First Alliance Logistics Management Adapts to Succeed, Has Dual Strategy

Time flies. A decade ago, several leading pallet companies saw a need for a new business entity to address a number of emerging changes that were rippling through the pallet marketplace, trends such as national contracts and asset recovery that continue to unfold today.

            The result of their assessment was the creation of First Alliance Logistics Management LLC. Owned by a consortium of industry leaders from across the country, it was launched with the intent to go after national and regional opportunities for pallet sales and management. While other pallet company networks failed to survive over the last decade, First Alliance has found its niche. Ten years later, it continues to quietly succeed in its target markets.

            The original First Alliance business plan was rather sweeping in terms of scope with opportunities stretching from national brokerage programs to recovery and retrieval of pallets. The vision needed some refining.

            “The Alliance originally was viewed as being a large brokering operation for its partners and an asset recovery specialist dealing primarily with just wood pallets,” explained Glenn Merritt, CEO and president of First Alliance since December 2002. “And there was a time when a lot of the emphasis was on 48×40. It has since changed to moving away from 48×40 to odd sized platforms.”

 A Powerful Partnership

            First Alliance has benefited from having well respected partners as well as a first rate group of suppliers, including such well known names such as Buckeye Diamond Logistics and  AAA Pallet Company, to name a couple.

            “I’m not sure that people appreciate the size of the partners in this group,” Glenn remarked. “I saw in (Pallet Profile Weekly) about IFCO being $400 to $425 million in annual sales. Well, that’s close to the size of the companies that make up First Alliance Group.”

            First Alliance partners have combined annual sales of $350 to $400 million, according to Glenn, and they produce over 40 million pallets yearly. Even though First Alliance is not anywhere near that size itself, Glenn noted, the combined strength of its supporting partners is very significant.

            The First Alliance board and partners are well known within the pallet industry and have been integral to First Alliance’s success. Bob Wenner of Pallet Service Corp. has been chairman of the board of directors the past three years. Other current board members include Don Remmey of Remmey-The Pallet Company, Neil Grimes of Pallet Resource of NC, Jeff Booher of B&B Lumber Company, Earl Handrigan of Atlas Pallet Corp., and Paul Kamps of Michigan Pallet Recycling.

            What sets First Alliance apart is that its key suppliers are also its members, said Glenn; they have a vested financial interest in the corporation. “That’s been a big asset in trying to sell different types of programs to clients,” he said. “You have companies that own their own facilities, but the next best thing, if you are looking to start something up, is to have something where your partners are actually your suppliers. That’s a big plus. And where we don’t have partners, we have been able to choose some really good companies to fill those voids and not skip a beat.  In that respect we’ve been blessed.”

Defining Target Markets:

Industrial and White Wood

            As the business unfolded, First Alliance decided to steer away from the 48×40 market and zoom in on opportunities related to non-standard pallets.

            “The thinking behind it was that the 48×40 was a commodity,” said Glenn. “It had a street value, and everybody from pallet management companies to what I call ‘pickers,’ the guys with the pickup trucks, was after that gold, the 48×40 pallet.”

            The First Alliance leadership decided that, although it would not turn away an opportunity in the 48×40 market if it presented itself, the company would normally focus on platforms where more value could be added — with the resources available within the First Alliance partnerships in combination with First Alliance’s logistics skills.

            Having settled into a strategy to manage and provide pallet recovery for odd-sized pallets in the commercial and industrial side of the business, First Alliance formed a joint venture with Penn Pallet – Penn-Alliance – to pursue another strategy about a year and a half ago.

            “Basically we are running two distinct businesses,” Glenn explained. “We’re running First Alliance, which is commercial-industrial, asset recovery and new pallet replenishment, and so on, and we have the Penn-Alliance, which is definitely our move into the retail side of the business.” Penn-Alliance seeks to replace pallet exchange programs where feasible.

            “We see a tremendous amount of opportunity in the white wood market because people don’t have a whole bunch of alternatives or options in that market right now,” Glenn said. “The business that we are doing with Wal-Mart is aimed at getting rid of the pallet exchange program.”  The role of Penn-Alliance is to convert customers over and work with their suppliers to provide good quality pallets. It has been received favorably by a number of companies, according to Glenn. “It just takes time to get people into the flock, per se,” he said.

            First Alliance’s partner, Penn Pallet, has been servicing two Wal-Mart distribution centers in Pennsylvania for quite some time. Future expansion opportunities into the Wal-Mart network are always being explored.

