Pasadena Skid Takes The Bull By The Horns In Competitive Market

Pasadena is one of the largest petrochemical refining centers in the world, and the highly industrialized region supports a very competitive pallet and container market. “We are in an area with large, well-run, financially sound pallet companies that have been around for a long time,” Rob explained.

When the ride gets rough, it may require tough business decisions. Rob was faced with such a decision six years ago and reacted by strategically expanding his company in a direction that has paid dividends for Pasadena Skid.

More recently, in its continuing efforts for efficiency in production, the company invested in a new Pacific Trail crosscut unit saw – the first new machine purchased at Pasadena Skid. The Pacific Trail system is helping the company remanufacture hardwood cants and low-grade lumber faster and more efficiently.

Pasadena Skid is owned by Rob, Tom Orr and Tom Thrash; the latter two men also are co-owners of WNC Pallet and Forest Products in Candler, N. C. Pasadena Skid is situated on seven acres of land and has 100,000 square feet under roof, with some space leased to a tenant business. With 42 employees, the company manufactures, recycles and supplies a diverse range of pallets and containers and related products. “We produce many types of products,” explained Rob, “including crating, bulkheads, recycled boxes, new and recycled pallets, cut to size plywood and OSB, and, via Corr Pallet affiliate, corrugated pallets.” (A bulkhead, Rob explained, is a wooden fixture that contains the cargo in an ocean-going and other containers.) It manufactures both hardwood and softwood pallets as well as containers and other wood packaging. The company’s cut-up operations produce 40-50,000 board feet of pallet stock and other components daily. It serves customers in the industrial region of southeast Texas that represent such industries as paper, petrochemical and rubber, and also supplies third-party contract packaging businesses.

Rob began his career in the forest product industry, but not the pallet business. He earned a bachelor’s degree in finance from Western Carolina University and then worked for a furniture manufacturer for three years before taking the plunge into home building. Born and raised on a small farm, Rob was not afraid of hard work. In 1979, interest rates were round 21%, the inflation rate was 15%, and unemployment was 14%; the home building industry was dead. “I couldn’t even find a deck to build,” he recalled.

About that time, Rob had just completed an addition for his brother-in-law, Tom Orr. Tom offered Rob a management position at WNC, and Rob accepted.

WNC had an opportunity in Pasadena. The company won a contract that created an opportunity for Rob and partners to spin off a separate company. A few months later, Rob and his new bride, Melinda, spent their honeymoon driving to Pasadena, where Rob had recently moved to launch Pasadena Skid and Pallet Inc. in early 1984.

The company leased a tiny metal building and hired 10-12 employees. It bought low-grade lumber, mainly yellow pine, and remanufactured it into components for skids and pallets, which were assembled by hand with power nailing tools.

The business was struck by a tornado in the first year, and the electrical system was destroyed. “It didn’t totally destroy the building, but it was stressful,” Rob recalled. Because the company was located in a high-risk region for tornadoes, the owners had a ‘plan B’ — a generator — in the event that power was knocked out. The generator enabled the company to keep going for about a month and a half. The company soon moved into a 12,000-square-foot building on three acres, a facility that had been under construction when the tornado struck. Since the tornado, Rob advises other business owners to “always have a ‘plan B.’ “

With the business re-established in a new location, Rob began knocking on doors and cold-calling to generate sales. He landed several big contracts with steel and rubber manufacturing plants, and steady growth followed. In its second year, annual sales increased from about $1 million to $2 million.

Word of mouth and Pasadena Skid’s reputation for strong customer service also contributed strongly to the company’s growth, according to Rob. “I will personally get out of bed at two o’clock in the morning and get a product to a customer, which is something I have done many times…That is something some competitors won’t do.”

Significant changes have accompanied the growth of the company, some of which required tough decisions. “In 1997, the paper mill we were supplying down-sized by about 80 percent,” said Rob, impacting Pasadena Skid in a big way. Rob was faced with either down-sizing the company or expanding in a new direction. “Down-sizing didn’t work,” he said, “so we decided to get into the mainstream pallet business.” He made new investments in equipment supplied by Brewer Inc. and Baker Products to manufacture hardwood pallet components and also added a used Viking 504 automated pallet assembly system. Viking also supplies bulk nails to Pasadena Skid.

The expansion into manufacturing hardwood pallets has paid off; new hardwood pallets now comprise about 40% of the company’s business. Pasadena Skid manufactures many configurations of hardwood pallets.

