MORRIS, Illinois – Armando Perez has seen the future of pallet recycling, and the future is automation.
Armando, 40, owns and operates AMEX Pallets Inc. The company, entering its sixth year, is based in Morris, Ill., about 60 miles southwest of Chicago, where he grew up.
Armando took some steps to begin automating his operations in 2010, and the results were so beneficial that he envisions further investments in the future. The two principal suppliers of systems and equipment were Pallet Repair Systems (PRS) and Innovative Data Systems. PRS supplied component equipment and an automated pallet repair line while Armando turned to Innovative Data Systems for its Pallet Track information system and a touch-screen kiosk computer system.
The PRS system enabled Armando to dramatically reduce his labor costs while maintaining and even increasing production. The tools from Innovative Data Systems gave him greater management control of his operations.
“The main issue is the overhead with employees,” he said. “With automation, it should make the business more profitable.”
The business is located in an 8,000-square-foot warehouse and employs 10 people. It is mainly involved in the market for GMA pallets. In fact, about 95% of the company’s pallets are food grade #1 GMA recycled pallets.
Armando started his own business, but he was not a stranger to the pallet industry and pallet recycling. His father, Rosario, operated a small pallet recycling company and trucking business in Chicago and ran it for about 15 years before retiring in 2004, and Armando had worked at two different times for his father. He worked for his father for a couple of years in trucking, then went out on his own as an owner-operator and had three trucks. In 2000, he went back to work in the family business, this time in the pallet side of the company. He was in charge of sales, supervised the warehouse operations, and oversaw some of the trucking operations, too.
When a Menard’s store, similar to The Home Depot, was preparing to open next door to his father’s company, the city would not renew a license for his father’s business. His father sold off the assets of the business and gave Armando and other siblings who were working for him generous bonuses.
Armando decided to open a pallet recycling business of his own but to move out of the tough, competitive Chicago market. “It’s like a war going on with these guys,” he said.
“I was taking a ride, going south of the city, a little west,” he recalled. He came upon a few small warehouses and ended up in Morris. “I thought it would be a great idea with all the new distribution centers opening away from the city, away from the competition.”
“It was a great idea to move,” he added.
His first customer was a Costco distribution center in Morris. His father had done business with Costco, which helped open the door for Armando when he called on Costco officials to offer pallet repair services.
“They thought it was a great idea,” he said, to have a pallet recycling business so close by. “They said, ‘When you’re ready to start, let us know.’ ” Another pallet supplier was providing pallet repair services to the distribution center at the time.
Armando leased an 8,000-square-foot warehouse about 1-1/2 miles from the distribution center. The company also has 9,000 square feet of paved space behind the warehouse and additional parking space nearby. Armando started with one employee. His wife, Margarita, worked in the office. (Armando took the word AMEX from the first letter of his name, Margarita’s, and the first two letters of the word express.) He launched the business with a 1987 model forklift and a Sears Roebuck trim saw. He got pneumatic nailing tools and collated nails from a local supplier. He leased five trailer vans to start and bought a single-axle tractor. All the trailers were staged at the Costco distribution center. The work was repairing Costco’s GMA pallets.
“That’s the way we got started,” he said.
Armando laughed when he recalled how much work it was for two men. “It was very, very hectic,” he said. After three weeks, he hired four more employees.
The work was mainly repairing broken leading edge deck boards and an occasional interior deck board. Armando bought cut stock, 4-inch and 6-inch hardwood deck boards, from Wisconsin-based Meisters Forest Products.
He enjoys a good working relationship with Costco officials. He had meetings with the distribution center supervisors to agree upon which pallets were suitable for repair and which ones were not. Costco personnel filled the trailers only with damaged pallets that could be readily repaired to Costco’s standards.
After six months he invested in more trailers and bought his first piece of pallet recycling equipment, a Smetco bandsaw dismantler. The dismantler enabled him to reclaim and recycle used lumber, eliminating the need to purchase new cut stock. Later he also added a Smart Products single-head power-feed trim saw and more forklifts. (He ‘retired’ the 1987 machine.)
He also expanded the business by purchasing surplus pallets from Costco, recycling them, and selling recycled #1 GMA pallets. He began taking on other customers within about a 20-mile radius. His first customer for recycled pallets was a cold storage business. As the business grew, it brought in more and more pallet cores.
