California Pallet Supplier Quick to Open the Door When Opportunity Knocks

LYNWOOD, California — Whether skating in alone on goal or running a pallet business, one key to success is taking advantage of opportunities when they come along.

                      Such has been the case for Roger Caruso and his company, Century Pallets. To borrow an illustration from hockey, Roger has jumped on a loose puck in the business world numerous times and scored. For example, his company has taken advantage of rising land values in the southern California real estate market. More recently it seized on the opportunity to buy insect-damaged timber removed from the nearby San Bernardino Mountains and process it into badly needed pallet lumber with the aid of a new Baker Products portable sawmill.

                      Roger, a hometown Detroit Red Wings fan transplanted to sun drenched southern California, started in the pallet business some 34 years ago when Chuck Demarco, his brother-in law, asked him to join him in his business, Pallets & Accessories Co. Chuck brought Roger into the business because of Roger’s expertise in operations management.

                      Roger recalled, “I was general manager of a packaging company — a job shop. We had about 800 to 900 people and did special packaging of products for Mattel, Max Factor, and Gumby Toys, to name a few. They sent us their merchandise, and we packaged it for retail. We packaged it and shipped all over.”

                      A few years later, Roger started Century Pallets while Chuck continued with Pallets & Accessories. When Century Pallets began, it was one of only two or three recycling businesses in the Los Angeles area at that time. Roger saw the potential for pallet recycling. Companies were begging recyclers to take away their excess pallets and gave them the used pallet cores free of charge. Century Pallets quickly began repairing the pallets and re-selling them. The company expanded so quickly that it outgrew its location and had to move three times in the first year. Century Pallets eventually expanded to include new pallet manufacturing and to supply pallets made of alternative materials.

                      After the first few initial moves in the beginning years, subsequent moves were driven more by escalating real estate values than operational requirements. “When the property gets too valuable, we find a new home for the pallet business and either sell the property or lease to industrial and commercial tenants,” Roger explained.

                      Century Pallets is in Lynwood, about 15 miles from downtown Los Angeles. Century Pallets owns about five acres with parcels on both sides of a street. “The street divides us,” Roger said. “We have about three acres on one side and two acres on the other.” One side of the street is utilized for cutting and storing lumber as well as custom repair orders.

                      Both new and recycled pallet operations are housed in one 30,000-square-foot building. The plant is open on both sides, which expedites the movement of used pallets and raw material into the building and finished goods going out.

                      Century Pallets is somewhat unique among West Coast pallet companies in having its own sawmill, albeit a portable mill. Like many other pallet suppliers in the region, it buys 2-inch dimension softwood lumber and remanufactures it into pallet parts, and it also buys pre-cut softwood stock.

                      Insect-infested softwood timber is being removed from the San Bernardino Mountains. The mountain region has suffered from a record six year drought. The years of dry weather significantly stressed forests, and the weakened trees have been killed by rapidly increasing bark beetle populations as well as pathogens, such as root disease.

                      The region affected by the drought has grown from an estimated 66,000 acres in October of 2002 to around 175,000 acres at present. The dead and dying trees pose a significant wildfire risk that threatens thousands of nearby homes. In addition, removing the dead and dying trees is proving difficult and expensive. The problem is complicated by the limited timber industry in Southern California.

                      Century Pallets bought a Baker Products portable sawmill about three years ago to take advantage of the abundant supply of salvage timber. Roger explained his decision to choose Baker Products as the supplier of the mill.

                      “We looked at a couple of different makes, but the way I like to do it is like this,” he said. “All the vehicles I buy are Fords, and a lot of my equipment is Baker. They’ve been in the pallet industry a long time. If you stay with one supplier, then you don’t need to inventory so many parts. A lot of parts are interchangeable from one machine to the other, and I get good service. If I call up and say this part is making this sound, they’ll tell me what to do and have the part to me by the next day.”

                      Roger finds it helpful that suppliers such as Baker Product and Rayco have product support personnel with the expertise to know what parts will wear out and require replacement so that Century Pallets can stock them. Century employs a full-time maintenance mechanic to keep everything running smoothly.

