NWPCA Meeting Focuses on Finding Solutions

With plenty of chances for fun in the sun and hot networking opportunities, hundreds of industry veterans and rookies met recently at the NWPCA Annual Meeting held in Scottsdale, Ariz. The meeting included educational sessions covering a wide variety of topics, a sold out exhibit hall with several new suppliers, and a number of networking opportunities. Focused on finding customer-driven solutions, speakers addressed issues of concern including the current state of the U.S .manufacturing economy, incentive pay plans, low cost ways to dramatically improve pallet performance, product liability safeguards, understanding the pallet user perspective, update on phytosanitary issues, tips for boosting sales and more. Just in case you could not attend or you missed something, our staff has compiled an executive summary of some of the top lessons to be learned from the Scottsdale meeting.

See the accompanying story for information on the awards and association business discussed at the meeting.

Where Does the Industrial Economy Go From Here?

Armed with new data and various reasons for the U.S. economy’s woes, Dean Garritson of the National Association of Manufacturers spoke on the macroeconomic causes of the recent recession.

“The U.S. is in a fairly significant cyclical slump,” said Dean. This recession was caused primarily by a slump in the commercial sector, especially manufacturing. “We think that we have turned the corner regarding economic growth. But it is very spotty in some industries. By the fourth quarter of this year, we expect (the manufacturing sector) to be almost robust, back to the 3-3.5% of growth.”

What are the major causes of the recession? There are several factors that led to the economic downturn. “Crude energy prices shot up almost 70% during June of 1999 to June of 2000. Fuel went up because of new ethanol-based fuels,” said Dean. This took money out of the manufacturing sector, which led to cutbacks on expansion and improvement projects.

Despite 11 interest rate cuts by the Federal Reserve Bank last year, lending institutions took 70 billion out of commercial and industrial loans. Instead, banks are putting their money into treasuries. Dean said, “Sixty percent of the current manufacturers are saying that they have seen either no reduction in the cost of borrowing or an increase in the cost of borrowing.” When the economy began to slump in 2001, companies began to work off inventories and withheld new purchasing orders, especially for durable goods.

The value of the dollar continues to rise, which can be seen as both a blessing and a curse. The dollar’s strong valuation makes the dollar the currency of choice around the world. But it also makes it difficult for some U.S. companies to compete. For example, every good that is shipped to Europe from the United States has about a 30% tariff on it due to the currency differential. During the last major recession, foreign spending of U.S. goods helped to pull the country out of the doldrums. But the high price of the dollar versus other international currency indicates that domestic sales will have to drive growth.

There are some positive signs for the U.S. economy. Inventories are being worked off, which should lead to more order volume growth. Manufacturing activity rose for the second straight month in March. Consumer spending remains strong. Interest rates are low, which has kept housing sales strong. Moderate tax cuts have given consumers a few more bucks to spend. But there are still some major minuses. Some large companies are still reporting negative profit pictures. The dollar remains vastly overvalued; bankers continue to withhold loans for capital improvements. The Arab/Israeli situation continues to worsen and threaten global stability.

Dean Garritson of the National Association of Manufacturers (NAM) also led a session on tax issues. According to NAM, President Bush is beginning to talk about wanting to simplify the tax structure and make some significant changes.

The House of Representatives passed a stimulus package that would have helped the business economy. But the Senate knocked it down. With both parties squabbling over the details, it appears that Congress will not pass an economic stimulus package this year. The Democrats wanted to use increased government spending to boost the economy, while the Republicans wanted to provide tax relief to American businesses.

NAM believes that Congress will work toward permanently eliminating the death tax this year because the cost to do so would be fairly low.

Enron has become a key catch phrase in Washington. The scandal could have implications for 401k and pension plans as Congress addresses the issues of retirement security. Some liberal lawmakers are eyeing this as an opportunity for more government control. According to Dean, over 79 million people have 401k plans. Congress has held 43 hearings about Enron. NAM warns that even a slight change in pension or 401k laws could hurt U.S. companies. Currently, there is more than $2.5 trillion in assets locked up out of the control of Congress in private retirement plans.

