There is a lot of unfair competition in the pallet industry, and it’s no secret, according to Gus Gutierrez, CEO of Pallet Consultants, a leading pallet manufacturer and recycler in the Southeast.
Pallet suppliers that compete unfairly with others in the industry because they fail to comply with regulations or laws regarding taxes, safety, insurance, trucking, or other issues, are not necessarily new or start-up businesses, observed Gutierrez. In some cases, they have been in business for many years.
This was the issue that Pallet Consultants highlighted during a recent visit with a Congressional candidate at its company headquarters and plant in Pompano Beach, Florida. Gutierrez hosted a visit by Mark Burns who is running for the 4th district seat in South Carolina.
A pastor and co-founder & CEO of the NOW Television Network, a Christian television network, Mark Burns met Gutierrez and his employees to discuss economic concerns and what the Palmetto state can do to improve the business climate. Burns was a strong supporter of Donald Trump in the 2016 presidential election. He campaigned with Trump and was a surrogate for him, and he was labeled “Donald Trump’s Top Pastor” by Time magazine.
One of the reasons that Burns met with Gutierrez is that Pallet Consultants plans to expand into South Carolina in the near future if it can secure the right location and ensure a workable business environment. Pallet Consultants has three facilities in Florida and two in Georgia, and it has a network of affiliated pallet suppliers and brokers stretching from California to New Jersey and from Florida to Michigan, most of them in the eastern part of the country.
Spotlighting Unfair Business Practices
Businesses that compete unfairly pay their employees ‘under the table’ to avoid paying taxes, noted Gutierrez. They may fail to comply with OSHA regulations, and they may lack workers compensation or liability insurance. “The list goes on and on,” he said.
Most pallet companies struggle with unfair competitors, suggested Gutierrez, because those competitors can undercut prices. “Here we are trying to do the right thing, and unfair competitors are depressing markets.”
“This is the kind of thing that is really hurting our industry,” he added, the fact that companies do not compete on a “level playing field.”
The solution might be steep fines for companies that do not comply with laws and regulations, or even shutting them down, he suggested.
Businesses that compete unfairly typically cannot offer the kind of value and services to customers as a legitimate business, suggested Gutierrez. For example, is their warehouse or facility equipped with a fire suppression system? Do they offer a program to ensure that pallets are free of contamination by rodents or other pests? Those kind of values and services are important when it comes to supplying and servicing Fortune 1000 companies, commented Gutierrez.
Pallet Consultants is equipped with 2017 and 2018 semi-tractors. “Why do I run new tractors?” asked Gutierrez. To ensure reliable delivery and service to customers. And if a semi-tractor should break down on the road, he can switch it out with a towing service.
Nevertheless, there is no shortage of purchasing agents at Fortune 1000 companies who ignore those benefits and services because their primary focus is pallet price.
“If something sounds too good to be true, it probably is,” added Gutierrez.
Legitimate companies also do more for their employees, suggested Gutierrez. They have good lighting and automated equipment to make the work easier. They provide benefits, like health insurance and retirement programs.
Companies that compete unfairly usually are deficient in three critical areas, said Gutierrez: pallet quality, sub-standard delivery practices and lack of responsiveness to the customer.
“My customer may not know they’re going to drop the ball on quality, delivery, or responsiveness…They may not know they don’t have insurance or play by the rules. Maybe they don’t care because they’re more interested in the cheapest price.”
However, for businesses that choose that kind of pallet supplier, the decision will come back to bite them, suggested Gutierrez. “If we lose a customer because of pricing, most of the time we get them back,” said Gutierrez.
One reason that customers stay or come back is due to the service level. Gutierrez explained that Pallet Consultants offers a guarantee that 100% of its pallets will be fully functional — a 0.0 percent failure rate.
Expansion in the Southeast, Working with Public Officials
Gutierrez is exploring plans to open another location in South Carolina. “We’re looking at two or three different properties,” he said.
Pallet Consultants is searching for potential sites in Charleston, on the coast, and Greenville, which is about 100 miles southwest of Charlotte, N.C. At this stage Gutierrez has not decided if the company would build a new plant from scratch or buy an existing building and renovate it. Depending on that decision, the new location could be operating by the end of the year or in the first half of 2019 or, if they build a new facility, up to 16-24 months.
“We have customers that we are targeting,” said Gutierrez. He also is talking to other pallet suppliers about an affiliation to serve customers in South Carolina.
At his level, having good working relationships with public officials is more than just a good idea, according to Gutierrez. “It’s vital. It’s part of the nuts and bolts.”
Especially when it comes to locating a new plant, those officials are the door keepers to the information and processes that provide various financial incentives to businesses to develop a facility, and they make the decisions about incentives. Those incentives often take the form of various breaks or reductions in local, state, or federal taxes but can provide other concrete financial assistance to help a company open up shop.
For example, Pallet Consultants participates in the federal Work Opportunity Tax Credit program. The federal tax credit is available to employers who hire people from certain target groups who have consistently faced barriers to employment. Target groups are veterans, recipients of food stamps or the Temporary Assistance for Needy Families program, and residents living in economically distressed areas classified as Empowerment Zones.
The recent visit with Congressional candidate Mark Burns by the Pallet Consultants team is just another example of a pallet company seeking to improve its relationship with public officials and thought leaders who can impact public policy. For many pallet companies, this is something they would never think about doing. But if the industry wants to be positioned for future success, more companies will need to follow the lead of Pallet Consultants, Lima Pallet and Bay Wood Products that are actively engaging with local and federal officials.
As one lobbyist recently commented at a pallet meeting, “If you are not at the table during discussions, you may end up on the menu.”
