CLIFTON HILL, Missouri – It seems the one constant in Ken Schroeder’s 20-plus years in the forest product industry has been change – changing markets, conditions, trends. Through it all, Ken has managed successfully to adapt his business, Kenmar Timber Co.
Kenmar – named for Ken and his wife, Mary – is based in Clifton Hill, Mo., about mid-way between St. Louis and Kansas City and roughly 30 miles due north of Interstate 70, which runs east-west and connects the two cities. (The company has a website at www.kenmartimber.com.)
The company is mainly a manufacturer of new hardwood pallets and had sales of $2 million in 2010, Its operations are located on 12 acres and comprise a combined 21,000 square feet under roof – a sawmill, resaw mill, pallet plant, maintenance shop, and office. It has 24 employees. Six people usually run the sawmill and six in the resaw mill; three workers are employed in the maintenance shop, and the rest work in the pallet plant or in the yard.
Hardwood pallets – mostly custom and specialty pallets – account for about 67% of revenues. Grade lumber normally accounts for about 15% of sales although the company sold almost none the last half of ‘09. The company also produces shipping crates and boxes, material for timber frame homes, and industrial lumber, such as trailer decking and mining timbers. When the market is tough it also cuts railroad ties. Ken also sells a small volume of cants and some cut stock to other pallet companies, and he exports some veneer logs to European markets.
In good market conditions for grade lumber, the company normally cuts 4/4, 5/4, 6/4 and 8/4 in random lengths – red oak, white oak, soft maple, and ash.
“The grade market looked like it was going to come back (in 2010) and then has dropped off ever since,” remarked Ken, 66. “This week, prices are still on their way down.”
Ken grew up in Wisconsin. “One of the things that really helped me survive in the pallet business was growing up on that Wisconsin dairy farm,” he said. “I grew up around machinery and hard work.”
He served eight years in the Army during the Vietnam era and came out as a captain in the field artillery. He went to work 18 years for AT&T, where he received quite a bit of management training and had a management role.
“That helped me with the management part of the business,” he said, “because I didn’t know much about the wood business” when he entered it.
He was working for AT&T in Kansas City when the company closed the office. Ken decided to buy a small sawmill business. When he bought the company in 1988, the mill employed five people. At the time it was mainly cutting pallet cants.
The previous owner of the sawmill also had pallet manufacturing operations, and he contracted with Ken to buy side lumber and cants. After a short while, however, Ken faced his first change. His customer stopped buying the side boards; now, he wanted to buy pallet cut stock. Ken added a Baker Products bandsaw and a Tri-State pop-up saw so he could process the side boards into cut stock.
It wasn’t long after that when he was faced with another change. Now, his customer wanted to buy only No. 1 material. Ken decided it was time to go out and add other customers. Within a short time he also entered the pallet market. The company began manufacturing pallets in 1994, “selling a few here and there,” said Ken, and assembling them by hand with pneumatic nailers.
The business grew, and within just a few years he made a significant investment in additional machinery and equipment to increase production. In 1996 he added a Brewer cant cut-off system, complete with a package deck and unscrambler, a pair of Brewer Golden Eagle bandsaws, a West Plains notching machine, and a Viking Champion nailing machine.
In 2000 he added a second Viking nailing machine, a used Duomatic. “It was easier to operate, and the guys liked it,” he recalled. “We started running it pretty hard.”
Two years later he bought his first semi-tractor so the company could do its own trucking.
He added quite a few customers in 2003, but some of them were concerned about the reliability of Ken’s company. “Pallet customers do not like you not showing up with the pallets when they need them,” he said. “You’re either in this all the way or you’re not in at all.”
To increase his control over raw material, he bought a truck to buy logs, and in 2004 he added logging operations. He invested in a skidder and started buying standing timber. Today, the company still has two small contract logging crews, essentially one or two men each. The company owns a pair of Caterpillar grapple skidders (a 518C and a 515) that it leases to the loggers, who fell the trees by hand and remove the limbs with Stihl chainsaws. A company-owned and operated SERCO 8500 loader puts the logs on the truck.
In 2005 some of his customers began requiring heat-treated pallets. Ken added a Kiln-Direct heat-treating kiln.
“I was very reluctant to get into that,” he said, because of the investment. However, he realized that competing companies would be able to make inroads into his customer accounts if he did not. “So just to be competitive, I went ahead and bought the kiln.” The move enabled him to keep his customers in the fold and to pick up new business. “That helped us in the end,” he said.