For hardwood pallets, Pasadena Skid buys mixed hardwood cants ranging from 3 1/2×8 to 7×9 from sawmills in east Texas and Louisiana. (Hardwood raw material is almost non-existent in the region, Rob noted, because of el Nino heavy rains and a reduction in logging contractors and small sawmills; Pasadena Skid is having to rely mainly on material it has in inventory and longstanding supply agreements.) Cants are stored in the yard until they are needed in the cut-up operations.

The new Pacific Trail unit saw is being used to cut bundles of hardwood cants and other lumber to appropriate lengths. “We like it for its precision and its capacity,” said Rob. Pacific Trail service and technical support have been unsurpassed, he added. “We are very happy with our choice.”

Even though the installation and transition to the new machine went smoothly, there was a problem the second day — though Pacific Trail was without fault. The machine was being used to trim a bundle of oriented strand board (OSB). Unbeknownst to the operator, the supplier of the OSB had accidentally left a steel bar in the bundle of material, which tore up the chain of the package saw. Replacing the chain was fairly simple, Rob noted.

In addition to its new Pacific Trail unit saw, Pasadena Skid has a Brewer cut-off saw and a Newman KM-16 multi-trim saw to cut cants to appropriate lengths. Rob has been very satisfied with their performance. “These machines will last forever if they are properly maintained,” he said.

Rob has equipped much of his plant with used machines, but they have held up well, he indicated. “We buy good equipment and use it to its full capacity,” he said.

After the cants are cut to length, the pieces are put through band saw lines to resaw them into deck boards or stringers. Pasadena Skid operates a two-head Brewer band saw system and a Baker Products five-head band saw system. Lennox is the company’s supplier of bandsaw blades. A Baker Products de-duster removes dust from the finished pallet lumber, which is stacked manually and stored in the yard.

Pasadena Skid continues to manufacture softwood pallets and wood packaging material. The company supplies skids, boxes, export crates, cut-to-size plywood and OSB, and dunnage. The company buys low-grade 2×4 through 2×12 softwood, and packages of this material are being cut to length on the Pacific Trail unit saw. The company also has Porter Hydrocut and Lauder-Hamilton pop-up saws for cutting individual boards to length. Material that needs to be resawn is put through the Brewer and Baker band saws. Most crates and boxes are assembled by hand with Stanley-Bostitch power nailing tools. Some components are assembled on Doig nailing machines; Pasadena Skid has four of the old machines.

About 10%-15% of the company’s business is pallet recycling. Pasadena Skid retrieves used pallets from customer locations, and two men sort them. Repairable pallets are refurbished in a recycling operation that relies mainly on labor, hand tools and power nailing tools. The repair stock comes from the company’s cut-up operations. About 400-500 recycled pallets are produced daily.

End trims and other waste material from cut-up operations and recycling is hauled to another business that grinds it into a wood fiber material that is sold for playground surfaces.

Pasadena Skid and affiliates own Corr Pallet Inc. to manufacture corrugated pallets. Rob was approached in 2002 by Stan Lee, owner of Corrugated Pallet Corp. in Houston, about becoming a licensee to assemble the company’s trademarked Unipal pallet. Pasadena Skid purchases double-wall corrugated sheets from Temple Inland. The sheets are slit, scored, folded, glued and assembled with specialty equipment to make pallets with lumber-like components. Corr Pallet’s corrugated pallet manufacturing operations are overseen by Barry Tobias.

Sales representatives Buddy Bishop and Jerry Owns helped Pasadena diversify further into other types of packaging a year ago. Products in this division include stretch wrap, air bags, slip sheets, banding, corner protectors and more. Buddy helped get the new division off the ground by calling on customers of his when he formerly owned a supply business. “It has been a great opportunity for us to diversify and create a one-stop shopping experience for customers,” said Buddy. Packaging sales by Buddy and Jerry already make up 15% of total revenue, and the packaging business shows more potential for growth.

Rob expressed a deep appreciation for his staff, and singled out several: office manager Belinda Esposito, plant manager Randy Dunkerson, production manager Donnie Smith, and the sales representatives, Jerry and Buddy. Several employees have been with the company for over 10 years. Pasadena Skid provides group health insurance for employees as well as a profit sharing program that is tied to attendance and performance.