Figuring out how best to motivate employees with incentive-based pay programs can be a difficult task. Kamps in Grand Rapids, Mich. has spent years trying a lot of different approaches. Bill Zeilstra, Kamp’s controller, explained why Kamps has stopped looking.

Every year, Kamps spends $5 million in payroll. Keeping up with employees at two locations can be difficult when paying many of them on a piece rate basis.

Bill said, “No one can make you work harder than yourself.” Employees paid on a piece rate basis work 50% harder than an hourly rate person. Plus, they do not need to have a supervisor standing over them to get the job done. The difficulty comes in tracking employee performance and setting up a system that is equitable for everyone involved.

Picking a good rate can be difficult. Use an honest person to set targets. Kamps tries to set a target daily earnings of about $100 per day. Typically, line workers can earn $12-16 per hour. Work targets can vary from pallet size, condition, etc. Repairing with used boards versus new boards can make a difference. Kamps adds two cents if repairing with used lumber. Usually a new employee cannot hit quota right away, he must work his way up to it.

When it comes to quality control, adding penalties for bad repairs tends to curtail any major quality problems. If a pallet is pulled out of stack due to problems, Kamps requires the worker to repair it again plus one additional penalty pallet for free. From the first day of work, employees are instructed that setup and cleanup is part of the job. These tips may help you improve your productivity and make the work situation better for your employees.

Kamps has developed a sticker system to track performance throughout the day. This eliminates quarreling about how many different pieces are produced. Each employee is given a roll of stickers at the start of the shift. They write on a sticker how many pallets are in the stack. Forklift driver puts stickers on clipboard, which provides a running tally.

Not all jobs lend themselves to piece rate compensation. These are good piece rate jobs: sorting, de-nailing, dismantling, saw operators, end board removers, plating and pallet building/repairing. The following are bad piece rate jobs: high/low operators, supervisors, quality checkers, mechanics and truck drivers.

A piece rate system does not mean that you are running a sweat shop. Employees will take pride in what they do if treated right. If employees do a great jobs, go out and give them a pat on the back. Try providing soup or chili to line workers when the weather gets real cold. These little touches can make a big difference.

Kamps has tried to use spreadsheets and off-the-shelf software to track employee production, but none of these really worked well for them. Then, they approached Penninga Engineering, Inc. about developing a program designed specifically for the pallet industry. The result is PalletTime, which has cut in half the amount of time it takes to do pay roll. The production worker does the data entry. Kamps uses a touch screen model. PalletTime supports multiple languages and offers networking features. Bill said that it is very intuitive, easy to use – people usually only have to be shown once how it works. For more information or a demo, call 616/656-2559 or visit www.pennengr.com.

Dr. Mark White of Virginia Tech presented the latest information on pallet design techniques. Poor pallet design can result in product damage, pallet failure, personnel injury or in rare cases even death. Several of the changes Mark talked about have been included in the latest edition of the Pallet Design Software (PDS).

According to Mark, 77% of all damage to wood pallet deckboards (both top and bottoms) occurs at the top end deck boards. When forklifts impact the edges of pallets, the nails bend. They continue to bend in the deckboard until they literally split the deckboard at which time the heads pull through and the deckboard and or joint comes apart. Studies have shown that forklifts cause most pallet damage during materials handling.

Stiffness in the edge of a pallet is important. A stiffer edge deckboard results in higher impact forces. Thus, lower stiffness end boards such as plastic end boards are significantly more durable and resistant to impacts according to Mark. The center connection absorbs most of the force (up to 50 percent). The ends absorb 25% each end.