The sawmill remains an integral part of the company’s operations. The mill, manufactured by New Hampshire-based HMC Corp., is essentially the same one that Ken initially purchased in 1988 although he has added or upgraded some components over the years. For example, he changed out the edger for a bigger one, added a debarker about 15 years ago, and also put in a new carriage.
Years ago he experienced recurring problems with the vertical edger; the shaft was subject to vibration and breaking. Ken changed to a splined shaft made by Cedar Creek Enterprise of Dowling, Mich. “Once we got that splined shaft, it’s been a dream ever since,” he said. It was only replaced once in about 20 years, he added.
Ken buys hardwood logs from 8-14 feet long. He specifies a minimum 11 inches in diameter up to 31 inches in diameter. In the yard, Cat wheel loaders are used to stage logs onto the HMC log deck. Logs are fed into the mill and are debarked inside by the HMC debarker and then go directly to the head rig, an HMC modular mill with a 54-inch head saw and a 30-inch top saw. The head rig is integrated with an HMC three-blade vertical edger to produce boards.
Another investment he made in the sawmill was the addition of Kent Corp. 15 hp swing saw to help recover pallet lumber from slabs. The vertical edger can edge slabs that are big enough to recover a pallet board. Kent Corp. owner Sam Baker helped engineer the mill to add a surge table with the swing saw, which is used to cut the slabs to length. The rough material is stacked and put into inventory until it is ready to go into the resaw mill to be processed further into pallet stock.
The company used to cut cants to length with a swing saw, but the Brewer cut-off system changed that. “When I put in that Brewer cut-off saw…that saved a tremendous amount of labor for us,” said Ken. “That’s one of the biggest improvements I’ve put in here.” The cut-off system has been in operation for 15 years. “It’s very reliable,” said Ken, “very accurate. It’s heavy-duty. Built to last. It’s still as good now as when we bought it.”
There are two main lines in the resaw shop for processing material. For one line, used to process cant material coming off the Brewer cut-off saw into stringers, he has a Kent Blockhead model bandsaw behind a four-head shop-built unit – five heads in a row. The first four heads cut runners to thickness, and the blockhead finishes the process of resawing the runners to a uniform 3-1/2” height.
The Brewer Golden Eagle two-head bandsaw is utilized mainly for recovering boards from slabs. “Generally, that system works well because a lot of slabs will only have two boards in them,” said Ken.
“Brewer makes a really good saw,” Ken said of the bandsaw system.
The resaw mill also is equipped with a West Plains double-head waterfall notcher. “That’s another reliable piece of gear,” said Ken. A Baker Products de-duster cleans pallet stock for customers who require dust-free pallets.
Ken uses notch cutting tools from Profile Technology, which helped him in the past with the development of a custom tool. Brick makers were a big market for Ken in the past. Profile Technology designed a tool for him to cut a military or banding notch in a deck board; the notch allowed the brick makers to use metal strapping to secure a load of bricks to a pallet.
“That was a big business for me for a long time,” Ken said, referring to the brick industry. Eventually, however, the two brick companies he counted as customers went out of business except for some specialty products.
A vibrating conveyor under the swing saw collects trim ends from the slabs and carries them directly to a 48-inch Fulghum chipper.
Scrap generated by the bandsaws is collected and routed to a Montgomery hog that Ken has been using for 20 years. “We run all the offal from the bandsaws into that,” said Ken. It makes a nice clean mulch product. “Our mulch customers really like that,” he said.
He has good markets for residuals, he reported. “The last five years, markets have stepped up for wood by-products,” he said. He sells sawdust for a profit to a ranch that uses it for livestock bedding and composting manure. Chips are supplied to a fiberboard plant. The company sells two types of mulch, bark mulch and the clean mulch made from wood that has been de-barked.
Ken buys cants from other mills and also sometimes buys some cut stock to supplement his own production. He usually buys cants cut to a minimum of 3-5/8” thick by up to 10 inches wide. He buys all lengths except he tries to avoid 9-foot material. Cants are staged in the yard until processing.
Last year Ken sold both his Viking nailing machines and bought a used Viking Turbo 504. The newer, more modern machine “is much faster and more accurate” than the older models he previously owned.
“We get along well with the Viking people,” said Ken. “They give us good support.” The company is using Mid-Continent bulk nails for the automated pallet assembly system.
For hand nailing some specialty pallets, shipping crates and boxes, it relies on Duo-Fast pneumatic nailers and collated fasteners.
