Getting your next meal from the field to your fork takes a lot more work than you can ever imagine, and the wooden pallet plays a central role in the process.
On a recent tour of the Arizona agricultural supply chain, it was clear that pallet quality can impact the process, and maybe nobody knows that better than Frank Shean, the owner and president of Valley Pallet Inc.
From its multiple locations in Arizona and California, Valley Pallet is one of the largest pallet companies in the country with a focus on the agricultural and fresh produce market.
Shean explained, “We grew our business around the fresh produce business in California. Customers migrated down here (Phoenix and Yuma) for the winter growing season.”
Today, Valley Pallet operates four locations in California and two in Arizona, supplying both new and used pallets. Mother Nature plays a key role in the production cycle of the agriculture market. The growing season is impacted by rainfall, cold snaps and dry spells that can push the harvest time back or forth from week to week.
And it isn’t just the weather in California or Arizona that can cause changes in supply needs. Shean added, “Weather out on the East Coast impacts our business because it affects what the growers do with supply to feed the eastern markets.” He added, “Right now growers are only harvesting about 40% of what is possible.”
Produce Supply Chain Process
Your salad takes a lot of hands and steps to get from the field to your home. Mexican workers may get up at as early as 2 or 3 a.m. to come across the border to work legally in the fields near Yuma. Workers follow a vehicle called a crawler that moves along the field at a very slow pace. Lettuce is picked by hand and visually inspected. The picker hands the lettuce to another person who puts it in a plastic bag and seals it and then places the lettuce in a corrugated box. Other workers on the crawlers come and collect the full boxes and palletize a load by hand.
Then fully palletized loads are transferred onto a shuttle vehicle from the crawler. This is the part of the process where pallet quality in the field can become an issue. Joe Puga, manager ag operations, Head lettuce division with Growers Express – Green Giant Fresh who works in the Yuma region, said, “I use a #1 recycled pallet because an inferior quality pallet can cause problems in the transfer process.”
He explained that there can be some gaps between the two vehicles, and the pallets must be able to hold the weight or the produce can be damaged. The fields range in size usually from 18-20 acres and are layed out using GPS devices to maximize yield. It normally takes 102 days from the time a field is planted until it is ready for harvesting.
Puga, a very friendly and knowledgeable second-generation farmeing manager, said the most recent innovation to reduce labor costs is an automated thinner device that can directly squirt chemicals to kill sprouts that are overgrown, which provides room for the others to grow. This entire process of thinning the fields used to have to be done by hand.
Shuttles exchange the full and empty pallets and then take pallet loads of produce to trucks that will carry the produce to the cooling facilities located in Yuma. One of the reason that Yuma has taken off is the high cost of land in Salinas and other parts of California. Puga explained that although land leases are higher in California, the yields are usually better. He added that the lower growing costs in Arizona has made it an increasingly popular place for growers.
Speed is critical to keep produce out of the heat. Trucks take pallet loads to cooling facilities where products are usually unloaded using forklifts capable of removing 10-12 stacks at once. Shean has seen these forklifts in action for years and moved to copy their efficiency in his pallet operations.
Shean commented, “The truck unloading and loading process used to take 30 minutes or more. Using the large forklift, you can load a truck with about 782 pallets in less than five minutes. When you have high volumes to process, the large forklift saves a lot of time.”
Once unloaded, pallets are quickly cooled before being put into refrigerated storage. One commonly used method for cooling is hydrocooling where produce is showered or immersed in cold water. Another method, vacuum cooling, is achieved by causing water to rapidly evaporate from a product.
Manuel Valdivias, warehouse manager for Green Giant Fresh said that chlorine is added to water to keep it sterile, and food safety laws require us to sample products and water daily for harmful bacteria.
Pallets are stored in refrigeration for a maximum of 2-3 days before being shipped. Manuel Valdivias stated, “Lately we have been hand-to-mouth in terms of produce, we are shipping everything out pretty quickly.”
Sometimes produce is shipped out as is from these cooling facilities. Other times, produce is cut, processed in some way, repackaged and then shipped out to retailers or foodservice companies.
Another company, Green Gate Fresh, specializes in cut and ready to serve salads for restaurants. Green Gate Fresh cools produce from the field and then sends it through a processing line. This involves cutting and washing the produce. A giant salad spinner then dewaters the produce where it is weighed and bagged. A metal detector identifies any foreign materials that could be in the salad. Bags of salad are boxed and palletized by hand.