VA Tech’s research shows that if a company is constructing multiple use pallets, one of the most efficient ways to improve value is to add an extra nail to each of the connections in the end boards. Other methods include: putting denser species such as oak or plastic lumber on the top end deckboards. CHEP is testing plastic lumber now in its pallet pool. Other options include using stiffer fasteners or butting end deckboards.

“The best way to improve the value of a wood pallet is to focus on the end board connections,” said Mark. Examining the results of the study, it appears in limited use or expendable pallets manufacturers can use fasteners, which are a bit lower in quality, that those that meet the criteria for the uniformed standard as now published by the industry. Mark’s research indicates that these lower quality fasteners may be used in hardwoods but are not usable in softwoods.

For more information visit www.www.palletlab.vt.edu.

By simply being in business, you take the risk of being sued. Believe it or not, a person can sue you if they use a pallet for a ladder and fall. Thus, the right amount of liability insurance can provide a wall of protection. David Creighton of Bryton Companies, discussed the reasons for the coming increases in insurance premiums and what companies can do to lessen the hit.

Here’s a few tricks:

• Go through your balance sheet to determine exposures including general plant, workers compensation, general liability, premises liability, equipment, etc.

• Try to get permanent equipment installation defined as building contents; this should cut the rate in half.

• When it comes to insurance valuation forget what you did with taxes. Your insurance valuation equals replacement costs minus depreciation versus actual cash value.

• Consider eliminating unnecessary coverage. For example, if your company owns a fleet of vehicles, eliminate glass coverage and absorb the risk of broken windshields.

• Deductibles lose their efficiency as they get higher. The standard deductible rate change has gone up from $100 to $500. Ask for the rate per thousand per hundred per million of coverage. Don’t get hung up on the premium. The rate of coverage provides a more accurate measure of what you are getting for your money.

• Lose Control — Ask your insurance carrier what lose control methods will help you save money. Add sprinkler to part of a building, improve safety guards/procedures, etc.

• Implement a monitoring process. Meet with your insurance agent half way through the year to discuss the market and issues affecting your coverage.

Read the exclusion, definitions and coverage provisions in detail. These sections in your policy will help you identify any coverage holes before they become a problem. “An insurance policy is like a piece of Swiss cheese. There is a lot of substance to it, but there is also some holes in it. You find the holes by reading what is not covered, exclusions in the contract,” said David. Your agent should emphasize the holes in the policy, not what is covered. Understand the conditions to the contract, issues such as requirements after a loss, how to report loses, settlement practices, etc.

The stock market flattening out and the 9/11 terrorist attacks have hit the insurance industry hard. As the investment income stopped, insurance companies started to get rid of average risks or greater. For 15 to 18 months, insurance companies have been re-underwriting policies and raising rates. The forest products industry is in a greater than normal risk category. Thus, some companies in this industry may have trouble getting re-insured according to David.

The pallet industry tends to be a cutthroat market where sales can be very tough. Low barriers to entry have flooded the industry, especially for recycling. Unfortunately, many customers see pallets as a commodity and focus on only the price.

It can be difficult to find ways to differentiate yourself in a very competitive market. Larry Laufer of the Sales Institute of Towson University believes that even in a non-innovative industry you can manage perception with the interaction that you have with your customer, and over time gain market share through strategic customer interaction.

“There are some problems with customer driven solutions because it infers that your customer is going to be part of the solution,” said Larry. “Many times buyers do not want you to have a good sales call… they do not want you to know what is really needed to make an adequate value-based solution presentation.” And other times they may not know what the solution is.

There are three key sales strategies – be the innovative leader, the low priced producer or the company that knows the market better than anyone.

Larry identified four major selling styles: analytical, driving, expressive and amiable. These styles dictate the nature of the sales relationship and will let you know what the potential customer wants from you. Some just want data. Others want a relationship. It is your job to figure out what will make them buy from you.