The company’s niche is specialty and custom pallets, not the GMA market. “Most of our markets are specialty pallets,” said Ken. He initially got into the specialty pallet niche because of the brick customers. “That’s kind of where we started,” he explained.
Typical pallet sizes are in the 37-50-inch range and sometimes up to 60 or 65 inches. Common footprints for customers are 44×44, 46×46, 38×45.
“We’re not a regular 48-by-40 type operation,” noted Ken. “Never have been.”
Specialty pallet manufacturing requires “more management activity, more management and work,” he added. “But it seemed to us that was a better profit than trying to compete with guys who set up for 48-by-40 and knock them out load by load all day long.”
About half the company’s customers are manufacturers of metal or plastic products. Other industries include minerals, chemicals, agriculture and publishing, and the military. His geographic market essentially is north-central Missouri. “We stay pretty much in Missouri,” said Ken, although he also does some business in Illinois and Kansas. The company does all its own trucking and also does some contract hauling. It owns three semi-tractors and is currently running two.
Besides all the change Ken has faced in his business, another constant since he entered the pallet business has been Pallet Profile Weekly, the market report and newsletter published by Industrial Reporting Inc., which also owns the Pallet Enterprise.
“I subscribed when I first got started because I needed to know some reliable information from an independent source for prices of pallets,” he recalled.
The newsletter carries information about pallet prices as well as raw material prices for markets throughout the country. In addition, it contains news and information about the pallet and sawmill industry. Industrial Reporting also publishes a similar newsletter on a monthly basis specifically for pallet recyclers, the Recycle Record.
Pallet Profile Weekly has been a valuable source of information and has helped Ken in his business, he indicated.
“It’s helped educate me about the pallet business,” he said, “and helped me identify when I’m going to have to adjust pricing, and how to go about it, and what kind of sales approach I can use.”
“It’s just a very good source, and I give those guys credit (the staff of Industrial Reporting)…for coming up with the information and putting it out there.”
He has benefited from the newsletter’s reports about various trends in the pallet industry, such as the move to treat pallets for export markets, issues related to industry rental giant CHEP, Costco’s move to block pallets, and more.
“There’s been a lot of change,” said Ken. “They were on top of that.”
“I’ve never let my subscription lapse, and I’ve never failed to read it every week. It’s one of the first things I open when I get my mail.”
During the recent recession, as sales nosedived, Ken did not lay off any employees, but he reduced operating hours. He gathered all employees together and explained the situation to them. He cut back to three days a week. “That was all the work that was available,” he said. Six employees quit; Ken did not replace them. The company later resumed operations four days a week, and last year returned to five. Now the company even has weeks when it runs six days. “It’s still a lean operation,” said Ken.
“We’re real proud of the people who hung in there with us,” said Ken. “I don’t know how they survived,” he said. “I wasn’t sure our company was going to survive in 2009,” he added.
Ken’s company has a simple IRA program for employees and profit sharing. Once a month he recognizes employees with birthdays by treating everyone to doughnuts. Company employees also share a meal once a month, and the meal is followed by a safety meeting and sessions about quality and production; employees are also recognized at this time for birthdays and service anniversaries. He recognizes workers after three years of service by giving them a gift of a collector’s knife with custom sheath.
Ken’s wife, Mary, helped him in the business on a limited basis while their children were young, but when they reached school age she began working with him full-time. She does virtually all the administrative work in the office – invoicing, collections, and much more. “She does an excellent job, and I wouldn’t be able to get along without her,” said Ken.
They have four adult children. A son works in the financial services in industry in Chicago, a daughter works for Boeing in Phoenix, another daughter is an entrepreneur in the health care industry in San Francisco, and another daughter in San Francisco is a stay-at-home mother with three children.
Bill Swetman has been a key employee, operations manager for 17 years. “He’s been like a brother to me,” said Ken. “I have complete trust in him.”
“We never would have been able to grow without his talents and commitment,” he added.
Bill supervises all production, maintenance and trucking operations while Ken handles financials, marketing, and buys logs.
Ken has been very active in the Missouri Forest Products Association over the years, joining when he first bought the sawmill. “It’s been a great help to me,” he said. “It allows me to network with other people.” He has learned from other people in the industry and also does business with other association members. Ken served on the association’s board of directors and also as president and vice president. He also has served on the board of directors of the Missouri Wood Industry Insurance Trust, a workers compensation self-insuring trust.
