availability are considerations, too. Pallets should not be stored too long in a trailer.
For recyclers that have limited drop yards, cores may need to be unloaded and put into temporary storage, especially during peak and surge times. “This is an intentional process and planned for given the possible seasonality of a great number of core suppliers in the retail markets,” commented Esarove.
Recyclers have such a variety of facility layouts that it is difficult to suggest one plan or scheme that fits all unless there is a commonality to recyclers of scale.
“Under-roof storage is always a premium for any pallet shop,” said Esarove, and it is expensive for the average recycler. Inside space is usually at a premium because the space is dedicated to processing cores and the equipment and machinery that supports those recycling operations.
Nevertheless, some customers require their pallets to be stored in clean, dry and pest-free environments such as customers shipping food products. With limits on the amount of inside storage space, food grade pallets and similar pallets are usually more expensive — regardless of grade. “These can be some of the fastest-moving pallets for recyclers also,” added Esarove. Long dwell time for food grade pallets can become a challenge for recyclers, he noted, because the pallets must be kept free of pests and mold.
Labeling and rotating inventory is a key discipline to maximize efficiency, according to Esarove. “Not all recyclers have enough space to truly rotate inventory, but it should always be in the back of one’s mind as they manage their facilities. Maintaining ‘active’ and ‘dead’ inventory locations for cores and finished product makes life easier for employees who unload cores or load finished goods.”
It also facilitates counting of inventory, explained Esarove. Small ‘active’ bays are easier and more quickly counted versus large bays where multiple people may have removed stacks of pallets from various sides of the same bay. When pallet parts are recovered and recycled, it facilitates taking inventory of used lumber, too. This discipline can also be used when counting components or nail inventory.
“The business of recycling is very dynamic and requires constant management of inventory, labor, logistics, raw material costs (cores), as well as keeping up with the market conditions of the area,” said Esarove. “Inventory is only one aspect of a plant manager’s day, but how one manages it will dictate if it is a larger part of the day or not.”
“Managing inventory in ‘micro’ movements as often as possible saves the knee-jerk reactions of inventory management versus sales. Sometimes this can’t be avoided, especially with trying to grow a business or more importantly, managing holiday swings. Balancing the teeter totter of cores and inventory is the key to stability and consistency in a great number of things, such as labor, overtime, logistics and sales. Every recycler knows the balancing act of core purchasing versus inventory and sales.”
It is very difficult to develop one inventory management approach given the variety of pallet yards and customers. There are no real rules for the most part, just operational best practices and market experience. Everyone tries to repair cores to their highest value possible. The key is to have a strategy and stick to it.
