Increasingly companies in the pallet and packaging industries are talking about diversification as a core strategy to deal with the changing business landscape. Rehrig Pacific Logistics (www.rehriglogistics.com) is one of the rare companies that has successfully morphed from its focus on pallets and containers to handling a wide variety of packaging and reverse logistics functions.
The Pallet Enterprise staff recently sat down with Matt Dannenfeldt, president of Rehrig Pacific Logistics (RPL) to discuss the history of the company and its model for the future. Companies that want to brainstorm for the future should consider some of the strategies used by RPL, just realize that none of these are easy money, and they all require a strong logistics expertise.
Founded in 2004, RPL was built to provide efficient systems for the use of returnable packaging through the retail supply chain. The parent company of RPL is Rehrig Pacific Co. of Los Angeles, Calif., one of the largest plastic pallet and container manufacturers in the country. This means that Rehrig has found a way to service customers with both plastic and wood packaging options.
RPL is focusing on helping retailers and suppliers reduce their packaging footprint and save supply chain dollars. This involves pallet management, reverse logistics, asset tracking and exchange, sustainability and recycling services, pooling, and transportation. Headquartered in Pleasant Prairie, Wis., RPL has facilities throughout the country. RPL changed its name last year from Rehrig Penn Logistics to Rehrig Pacific Logistics to create a more unified brand tie with the parent company.
Pallet Enterprise: Explain the reason for the name change and what impact has this had on the Penn Pallet side of the business. How does this name change reflect any new management strategy?
Dannenfeldt: The reality is internally nothing has changed. Our focus and the things we’ve been working on since day one are more or less the same. The name change was really around our customer base what’s happening and what we’re doing as a total organization, Rehrig Pacific entered the retail services industry with the acquisition of Penn Pallet that you eluded to back in June of 2005. We kept the name Penn because within that retail services space Rehrig Pacific didn’t have any significant reputation. Really from day one structurally speaking, it’s always been one large Rehrig owned organization both the retail services business (RPL) and the packaging manufacturing business under the Rehrig Pacific brand. As the logistics and services side of our business has matured and more and more people within the entire organization are aware of not just our traditional manufacturing capabilities but our service and logistics capabilities.
About a year ago as our sales force was basically doing its job, and introducing Rehrig Pacific as this full supply chain solutions provider there was confusion in the marketplace. Customers were looking at these two business cards going, ‘You’re telling me you’re the same company, but the name is not the same.’ Really it’s a name change to create clarity for our customers. It really just reiterates the internal work of a lot of folks that are selling everything we do as an organization not just necessarily selling product.
Pallet Enterprise: I understand that you recently bought a few locations. Tell me about your expansion over the last couple of years.
Dannenfeldt: It’s been all over the place. In terms of dollars, we’ve gone from back in 2005 as essentially a start-up company to roughly $80-85 million in gross sales. We are now opening our 9th and 10th operating location that is RPL owned, which does not include on-site labor deployment. We currently have about 700-800 employees total. So we’ve seen tremendous growth, but that growth comes from a lot of different channels.
RPL has grown its retail services business providing management of dunnage, pallets, recyclables, bins and boxes, and other packaging. We’ve grown our recycling business so we are a full-blown recycler in the plastics industry. We are actually buying material back from MRF (Materials Recycling Facilities) and cleaning, processing and reselling processed material back into the market. Most notably we try to send material back to Rehrig Pacific as the manufacturing parent company to remanufacture more recyclable products.
We also have grown our pooling business. RPL owns a fleet of bins in the central Great Plains area that are leased primarily to the meat and poultry industries. So you know the growth is kind of all over the place; we have made a few key acquisitions in a few target markets. We are not really a growth by acquisition company. Rehrig as a company over 100 years has probably made four acquisitions three of them have been managed by me in the last 20 months.