“We started growing and growing,” he said. “The more pallet cores you have, the more you can sell.” By the end of the year, the business was up to 20 trailers, and Armando added two tractors.
After a year and adding more cores to his inventory, he began servicing customers further away – up to a 70-mile radius. He made more sales calls, offering recycled pallets and also pallet repair services. “Everything started picking up from there,” he said, and he began doing business with customers in Chicago.
Early last year, Armando added the Innovative Data Systems Pallet Track system with a touch-screen kiosk to enter data. “It’s a very good system,” said Armando. “Alan (Miceli of Innovative Data Systems) does a very good job.” The information technology system eliminated a lot of manual counting and enabled Armando to have greater control of pallet quality, production, and inventory.
“I used to pay by piece rate, and it was hard to keep track of,” he said. He had a system using tickets. When a worker finished repairing a pallet, he attached a ticket to the side with a staple gun. It required frequent manually counting pallets and tickets. “Alan made it a lot easier for us,” said Armando.
One noticeable change with the Pallet Track system was that individual production declined. “Everybody’s production numbers went down,” said Armando, because they either had been cutting corners or otherwise finding ways to inflate their pallet production numbers. With the Pallet Track system, the numbers they had been reporting in the past didn’t add up.
As a result, a few employees quit. “They saw we had more control,” said Armando.
His first experiment with automation was to invest in a Bronco Pallet Systems stacker. “That’s what really got us started,” he said, in June 2010. Armando was stunned how much could be accomplished by one man sorting pallets with a stacker. “It eliminated a lot of fatigue,” he noted, fatigue caused by picking up pallets and moving and stacking them by hand. The stacker was stationed near a repair table, connected with a conveyor. When the pallets came down the conveyor, the worker would slide them into the stacker. “It was very efficient.”
Armando did not have any previous experience with stackers or other automated equipment in his father’s business. He had begun to get acquainted with pallet recycling machinery from reading Pallet Enterprise and attending the Richmond Expo pallet industry trade show a couple of times.
After only a month of using the stacker, Armando decided to add an automated pallet repair line from Pallet Repair Systems (PRS). His goal was to reduce labor and payroll costs. “Workman’s comp is just brutal,” he said.
He had researched several different pallet machinery suppliers, but one thing that attracted him to PRS was its proximity to his business. PRS, located in Jacksonville, Ill., about 30 miles west of Springfield, was only three hours away.
Bob Coplea, sales manager of PRS visited AMEX, reviewed the company’s operations, and made some recommendations. At the time, Armando had 16 employees, including 10 who were repairing pallets.
PRS supplied a 40-foot repair line and incorporated the stacker Armando already had. The PRS equipment included a power roller conveyor, two stackers, and three repair tables. (The PRS stackers include a model TX and an FX, which is an adjustable stacker that can accommodate different pallet sizes.)
The repair stations are on one side of the line. As the pallets are repaired, the workers push them onto the conveyor. At the end of the line, an employee double-checks the pallets for quality, then pushes them into one of the three stackers.
He soon decided to add a PRS pallet dispenser at the start of the line with another conveyor, so the overall repair line now is 60 feet long.
Besides using the bandsaw dismantler to disassemble odd-size and scrap pallets in order to reclaim and recycle lumber, the machine also is used to prep pallets that have a damaged leading edge deck board. The pallets, with the broken boards removed, are staged and moved in stacks to the repair stations. The repair workers only have to nail on a replacement leading edge deck board.
Incoming pallets typically go to the dispenser at the start of the line. The worker at the dispenser inspects each pallet coming out of the machine. Pallets in good condition that do not require repairs and can be immediately re-sold (‘ready to go’) will continue down the conveyor line to the stackers at the end. The worker operating the dispenser uses a system of chalk marks on the pallet or turns the pallet so that workers on the repair line know if it needs repairs and to indicate pallet grade to the worker at the end of the line who sorts and stacks the pallets.
If a stack of incoming pallets contains mostly pallets that need to be repaired, it will be moved and staged at the dismantling machine so the pallets can be prepped.
At the time he put in the PRS system, Armando had 16 employees, including 10 repair workers. He was considering adding a second shift to try to keep up with the rising volume of work.