                      The Baker Products portable sawmill, equipped with a hydraulic lift to raise the log onto the bed, is powered by a diesel engine and can saw logs up to 30 inches in diameter and 16 feet long. Century Pallets runs disposable band blades on the mill.

                       “Although Baker mills are available with various power options, diesel is faster and it’s economical,” said Roger, “and we could take it anywhere if we wanted to.” He is considering moving the portable sawmill to a site closer to the San Bernardino timber, which would help reduce inbound freight charges. Roger has also considered buying an edger to increase recovery.

                      The Baker Products portable sawmill is available with optional debarking equipment. Roger did not order it, however, since the bark beetles already do a job on the bark.

                      With the volatile lumber market, calculations for return on investment are uncertain. In the course of a month, lumber prices have dropped from $300 per thousand board feet to $200.

                      The company is processing all the lumber as pallet stock although Roger has considered sawing some grade lumber. When the log has been reduced to a cant, a Baker Products 25-inch chop saw is used to size the cant to length.

                      Century Pallets has other Baker Products equipment for its lumber remanufacturing operations. The company has Baker Products two-head and five-head band resaw lines. The band saw lines are typically used to resaw cants into 2×4, 1×6 and 1×4 lumber. A gang rip is used to process wide material into 4-inch and 6-inch stock. Baker Products chop saws are used to cut lumber to length, and Baker Products chamfer and notching machines complement the cut-up operations. The chamfer and notching machines are equipped with Profile Technology cutting tools. The plant also is equipped with a Newman Machine multi-trim saw for cutting boards to length and a Newman chamfer machine.

                      For pallet assembly operations, Century Pallets has a Rayco nailing machine, a Pallet Chief nailing machine, and a Bronco Pallet Systems semi-automated nailing station. The Rayco is used for longer runs, producing about 700 pallets per shift. The company uses Stanley-Bostitch nails.

                      Like other pallet recyclers, the company picks up trailer-loads of used pallets from large customers on backhauls from pallet deliveries. The used pallets are taken to the plant and sorted to be repaired or disassembled for recycled lumber. Smart Products and Foxfire bandsaw dismantling machines are used to disassemble pallets.

                      Century Pallet also manufactures pallets made of hardwood lumber but has been hampered by the low supply of hardwood lumber in the marketplace. One of Roger’s regular suppliers has been hurt by a strike while another hoped to deliver in February a railcar that was ordered in mid-October. “It’s getting harder,” Roger said.

                      In the recycled market, Roger tangles with backyard operations that have proliferated. There are 200-300 of these small recyclers in the Los Angeles area, he estimated. “You can’t compete,” he said. “They’re not paying the workman’s comp or the general liability insurance, and the customers are just interested in the low price.” In addition, the small operators divert a lot of cores “so the only thing left is garbage.”

                      Because these small competitors may not repair pallets to spec, Century Pallets essentially has to strip GMA pallets completely in order to salvage them. In addition, Roger has to devote resources to dismantling pallets in order to recover stringers. “To get maybe 100 or 200 GMAs, we have to pick up around 2,000 48x40s,” he said.

                      High workmen’s compensation insurance premiums are a burden. “The workmen’s comp is killing us out here,” said Roger. “It’s digging into the profits.” Fortunately, some larger customers consider it important to use vendors that have worker’s comp and liability insurance, and doing business with some of these larger customers provides Century Pallet with access to a considerable supply of cores.

                      In the new pallet market, Century Pallets focuses on specialty pallets. “We specialize more on small orders than the large orders,” Roger said. “The large orders are so competitive that you are just giving your lumber away.”

                      Century Pallets is not set up to process any of its residuals, mainly because of regulatory issues. “We have tough environmental agencies here,” said Roger. “We can’t have too much sawdust in the air. We used to be able to sell the virgin sawdust, but now we have to pay to have it hauled away.” The sawdust previously was sold for fuel to a power plant that had to cease operations because of environmental issues.

                      A challenge that Roger faces every year, from about mid-November to mid-December, is a shortage of lumber delivery trucks; companies like Century Pallets have to compete for trucks with the seasonal Christmas tree business. Truckers hauling Christmas trees earn bonuses, according to Roger. “Who wants to haul lumber when they can make extra on the trees?”