Most recently RPL acquired American Pallet Co. based in the Chicago market. American Pallet had been a long-time partner in Chicago. RPL wanted to enter the Chicago market on a number of fronts not necessarily the pallet industry. Particularly, we were interested in pooling opportunities because Rehrig Pacific has a manufacturing plant in Kenosha, WI that can receive and manufacture a lot of recycled plastics. So we considered Chicago a really important market for us to enter on a number of different fronts.
American Pallet obviously had a long standing customer base, really great relationships, tremendous customer service, which are all the things we just feel are paramount in how we want to go about our business. It was just a good fit and as we look to incorporate the pallet business with these other things as we enter the market.
Pallet Enterprise: From what I understand you’re coming out with some new product lines, especially alternative pallets made from recycled content. What are these products and how do they fit into the overall strategy of RPL?
Dannenfeldt: We’re very excited. We will be opening a 100% recycled scrap wood fiberboard facility in Easton, Penn. They will be manufacturing basically an MDF quality 4×8 sheet. The unique part is it will be made from 100% wood scrap. Most of the MDF or even lesser grade particle board has some component of virgin timber in it. Our new product is a non-formaldehyde-based board, which is also something we are pretty proud of. And it’s cost effective, so it’s going to be a board which is quite frankly as good in terms of performance as MDF that we will be able to offer the market at a lower price point. This is obviously a great compliment to our wooden pallet business.
RPL is trying to find ways to add value to everything we touch. This is a way to create value and utilize wood scrap and turn it into a product that is essentially the core of a lot of furniture and cabinetry that can get sold right back in that same retail store. So in the way of sustainability and that cradle to grave waste to value add, we’re very excited about it.
Pallet Enterprise: Is that wood fiber board just going to be used for furniture or is it going to be used in pallets and other packaging applications?
Dannenfeldt: We have developed a pallet prototype, but I wouldn’t want to overstate it yet. We’ve got about 30 that we have built and are currently testing. What we are very excited about is that early indications are that it has tremendous performance capabilities. It is lighter weight than your typical 4-way entry 9 block wooden pallet. It has a solid top deck constructed without nails. But we are not ready yet to commercialize this pallet because we are still testing its performance.
Pallet Enterprise: The wood waste that you are using to make this new fiber board material. Does that come solely from your facilities or does it also include wood waste from other sources?
Dannenfeldt: It’s both. Most of the scrap wood will come from the pallet community.
Pallet Enterprise: Are they grinding those pallets up and then sending you the ground material? Or are they sending you the pallets and you are doing the grinding?
Dannenfeldt: Well, they are not doing either yet. The plant is not operational. But the plant will be set up such that it can take either/or. We can buy ground up material or we can buy traditional scrap pallets in pallet form and handle it ourselves once they arrive. So the opportunity exists for us to be a good outlet for wood scrap in either form.
It tends to be more cost effective to ship ground up material. But if a company is not going to have enough loads to invest in grinding equipment, we can still make sense of taking that material off their hands and negate expensive disposal options.
Pallet Enterprise: Can you talk a little about what you guys do as far as total pallet and packaging and waste material recycling that’s different than that typical pallet company would do?
Dannenfeldt: First, I should preface this by pointing out that the pallet recycling industry has a lot of good players out there. They know their stuff, and they are good at what they do. I think that where we try to differentiate ourselves is we’re trying to position ourselves in the supply chain where we are able to handle all of your packaging and provide maximum value for all of it.
So that’s not unlike what a lot of pallet companies are doing as it relates to the pallets, but the rest of the story would be on the wood scrap piece, we’re trying to go there. The paper piece…rather than just simply cross-dock bales of OCC, we are investigating and investing in technology that will actually allow us to directly process that paper and turn it into a structural product that can be made into new packaging products, pallets or otherwise.
Our position is that there are really two pieces of the business. There’s the control of packaging assets, and then there is the value add innovation that we spend a lot of time and energy on too. It’s how are we going to maximize the value of that material that hopefully allows us to go back and put those dollars back into the hands of our clients. By finding a better value end game with those materials, we can offer more for the same materials.
Pallet Enterprise: In your typical facilities, do you have facilities just set up to process plastics or all your facilities, at least to some degree, set up to process a wide variety of dunnage?