            “We actually have to contract with CHEP to sort our pallets through ProPak and isolate those for pick-up out of the Wal-Mart facilities,” Glenn said. “In order for us to grow into other distribution centers and manage them ourselves, that would be something that would have to be negotiated. What happens over time will be interesting to see.”

            Glenn also is president of Penn-Alliance while Dan Cunningham of Penn Pallet is CEO of Penn-Alliance. “He brought us to the table based on his excellent working relationship with Wal-Mart,” Glenn said. “It’s noteworthy that Steve Curci and Rob Martin are managing this project for us.”

            “What we brought to the table is a network, which they would have a difficult time reproducing. And the other thing we bring to them is a killer tracking system. We have a state-of-the-art tracking system. We just launched it in the second quarter of this year.”     The company previously used the services of a third-party provider. The new tracking system was designed by First Alliance and developed by a software firm in Charlotte, N.C., where First Alliance is headquartered.

New Tracking System

            The new tracking system is more user friendly for First Alliance customers, including distributors and corporate clients. The Internet-based system is available to track pallets 24 hours, 365 days a year.

            “Customers can jump on any time from their home or their office,” said Glenn. “It not only has ‘drop down boxes’ but actually prompts you to do every keyboard function.”

            The program has safeguards against keying errors and has an upload feature to First Alliance’s financial software. “All business that is conducted, pickups and returns, is fed into the software so it automatically generates payables and receivables for all of our businesses,” Glenn explained. “It takes that re-keying out for our bookkeepers and accountants.” The program can generate generic management reports and also has customization features for specific accounts.

            First Alliance plans to promote its new tracking program and make it available to others – even companies that are not its partners or customers. “We will not only be using this for our own business,” said Glenn, “we will be promoting this to the industry and other industries to utilize our services just for tracking, where we don’t actually do any (retrieval) work for them.” With its software program, First Alliance would act simply as a tracking system provider.

Diversifying Asset Recovery

            Diversification of asset recovery services is a key part of the First Alliance approach since it first won an asset recovery and retrieval contract with Alcoa, the aluminum manufacturer. “I think the best thing that ever happened to First Alliance was picking up the Alcoa account,” said Glenn. “That was the first substantial recovery piece of our business. That’s what launched us.”

            First Alliance provides retrieval and recovery services for 45×156 pallets that Alcoa uses to ship vinyl and aluminum siding. First Alliance has made distributors happy by picking up as few as 30 pallets at a time versus the previous minimum of 60; it also trimmed the retrieval time from more than two weeks of receiving a pickup request to three business days. In addition, Alcoa received back its pallet deposit more quickly. Overall, First Alliance reduced Alcoa’s new pallet purchases and overall packaging costs and also reduced return unit freight costs.

            One example of its efforts to diversify asset recovery services is First Alliance’s flower cart program. “We pick them up, collapse them, repackage them for the growers, and send them back,” Glenn explained.

            First Alliance is also looking at working with a Midwest company that ships equipment on heavy duty pallets with steel racks attached to them. The pallet forms the bottom of the crate, the steel racks form the sides, and the container has a wood top. “It is a very good packaging system that can be returned,” said Glenn, “and we already have the tracking system and we have the network.”

            Another potential asset recovery opportunity First Alliance is pursuing involves the use of plastic pallet ‘sets’ that include the pallet, plastic layers for bobbins, plastic tops and steel banding. One of the advantages of the new First Alliance tracking system is that it allows the tracking of individual components like those that go into the plastic pallet set.

            “The customer also likes our connection with other freight companies to be able to coordinate the return freight moves,” said Glenn. The ability of the First Alliance tracking system to handle serial number and barcode information is also opening opportunities to track other heavy reusable industrial packaging.

 Flexible Network

            In order to go after such opportunities, it has been important to teach suppliers to be multi-dimensional. “Our suppliers are becoming more computer literate because we are introducing software and systems to them,” said Glenn. “It is very positive for us because we are developing a very flexible network. We are helping friends of First Alliance become more diversified, and ultimately that’s what you need to do to be successful in business.”

            Being a career logistics professional with experience at large manufacturing businesses such as Kraft and Nabisco, Glenn is used to managing diverse interrelationships. “The logistics group is probably the most highly visible in an organization because everybody knows them and deals with them,” he said.

            Having 18 partners might be looked at as an impediment by some managers, but Glenn sees it as an advantage. “They are all entrepreneurs, but they are all good guys,” he said. “They will all call you and let you know how they feel about things.”

            As the person chosen to run the company, however, he is entrusted to make decisions based on what is best for First Alliance. “Sometimes they are looking out for their own business, but they’ve invested a lot of money in this business, so you really have to look out for both.  I respect each and every one of our partners.”