                      In order to plan for the annual truck shortage, in the fall of 2004 he ordered enough lumber to carry him into January. However, building up inventory makes a company susceptible to price fluctuations. “You have to be careful when lumber prices move up or down,” Roger noted.

                      Roger is a strong advocate of membership in the National Wooden Pallet and Container Association (NWPCA). Century Pallet has directly benefited from membership in the association because of Roger’s opportunities to network with owners of other pallet businesses. “I network through the NWPCA, and we sell all across the United States,” he said. “We have a pallet company in Ohio that calls up and says, ‘We have a customer in California. Can you service him?’” Roger served on the NWPCA board of directors from 1998 to 2001 and previously served on the governing board of the Western Pallet Association.

                      Century Pallets uses the Pallet Design System (PDS) software program as a selling tool. However, Roger finds that customers do not fully understand the benefits of using the best pallet for their application at the lowest cost. “We have to explain it to them,” he said.

                      One lament Roger has about PDS is that all of the training classes are held in the East on the campus or branches of Virginia Tech. “It costs us $1,000 or $2,000 to send someone back there for the class,” he said. “You have airfare, room and board, and time away from work. I tried to talk them into coming out to the West Coast when I was on the board.” That was not feasible, however, as the training sessions require classrooms equipped with desktop computers.

                      When Roger was on the NWPCA board, he also was an advocate for regional association meetings. Instead of having most meetings on the East Coast or West Coast, he believes they should be held in more central locations in order to increase attendance and minimize time away from work.

                      (The NWPCA is planning to initiate regional meetings in 2005 with a southwest regional conference scheduled for April 8-10 in Dallas.)

                      Century Pallets was also one of the earlier wooden pallet companies to begin offering plastic pallets; the company has supplied them for 20 years. “It’s a stable business,” Roger said of the plastic pallet market, noting the high volume of goods exported from the West Coast. In fact, plastic pallet sales have increased in recent years because of the new global phytosanitary rules on wood packaging, Roger noted.

                      However, now that Australia has begun accepting certified heat-treated pallets, many Century Pallets export customers have switched from plastic to heat-treated pallets. Century Pallets buys heat-treated lumber and is certified to manufacture heat-treated pallets. Third-party verification is provided through Timber Products Inspection. Chris Whiting, who has been with Century Pallets for over 10 years, is in charge of the export pallets division.

                      “Being a member of the NWPCA, you get information earlier than others,” Roger said. Armed with information about the phytosanitary regulatory issue from the association, he was able to get a jump on other pallet suppliers into the arena of certification. “I beat everyone on the West Coast. I had my stamps and all my paperwork. I worked with NWPCA and knew what was happening.”

                      Century Pallets also supplies plywood pallets and manufactures wood packaging for the military but has found demand gradually decreasing. There is a lot of bureaucracy and paperwork involved in supplying the military. For example, Roger noted that each container spec is about 25-30 pages. Due to the extensive training requirements, Century Pallets has one employee specialize in such product areas as military containers or plastic pallets.

                      Roger is quick to emphasize the importance of key staff members in the ongoing success of Century Pallets. In addition to Chris Whiting, he acknowledged the efforts of operations manager Maria Ortega and Rose Hall, who is in charge of accounting.

                      In spite of his busy schedule, Roger still finds time to enjoy hockey games. He is a long-time fan and has held Anaheim Mighty Ducks season tickets since the team’s debut. He enjoys taking his grandchildren to the games. He and his wife also have also enjoyed excursions with other fans to away games in cities such as Detroit, Nashville, Phoenix, Vancouver, Edmonton and Calgary. At the time he talked with Pallet Enterprise, Roger was weathering a protracted lockout by the National Hockey League quite nicely, looking forward to accompanying a grandson’s hockey team on a trip to play teams in British Columbia.

                      Whether deciding on a career in pallet recycling, choosing to market plastic pallets, jumping into certification to supply heat-treated pallets, or going ahead with a sawmill investment, Roger seems to have had a knack for pouncing on good ideas. Like a hockey player who seems to be able to pounce on a loose puck, it’s a good knack to have.