Dannenfeldt: The latter. I would say at this point they are all set up to handle a wide variety. If you break it down in its most simplistic of categories it’s wood, paper and plastic. So we’re effectively set up to handle all three, which is not typical of most pallet recyclers. We’re bringing in a lot of inbound materials. Pallets are certainly a very important part of that, but they are but one part of it.
Pallet Enterprise: As far as the future goes, do you feel like there’s going to be a lot more recycled content end products and maybe even in pallets on the market?
Dannenfeldt: Gosh, I don’t know. Future is promised to no one, as they say. But as long as there are companies out there like ours looking for a better way, it appears that recycling of materials and bringing sustainable value to the supply chain has a place.
As more retailers and manufacturers demand that their service providers are finding innovation, our goal is to be a part of that curve. I think it’s safe to say as there are a lot of good companies looking at things in a new, innovative way that it stands to reason you’ll see more recycled content as a result. It’s that old reduce, reuse, recycle mantra.
Pallet Enterprise: Looking at your website, it has a list of 8 or 9 locations. Of those locations, are those all homogenous as far as how they are designed or is each one somewhat unique?
Dannenfeldt: I’d say they are more homogenous. I would probably bore you to death with how there are a few idiosyncrasies at each facility. They are all effectively equipped to handle those different materials we talked about as well as do pallet repair, do washing, do plastic recycling and, hopefully, even add to new services as opportunities present themselves.
Pallet Enterprise: How different is the plastic pallet recycling aspect than wood pallet recycling? Is it almost a whole other planet?
Dannenfeldt: As with so many questions, the answers lie in the details. What kind of plastic pallet is it? Is it repairable? I will give you an example: we do some plastic recycling in Ohio where most of the plastic we end up handling is not in a position to be repaired. Mostly it’s ground and cleaned and pelletized. But in Kansas, where we own those meat bins, we do a lot of plastic welding. That’s because the kind of damage we see can be corrected by a good repair weld. Essentially, it’s a pallet base with four walls. Repairing the bin furthers the life of those assets.
Pallet Enterprise: Now, when you are talking about plastic recycling, do you just do pallets or do you do all sorts of plastic you get from retail partners?
Dannenfeldt: In fact, very little of it is pallet based. Most of our plastic recycling business, we’re buying baled material out of Material Recycling Facilities (MRFs). These facilities collect recycled material from curbside waste programs or when your private hauler comes along and collects recyclables from behind your house. We effectively buy back certain types of plastic material from those MRFs for further processing and cleaning. We can then turn that into a viable, clean, reusable quality raw material that we can ideally get back to Rehrig Pacific for the remanufacturing of various products. Some of the plastic is old, damaged, plastic pallets, but as a percentage, that’s probably less than 1% of the total plastics we recycle on a monthly basis.
Pallet Enterprise: So old coke bottles and all sorts of stuff?
Dannenfeldt: It’s not PET. It’s old milk jugs and dishwasher detergent. It’s mostly high density polyethylene (HDPE). So like milk jugs and Tide products, would be representative of the kind of material that we mostly process.
Pallet Enterprise: Now, on your website, you talk about having asset tracking. What type of tracking software do you have? Specifically, what do you use it to track?
Dannenfeldt: RPL has built an in-house system that goes under the acronym of PARTS. It’s interesting, we built that system in-house about five years ago to track our own assets. We also sell licenses of that system as subscription to various customers who obviously might have similar asset management or inventory tracking needs.
We’ve kind of taken what’s worked for us and asked, ‘What other companies might have a need like this?’ Not necessarily in the same arena, of course, or even a pooler, but as an example, a manufacturing company that might want to track its internal assets across a number of different facilities can use that system versus building it themselves. We have a sales staff selling software as a service outside of our traditional categories. I only mention that because it’s kind of a neat little side piece of our business.
Pallet Enterprise: And when you talk about having third party logistics, that’s primarily warehousing for different product manufacturers or retailers…right?