This Green Gate Fresh location in Yuma has eight lines and can produce more than 150,000 cases of processed salads per week. This requires about 2000 pallets; 400 are CHEP and 1,600 are white-wood pallets.
James Eade, manager of purchasing and cost improvement at Green Gate Fresh, said his company uses plastic pallets for internal needs within the facility and wooden pallets for outbound shipments. Valley Pallet has been a cooperative partner to find solutions.
Eade commented that forklift operators were having problems getting fork tines in the pallets. Valley Pallet worked with Green Gate Fresh to change the pallet specification to solve the matter. Eade explained, “We began buying a pallet with a little higher stringer, wider leading edge boards and harder wood on the leading edge to ensure that the forklifts could have easy access without damaging the pallet or the loads.”
New food safety laws have certainly impacted the fresh produce business. All the equipment at Green Gate Fresh is stainless steel. Eade said, “You have to connect everything from field to customers. New food safety laws have increased accuracy requirements of our documentation and validation points.”
Concerns about sanitation and quality is another reason for companies to use higher quality pallets. Green Gate Fresh only uses new wooden pallets for its outbound shipments.
Valley Pallet’s Expansion Strategy
As the Arizona agricultural market grew, Valley Pallet bought an existing plant in Yuma near the main cooling facilities. Sourcing cores was difficult in Yuma so Valley Pallet opened a facility in Phoenix about 15 years ago.
Shean commented, “We bring in pallets at the Phoenix facility and repair them to ship to Yuma. Over the years we have worked to develop the customer pool/base in Phoenix even though the facility would still be there without them.”
Frank Shean’s daughter, Lindsey Shean, has taken over Arizona sales for the company, and it has a solid base of beverage, retail and industrial accounts.
Lindsey said, “There are a lot of pallet companies in Phoenix, probably 100 or more. Competition is pretty intense.”
Valley Pallet has opened a number of its plants because customer needs mandated the movements. Frank explained, “We went into the Los Angeles market to feed the southern California agriculture business with used pallets. And we have moved into industrial markets to secure core supply.
Frank stated, “Phoenix is better than being in Los Angeles because there are fewer regulations there.”
The Phoenix facility processes about 5,000 used pallets per day. And its workers build 1,200 to 1,500 new pallets per day using hand nailing with tables and nail guns. Valley Pallet is getting ready to add a Viking nailing system to its Phoenix plant.
Frank pointed to the pallet yard and explained, “We build up inventory for 3-4 months and deplete it this time of year. By the middle of February this yard will be pretty much empty.”
The Phoenix Plant
Pallets come in the receiving dock and are unloaded, counted and visually sorted by the forklift operator to remove odd-sized material, CHEP, etc. The forklift driver will sort pallets into #1s or #2s at the dock. Pallet stacks are moved several at a time to repair stations.
There are four repair stations on the line, which can process 2,000 pallets per day with eight workers. Each repair station includes a metal repair table. Workers use hand tools to remove unwanted boards and nail down new ones. Finished pallets are put on a conveyor and marked with chalk to indicate the builder.
A quality control operator checks each pallet to determine the final grade and positions the pallet for the proper stacker.
One business that has been a great little benefit for Valley Pallets and its customers is recycling of corner boards. Frank said, “We provide gaylords to retail customers for shipping back to us corner boards. This business is profitable and assists customers as well.”
The Phoenix facility also has a Smetco repair line that is set up just to process smaller pallets for beverage companies. Usually, the line handles 36×36 pallets. Two operators can both sort and repair about 1200 pallets in an 8-hour shift. Frank praised, “The Smetco line works real well and has made it possible to efficiently serve our beverage clients.”
The tear down operation uses a PRS OM-1 and two PRS round turn tables. Most of the bandsaws at Valley Pallet are built by JBC Saws, which the company purchased a number of years ago.
Frank stated, “We can tear down a little bit more than we bring in on one shift. His company is looking at other bandsaw options right now. “We have not used two man bandsaws.”
The newest equipment addition to the plant is a Cresswood (model HI 3630ST) grinder for processing wood into mulch for animal bedding.