With the automated equipment, Armando switched to an hourly rate for his pallet repair workers. With the machinery and equipment, they would not tire as much and were able to produce more. “We took away the lifting and fatigue,” said Armando. Some workers figured they would make less money and chose to quit, but some came back to the company. “The guys who were loyal to us and stayed realized it was a lot better for them,” he said.
Now he is down to 10 employees, total, only three dedicated to repairing pallets.
In the past, with 10 pallet repair workers, production was about 1,600-2,000 pallets daily. Now, with only three men repairing pallets, production is a little more than that. So, the big advantage is that while production has stayed at a consistent level and even increased slightly, his labor and payroll costs have been dramatically reduced along with some of the issues related to managing employees. The company also is able to sort incoming pallets faster.
“PRS really turned things around for us,” said Armando.
“The service and the technical support – they’re right there,” he said. “If we have any problems, they send Greg Williams or Allen Steele right away. They have good service,” he said, and provide strong technical support.
“Thanks to PRS, we have seen a significant turnaround in our operation,” said Armando. He also praised his other pallet machinery suppliers. He called his Smetco dismantling machine “bulletproof” and added, “The Smart trim saw has been very reliable, too.”
Two men normally run the trim saw to trim 4-inch and 6-inch deck boards. “We don’t trim every day,” noted Armando.
AMEX Pallets uses MAX pneumatic nailing tools for nailing on repair stock. Armando buys saw blades from Bernie’s Saw in the Chicago area. The wood scrap material from the company’s pallet recycling operations is supplied to a company that processes it into mulch.
He now has about eight customers, including those businesses where he buys cores. He is running 52 trailers and five tractors.
Besides staging trailers at customer locations, Armando also uses them to “warehouse on wheels.” He is keeping about 10-15 trailer vans filled with recycled pallets that are ready for delivery. He still is operating in about a 70-mile radius.
Armando recently has initiated a new program to upgrade some #2 pallets to #1 condition. If the pallet is in good condition except for a cracked outside stringer, it is sorted out and stacked. On weekends he has one worker who is removing the cracked stringer on these pallets and replaces it with a new notched hardwood stringer supplied by Meisters Forest Products. He has found it is worth the cost to upgrade the pallet because #2 pallets are, by comparison, so much cheaper. In his market area, #1 pallets currently are priced from $5.15-$5.45 while #2 pallets are priced from $2.90-$3.25.
Recently he has been paying $2.25-$2.75 for high quality cores, up from the previous price range of $1.75-$2.50. “Some guys are paying $3 for cores,” he said.
Providing good quality pallets and strong service to customers is a very important part of the business, he noted. “The customer is the boss,” he said. The customer “is calling the shots.”
Armando and his wife, who have been married 14 years, are members of a Catholic church in Joliet, about 22 miles away. He has one hobby: go-kart racing. He used to race motorcycles but decided it was too expensive a hobby.
When he tried go-karts, he was quickly hooked. “Once I stepped in there, I didn’t want to let it go,” he said.
During the summer, he races nearly every weekend and puts in time practicing, too. At the half-mile road course-type track where he races, the carts achieve speeds of 80-100 mph on the straightaway, he said.
He has been fortunate to have good employees, he said, acknowledging that the tasks in a pallet recycling business are not easy. “It’s very difficult work,” he said.
Armando pays bonuses on Friday based on overall production. He also gives employees paid holidays, and they earn a week of paid vacation after a year. Good performance from employees has been a key to Armando’s success. He singled out a relatively new employee, Claudia Balderama, who works the kiosk and checks quality control and places labels on the pallets. Her hard work has helped the company improve quality. She is Armando’s go to person for things that need to get done around the office.
The economy in the Chicago region has been stable, according to Armando. “Sales are a bit slow compared to last year,” he said, “but it has been very, very stable.”
He has lost a few customers because of pricing, he said. “It’s been a challenge,” he said. “We have our ups and downs.” He has had to deal with losing a few customers and getting the right employees for his business.
Armando is thinking of relocating to a larger warehouse. “My building is not big enough,” he said. If he does, he may add more machinery and equipment to continue automating his operations. He is interested in using bar code labels to tag the pallets so that when they go through the final inspection process, a bar code scanner would ‘read’ the label, and the PRS system would direct the pallet automatically into the appropriate stacker.
