ENTERPRISE: What is your background and what attracted you to the pallet industry?
Mike: Thirty years ago I owned another business that required pallets in the distribution of our product. A customer of ours had the opposite problem; he was building large inventories of pallets. So combining our need and my customer’s problem created an opportunity. The Pallet Factory was born, and the rest is history.
ENTERPRISE: What are the three greatest challenges facing your company today?
Mike: Like every pallet manufacturer, I am concerned about the uncertain availability of new lumber; acquiring enough material can sometimes be a challenge. Then there is always the shortage of pallet cores, which has been a major ongoing concern for pallet recyclers for many years. Labor is at or near the top of the list for most pallet companies.
ENTERPRISE: How is the labor pool changing for pallet companies? What impact is it having on employee and human resources policies?
Mike: Our industry’s labor pool has changed dramatically. Many pallet companies now rely upon Hispanics who have proven to be excellent workers. Of course, every responsible pallet company wants to make certain that their systems for checking immigration are fair and legal.
Most pallet companies have found that many of their older sources of new workers just do not bring in enough qualified people who fit their requirements. We tried placing more general newspaper ads that were not so job specific. We got a lot of applicants, but very few of them were able to the do the work. Yes, labor continues to be one of the biggest challenges facing a pallet company.
ENTERPRISE: Is there a reasonable potential for a revived white wood pallet pool? If yes, how do you expect it to develop?
Mike: Why not? EPAL is a successful pool, so is CPC and to a limited extent PECO and others. It’s obviously not easy to put one in place and the start-up costs would be substantial. I’m also not sure any of those modes would work in the United States. But there are certainly a lot of folks looking at trying to do it. The recently completed NWPCA study on the Grocery Industry Warehouse and Distribution Trends conducted by Michigan State University reported that, at least in the food industry, respondents were uncomfortable with the fact that there was no competition to CHEP. When end users express a need like that, someone is going to respond and I believe people will try to structure white wood pools.
ENTERPRISE: Are block pallets becoming more important in the U.S. pallet market? How do you see them impacting the future face of our industry?
Mike: Block pallets are extremely important and are becoming more so. At some point in the future they are likely to start penetrating the stringer pallet market. Certainly the grocery industry can cube out trailers better with block pallets. A number of grocery companies are now talking about white wood block pallets. Many grocery leaders want an alternative to CHEP; it is natural for grocery companies to want supplier choices. There has not been any significant shift yet toward block pallets, but I believe we will see block pallets become more prominent at some point.
ENTERPRISE: No issue has been any more controversial and polarizing than CHEP and its relationship with pallet recyclers. What do you see in the future about this relationship?
Mike: You know, I have heard all the chatter about CHEP. I actually wonder when, if ever, it will end. CHEP, like it or not, is here to stay. CHEP buys a lot of new pallets, and some new manufacturers are glad to be their pallet suppliers. Recyclers have had legitimate grievances with them in the past. Some of those issues have been resolved, and some remain on the table.
So whether you call them ally, competitor, or the things I’ve heard in the industry, which I need not mention here, the fact is CHEP is here to stay. As I said, opportunities – we can find a way to compete effectively against them; we can negotiate a way to make them a customer. I believe in the market. If CHEP were not delivering value to customers, they would not exist. If they stop delivering value to customers, they will in the future cease to exist. If we figure out a way to compete on the same national scale and do it better, they will continue to exist, but we could take some of their market share.
They are a member of NWPCA. Like all members, they share knowledge with NWPCA members – not all of it of course, but then what company does? Our bylaws allow brokers in our membership ranks. CHEP happens to be the biggest broker. The association is a forum for negotiation and resolution. CHEP is a major player in our industry and will remain so in the future.
Let me put it this way. I would rather talk with a competitor from any company at an NWPCA conference than to take our discussion inside a courtroom.
ENTERPRISE: What are the biggest issues facing the pallet industry in the next couple of years?