The Yuma Plant
Located right in the middle of the cooling facilities, the Yuma operation services mostly agricultural accounts with either new or used pallets. All of the repair process is manual at this time, but Frank is looking at adding some automation to the repair process in 2015.
New pallets are produced on a Viking Champion and two Viking Duo-matics. The champion is used for producing specialty or odd-sized pallets. For example, Valley Pallet manufactures a heavy-duty design with double center stringers capable of holding up to 3,500 lbs. The pallet is used for storing and transporting batteries.
A rail spur feeds material into the yard, especially lumber. Frank said, “We use a lot of alder for produce customers at the Yuma location, and we can get a solid volume of material in via rail car.”
Most of the material comes in precut to size. But there is a small resizing operation for specialty orders equipped with a Morgan band resaw, HighPoint resaw, and Hazlethorn chamfer machines, and Hazlethorn double head notcher. Wood waste is ground up by a West Salem 1662 grinder.
We buy most of our nails from Doug Baldwin of Baldwin Industrial Supply. He has been a dependable supplier for us through the years and always delivers a quality nail for the price.”
One of the investments Frank raved about is the Kiln-Direct heat treatment system. He opted for the Piggyback system, which can be added to a standard trailer. He explained, “The Piggyback will dry a load in about 1.5-2 hours, and the cost is minimal compared to the benefit. It has paid for itself 100 times over.”
A large majority of the heat treated pallets produced in the Yuma facility are recycled pallets headed into Mexico.
Between the two Arizona facilities, Valley Pallets sells about 30,000 to 35,000 pallets per week.
Business Efficiencies and Challenges
People are what make pallet companies successful. And Valley Pallet has encountered it all through the years. Frank said, “There is a shortage of labor although it is better than in the past.” A few years ago, some industries paid a $50 cash bonus just for people showing up to work.
Frank explained the reason for better labor conditions. He said, The federal government has loosened things up a bit so it is easier to get workers across the border.”
Many of Valley Pallet’s employees live across the border in Mexico and come across every morning to work. They are U.S. citizens or have work permits. They get up very early to come to work. Sometimes, they get up really early, especially during the summer months when the work crews start at 4:00 a.m. to avoid the summer heat. Frank commented that 80-90% of his workforce is Hispanic.
Frank stated, “We would not exist today if it wasn’t for the Hispanic worker.”
Today, it is possible to get labor, but wages have gone up to secure dependable workers. He lamented that wages went up $2.50 per hour in 2014, which was a substantial increase for the company, adding seven cents to the cost of each pallet.
Unfortunately, the costs are likely to continue to increase. He suggested, “And with Obamacare, we have estimated our costs will go up another 9-10 cents per pallet to offer employees coverage.”
Valley Pallet currently offers employees coverage although it requires employees to pay a share of the cost. Frank forecasted, “Because we are asking employees to cover part of the cost, we believe that many of them will opt out of health coverage.”
Valley Pallet uses a non-profit agricultural trust for health insurance. “We have always offered open enrollment to employees,” said Frank. “But we have had few employees opt to get health coverage in the past.”
Hiring the right people has been key for Valley Pallet. Frank praised the hard work of his employees and the oversight of Victor Dominguez, the plant manager for the Arizona facilities. Frank said, “Victor has been a huge asset to help us train people and get the most out of our employees.”
Formerly, Victor worked in Distribution management with The Home Depot. His focus right now is improving employee training procedures and ensuring that employees are put in the right job to fit their talents and skills.
Victor said that he would like to reach 400 pallets per day per worker. But a new person will get 250. An experienced person will complete 300-359, so there is still some room for improvement.
One way the company is positioning itself for the future is rolling out the use of Palmate™, an enterprise resource planning system published by Automated Machine Systems. This software will connect all the key parts of the business together. Frank said, “We are excited because Palmate can integrate with Great Plains, which we use for accounting. This will help us with production tracking, billing and overall improving customer service.”
Always looking to save money and become more efficient, Valley Pallet is looking to add solar power generation to its facilities. Valley Pallet has worked with an energy consultant to navigate the process.
Frank explained, “The secret is getting enough power, but you don’t want too much because the amount the utilities pay is not enough to cover the cost of the added infrastructure.”
Usually he suggested it is best to generate a little less than you will use. Tax credits have helped Valley Pallet make the installation cost effective.
Frank stated, “The cost to install solar has gone down a lot, and it will keep on going down as the technology improves.”