According to Larry’s research, it usually takes three questions before you get to the core of what they want. When people tell their needs, they usually don’t identify what is the most important one. So ask them to rank the needs and explain why they ranked the needs in that order. Don’t give away too much in your questions. Address a customer’s needs and treat them according to what their tension level dictates. “All else being equal, people buy from those that they are most comfortable with,” said Larry.

Rick Butts shared his insight on surviving today’s rough business environment. Having done everything from being a pig farmer to selling cars to preaching to running a pallet business with his father, Rick identified several keys to living a less stressful, more productive life.

Rick pointed out how technology has failed to live up to its promise by speeding up the pace of business not of relieving the average workload. Today, everybody wants it yesterday, which has led to increased stress for just about everybody. Rick said, “If you have a book on time management on your nightstand that you are too busy to read… that’s a clue.”

According to Rick, people change for only one of two reasons either they see the light or they feel the heat. When things change, most people try to grab hold to the past. People who deal with change the best envision a place in the future where they have already embraced the change and are back to productivity.

Rick stressed three major keys to successfully managing change – control, clarity and courage. People feel happy to the degree they feel in control of their lives, and experience stress to the degree they feel out of control, or controlled by someone or something else. According to Rick, “The starting point for control begins when we take responsibility for the choices that we make on a daily basis.”

When it comes to clarity, most people get very busy keeping things going, and often forget to dream big things, and pursue them. “We get so busy that we forget that we ever had a dream,” said Rick. “The future does not care about your mistakes. Only you carry it around like a noose on your head.”

The main key to success is not getting more data. Most companies are drowning in information already. The difference between winner and losers comes down to those people with the courage to embrace change.

• Increased Productivity: Employees innovate to boost their performance. People find new, better ways of doing things.

• Hourly workers work a whole lot harder if surrounded by others working on a piece rate basis. The active pace breeds a culture of hard work.

• Flexibility: Employees are their own boss. They can have a more flexible schedule.

• Accuracy: System helps determine direct labor cost and provides better production information.

Negatives—

• Setting a fair rate can be difficult.

• More paperwork can be cause problems without a proper system in place.

• Quality control: Employees work faster, which leads to a greater chance for worker error.

• Safety: Employees can work so fast that they can get injured.

• Increased employee turnover.

• Math errors can cause accounting headaches.

• Managers have to take pay cut to do management (hourly) vs. piece rate working on the line.

• Anti-modernization/mechanization

• Employees may put off or ignore duties such as cleaning up because it does not count toward piece rate totals.

The National Wooden Pallet and Container Association (NWPCA) recently honored several companies for attaining 25-year membership in the pallet industry trade organization. They received awards at the NWPCA’s annual meeting.

Achieving 25-year membership status were Edwards Wood Products, P.T. O’Malley Lumber Co., Yerger Wood Products and Industrial Reporting, which publishes Pallet Enterprise and Pallet Profile Weekly.

The association also recognized three suppliers as ‘season sponsors.’ Mid-Continent Nail Corp., Viking Engineering, and North American Industrial Lt. were acknowledged for their commitment and dedication to the pallet and container industry and their customers.

The NWPCA presented its second annual Recognition Award to the American Feed Industry Association. When the NWPCA was working with federal officials to reverse U.S. policies that prohibited fumigation and pressure-treated pallets for European Union shipments, the feed trade association contacted the NWPCA and made its resources available. Jim Rydell accepted the award on behalf of the feed industry trade group.

Members elected Jan Fredell as chairman of the board of directors; Jan is president of a pallet and container business in Sweden.

Bill Biedenbach of Allegheny Recycled Products was elected chairman-elect and was re-elected to the board of directors. Also chosen for the board were David Eason of Pallet Resource, Steve Geiges of Treen Box & Pallet Corp., Jamie Gilbert of Custom Pallet & Crating Inc., Jim Murphy of IFCO Systems, and James Ruder of L&R Pallet Service. Jordan Piland of Williamsburg Millwork will serve as treasurer in 2002.