Dannenfeldt: That’s right. We have some warehousing and logistics work. We do that at a number of locations across the country. Some of that is seasonal overflow and inventory controls. We do have an order fulfillment house where we have 3-4 that are mostly Web-based sales. We manage all of their inventory in our Columbus, Ohio facility providing order fulfillment services. This involves mostly consumer parcel deliveries as a piece part shipment. So we do some traditional order fulfillment beyond just your larger warehousing opportunities.
Pallet Enterprise: Is that like for people who are buying shirts and that kind of stuff?
Dannenfeldt: Yeah, I can’t tell you the name of the client. But you might go online and buy something for your grandfather and that order would process from our client’s website. The work order would actually come to us, and we’re managing their inventory and then deploying that shipment.
Pallet Enterprise: Wow, that’s way outside the realm of pallets or containers. Were those things that kind of presented themselves or were you kind of looking for wherever you saw opportunities? Because you really do seem to have some diversity there that’s kind of unique.
Dannenfeldt: I think what it is in a nutshell is that we are constantly looking for ways to be entrepreneurial and to deliver new services to existing clients. As I recall now, the way we initially got into that piece of the business is that originally they were a pallet customer. And so we’re in there talking to them about pallets and we realized that we’re actually shipping the pallets to another location and it turns out they were using a third party for that order fulfillment piece, but they weren’t real happy with them. And, so we kind of starting to look into it and figure out if this is something we could do and do well.
RPL is constantly trying to figure out a way to diversify our business and to bring new value to our existing clients. This strategy has led us down some interesting roads and, as you said, very different than your typical pallet company. And I guess we like to think in our little world, that’s generally a good thing. It allows us to be creative and talk about supply chain solutions that aren’t necessarily just about the pallet.
Pallet Enterprise: When it comes to third party logistics, does RPL handle dock sweeps for retailers and other major DCs?
Dannenfeldt: Yes, we do that too. RPL also has a freight brokerage team so we do some freight management for a number of clients where we strictly handle all their freight moves. We have a private fleet of assets that we leverage. Also, we have very good relationships with the common carrier base that we can also use to manage freight accordingly.
Pallet Enterprise: One of the last things I saw on there was reverse logistics. How is that different from some of the sustainability things we talked about? I’m always curious when people say that, what do they really mean?
Dannenfeldt: That’s a great question. As I talk about reverse logistics, it’s the back flow of items, assets from store level backwards. And so by and large our reverse logistics offering today is about packaging, it’s about pallets, boxes, totes, stretch film, other packaging materials that we’re handling that are coming out of store level. It’s items that a retailer in particular would rather not have flow through its distribution network. But we are, as we continue to explore and diversify our business, we are looking at reclamation. So more on the merchandise side of things that is obviously a whole other channel of reverse logistics.
Pallet Enterprise: So return products and all that kind of stuff?
Dannenfeldt: Exactly. As we evaluate these things, we are already bringing trucks out of these stores and that transportation’s being covered to handle these packaging items. We are asking, ‘What else could we put on that truck?’ As long as we’re going to pay to cover those miles, is reclamation of merchandise a next and good tangent that would save our client’s money and reduce the number of miles that we’re putting on trucks and the number of gallons we’re having to put into tanks? So, yeah, that’s kind of the next phase of reverse logistics we are currently evaluating.
Pallet Enterprise: When customers put things into these trucks, do you have very specific criteria about that they can put in them? For example is this one only for plastic and that one is only for word? Or do you just kind of let them throw whatever you would generally accept into it and you guys sort it yourself?
Dannenfeldt: It’s all built around what makes sense for the customer. RPL does not say this is how the system works. Instead, we seek where the value lies for the customer. If there’s a value to them not having to do any sortation, and that value usually comes in the way of space or labor, then we will handle the sortation at our facility. There are other clients who would rather do the sortation themselves. They’ve got a little area assigned for this sort of work and are pretty efficient at it. They would rather get a higher value for the material and do the sortation themselves. Our sales process is more about listening than telling.