            When asked how First Alliance approaches business opportunities within a partner’s market region, Glenn explained that the partner gets first right of refusal. Sometimes partners are not interested in the account and may turn it down.

            “One of the things I’ve had to become is a master of communications and keeping everyone informed,” Glenn said. “I’m a concurrence builder. I have to coexist with all these entrepreneurs.” Some business decisions may require a vote of the board of directors.

Closed Loop Systems

            Selling pallet retrieval and recovery services is a patient, long term process, Glenn observed. “I think that, overall, if you’ve ever been in to sell a purchasing agent or a logistics guy on an asset recovery program, you can almost see the deer in the headlights. You’ve got guys who have been around a business for years and they are older and waiting for retirement, and they can see their retirement going by the wayside if they consider a returnable program that does not perform to expectations.”

            They are reluctant to try a returnable pallet program because they see an increase in pallet cost that is not offset by the rate of recovery. “It is a real risk or gamble to him,” said Glenn. “It’s not a real easy sale.”

            In order to make the sale, a company like First Alliance must persuade the potential customer about its tracking system and software and also convince it that First Alliance will provide reliable pallet pick-up. In addition, the business must allow First Alliance to contact its customers to set up the recovery and retrieval service. “It’s not like anyone is fat anymore staff-wise,” said Glenn. “It is like you have to go in there and set the whole thing up yourself.”

            Pallet recovery programs evolve; they do not happen overnight. “You don’t just push the button and say we are starting a recovery program on July 1, and then go out and pick up 50,000 pallets,” said Glenn. “It’s like one customer or distributor at a time. It’s hard work to get them on-line. Some of it gets passed through word of mouth or through sister companies. It takes time to build these things up. That’s been my experience.”

            While interest in pallet recovery programs has been slower to develop than some visionaries might have expected, Glenn noted that interest has continued to build steadily as laws regulating solid waste and pallet disposal get tougher. Competition is increasing among companies that provide pallet recovery services, both national and regional players.

            For the most part, these companies, like First Alliance itself, are not looking for publicity. “We don’t really go after the limelight,” Glenn said. “I did this (interview with Pallet Enterprise) only because I thought that our company deserved some recognition for our 10th anniversary.”

 Pallet Brokerage

            One way that First Alliance intends to help its partners is to revisit its involvement in pallet brokerage. “Brokerage was a big part of the original plan,” Glenn explained. “We got a lot of brokerage business, but the margins weren’t there, and there wasn’t enough to sustain the staff that you needed to have. Once you’re established and you’ve got a chunk of business where you are adding value to customers, then it is okay to get in and start doing some of those things.

            “We committed to our partners at our April meeting that I would work harder at using some of that excess capacity, and we are now just setting up the templates on our Web site where we can bring all of our partners into a ‘members only’ section. They can drop all of the pricing grids in there and price accordingly. Basically, they do all of the work, and we’ll be the administrator.”

            “We are going to be doing some national and regional business under the First Alliance, but really it is our partners and suppliers who will be doing all of the work,” Glenn explained.  “We are just putting the pricing together, then we have templates that we would customize for specific customers and put proposals together. We’d even do the face-to-face with customers.” Once the sale is made, First Alliance would be the administrator with a small fee to cover its costs.

            First Alliance dropped its Pallet Clearinghouse program in January of this year. “With everything else that we’re about now with Penn Alliance, we are really looking to kill the pallet exchange function, and the Pallet Clearinghouse was supporting it,” Glenn explained. He envisions that there will be some need for this service on a case by case basis, but it will not be a significant business as it was in the past. “What really killed programs like Pallet-Pallet and the Pallet Clearinghouse was the rental business,” Glenn said.

Look Under Every Rock

            Glenn envisions that First Alliance Logistics Management will grow the commercial-industrial business, but he sees also the need to diversify. “Our philosophy has been to look under every rock so we don’t miss any business opportunities,” he said. While pallets remain a strong focus, First Alliance is extending its services to other assets, such as plant racks, pallet sets and reusable packaging.

            First Alliance seeks to build its network by helping its partners and suppliers become better companies. “I feel like we’ve already done that through our management techniques, our reporting, our systems and our software, as well as the diversification we’ve brought to people in terms of different sizes and styles of pallets and non-pallet assets.”

            While it is hard to predict the future for pallet retrieval and recovery services and Penn-Alliance, it is fair to say that First Alliance will continue to develop its network and adapt in order to succeed in the marketplace. Congratulations on the first 10 years!