Mike: I think the most critical issue for our industry is positioning ourselves to take maximum advantage of changes as they emerge – anticipating any opportunities and being ready for challenges. For example, well before the international regulations for wood packaging were finalized, and certainly long before they were implemented, the NWPCA launched an education process that included articles in our publications and presentations at conferences on this topic. We explained that heat treatment or fumigation would be required for exported wooden pallets and containers. Because we, the members, knew about this pending requirement, many got out in front of it and invested in heat treating equipment. I personally know of several members who are bringing in more money heat treating pallets for other manufacturers and recyclers, than they make on their own pallet business. There was a change; we knew about it early. We were briefed on the details so we had a thorough understanding of the impact of the requirement, and we were able to respond. That example is a model for dealing with all changes whether they are from end users or regulators.
The industry has seen its share of changes over the past couple of decades. The pace of change continues to increase. Those who have advance knowledge and understanding of what’s to come and have a forum for exchanging ideas on ways to cope will be the people who have the capacity to turn lemons into lemonade. Clearly, I believe that belonging to an association of my peers and having access to industry-specific information gives my company an advantage.
ENTERPRISE: In your opinion, who are the top five people who have impacted the industry over the last five years?
Mike: It is impossible to single out just five people. I don’t think we can look at individuals or single companies. NWPCA has a working theme “Shared Vision, United Goals”. It means that together we can accomplish what no single company or individual could do alone.
I want to identify as having had an impact all of the dedicated and talented people who – past and present – have played an active role in the association. Those in governance, not only those on the Board, but the members of the committees and task groups who make recommendations to the Board. They have set the forward-looking course for the organization that gives all members tools to take advantage of the types of changes in our business environment I described earlier. That direction will serve the wooden pallet producer far into the future.
More than that, they have influenced and guided the industry through very challenging times and significantly impacted the positive outcomes we’ve seen. We are a small industry, relatively speaking, but have built a large and effective voice that speaks for all of us. We turned around the Justice Department when it proposed allowing federal prisons to build pallets for the Department of Defense.
We persuaded the European Union to delay a “bark free” requirement; we believe we have turned them away from bark free toward a manageable “debark” policy that will be practical and achievable. We’re working with them now to determine a specific definition of debarking.
OSHA was very open about targeting our industry for safety and health violations; NWPCA met with the OSHA administrator and negotiated a workable policy on bandsaws. We formed an ongoing formal alliance with OSHA to deal with other issues as they arise. We work with 80 end user associations whose members are high-volume pallet users. We work with Congress and regulating agencies to encourage policies that will have positive results for our industry.
It is only by joining together as an industry that we can achieve all of this. Those who have served in the past and those serving on our NWPCA Board work hard. I’m impressed by their commitment and honored to be able to have a year of leading this fine group.
ENTERPRISE: What are the most important benefits that you and your company have experienced through your NWPCA membership?
Mike: Beyond what I’ve already said, membership in NWPCA means access to a vast network of peers that can be great support for your business. We learn a great deal from each other – at the plant tours and by talking at social functions and when we work together on committees. We exchange ideas for getting more business. We share our thoughts on the most pressing challenges and solutions we’ve discovered. I could try to do it alone, but why would I want to? It’s not only easier to achieve my company goals, but it’s also more fun to be part of an industry group. It’s nice to have what I do on a daily business understood by a large group of people and recognized for the important role our products play in the supply chain.
ENTERPRISE: The bark free issue has been on the front burner with the European Union in phytosanitary discussions. What do you expect to happen and when?
Mike: So what do I expect to happen? I think that when the IPPC meets to resolve the debarking and bark-free issue some operational definition of what constitutes tolerable levels of bark will be established. I recently returned from a series of meetings in Europe with Sam McAdow, NWPCA Chair-elect, Bruce Scholnick, NWPCA President and Stan Bowes, NWPCA International Director. We had the opportunity of visiting a number of pallet shops and let me tell you that even in Europe, pallets have evidence of bark. The European Union and those countries that are following their lead recognize full well that there needs to be a balance between the environmental protection issue of quarantine pests and the maintenance of trade, not only with the U.S. but with all countries with which they deal.
This is a critically important issue in the EU and U.S. alike. But the work that is being done in all areas seems to suggest a compromise will be made between the technical and practical implementation of regulatory action. What is critically important is that our industry needs to be kept aware and to realize that compliance with these international regulations is critical. Anyone who cheats or who inadvertently ships infected packaging material puts the entire industry in jeopardy. Our industry is capable of dealing with international standards.