Buddy considers it a privilege to work for someone like Rob. They met years ago when Buddy owned his supply business and bought lumber from Rob. “It is an honor working for him,” said Buddy. “He is a good Christian man, and I treat him like a son.” The admiration seems to be mutual. “He is a workhorse at 80 years old,” said Rob, “a great guy.”

In his spare time, Rob, 49, enjoys wood-working, boating, and spending time with his wife, Melinda, and their two sons, Chase, 11 and Cameron, 14. He served on the board of directors of the National Wooden Pallet and Container Association from 1999-2001 and previously chaired the association’s education committee for six years. Rob also has volunteered time to the local YMCA, civic and neighborhood organizations, and other groups.

WNC has spun off several companies since its beginning in the 1950s, several of which Rob and several others are investors. “The partners in the group of companies may or may not have equity in any one given operation, but….we support each other in numerous ways,” Rob explained. Those ways include technical assistance, expertise, financial, communication, and knowledge. “And yes, sometimes (we offer) a shoulder to cry on, although that is not always well-received,” he joked. Rob is also a part-owner of Baywood Products in Loxley, Ala., Pensacola Skid and Pallet in Pensacola, Fla., and Core Pallet, which is also located in Pasadena. Other WNC Pallet affiliates include Alabama Pallet in Town Creek, Ala., Valwood Corp. and WNC Dry Kilns.

Rob has had a few learning experiences over the years that have helped make him into the successful, well-seasoned businessman he is today. He shared a lesson he learned the hard way just last year. “Pricing has become very competitive,” he observed. “Every time an online bid is accepted, it creates a disruption in the marketplace. It is important to be pro-active. When you enter into a competitive pricing situation with a customer, you need to respond quickly. Don’t be in denial….Before you cut your price, get your facts in front of the customer.”

There is significant over-capacity in the pallet industry in the current economy, Rob noted. “Almost no one is running double or triple shifts,” he said. The market is not growing because U.S. manufacturers are moving overseas. And the reason is not solely cheap labor, Rob contended. “We are seeing this happen at an alarming rate,” said the National Association of Manufacturers. “Customers are leaving because of too many regulations from federal, state and local government,” said Rob. “We are killing the goose that laid the golden egg — America’s manufacturing. We are ridding ourselves of the golden egg when we buy their products.”

Another, more timely challenge is the shortage of hardwood raw material. Logs are scarce in the region, and the industry is losing loggers as timber harvesting becomes less profitable. Last year Texas and Louisiana lost about 15 sawmill businesses, he said. Frustration mounts as timber on federal government lands has been taken off the market. “I believe we need to manage the forest, not lock it up and throw away the key,” said Rob.

The marketplace is changing dramatically, he added. “Green hardwood lumber is coming to us from Poland,” said Rob, as well as France, Russia, South America and Scandinavia. “That didn’t happen five years ago.”

Rob encourages others to get the attention of their members of Congress and help them understand the importance of manufacturing to the U.S. economy. “The high-tech bubble is great,” he said, “but we still have to have the manufacturing jobs that create wealth. The pallet industry is hurting because major manufacturers are leaving the country. The pie is shrinking because of a more friendly regulatory environment, cheap wages and an overseas labor force that is willing to work. They don’t have the entitlements.” Americans, on the other hand, have become “spoiled,” said Rob. “Too many safety nets.”

He favors rolling back government regulations in order to encourage manufacturers to stay in the U.S. and spend their capital expenditure dollars here and get a good return. “A major executive asked me, ‘If you had $5 billion, would you try to build a refinery in the U.S.?’ I

answered, ‘No, probably not. It would never get built because of too many regulations, permits and more regulations and re-permitting.’ “

Rob spends 60% of his time dealing with the regulatory issues, he estimated. Pasadena Skid’s strategies for combating costly regulations include automating to increase productivity and efficiency.

“What we can’t (easily) change is the fact that American (pallet ) manufacturers, as uncomplex as we are, are hamstrung with so many regulations,” said Rob. “It’s gotten worse in the past three years, and I don’t see it slowing down. The people in Washington just don’t get it.”

He remains optimistic, however, about the ability of U.S. manufacturing businesses to compete in the global market against cheap overseas labor. U.S. businesses have an edge in productivity, he noted. “We can bridge the cheap labor gap with our higher productivity if the regulatory environment will allow us to do so,” said Rob.