CINCINNATI, Ohio—Green, gold, brown and red. As pallet manufacturers and recyclers gathered in southern Ohio, the fall colors closely mirrored the state of the industry. Just as the brilliant colors of the leaves signal a change in season, the pallet industry is undergoing transition. From the departure of John Healy as the president of the National Wooden Pallet and Container Association (NWPCA) to the challenges of an increasingly competitive market, the meeting buzzed with anticipation and worry for what the new year holds.
The event started with four plant tours including Schaefer Box and Pallet Company, Conner Industries, a Kroger distribution warehouse, and Senco Products. Schaefer designs and builds custom wooden pallets, boxes and crates. Their operation was featured in the October 1999 Enterprise, on page 25. Conner’s Ohio facility is a sawmill capable of producing 80,000 board feet per day of hardwood and softwood cut stock. Conner Industries was featured in our September issue, on page 25. Tour goers also got a chance to see the inside of a user’s facility. They visited Kroger’s Cincinnati warehouse. It receives grocery products in bulk and provides order picking for distribution to local stores. The facility ships 55 truck loads of groceries per day.
After the tours, the primary meeting began with a networking reception, followed by a day and a half of informative sessions. Topics varied from general business issues to an introduction of the new Pallet Design System(See article page 30). Some speakers astounded the audience with what they had to say. Dr. Patrick Moore, a founder of Greenpeace, debunked the myth that logging harms the environment. Instead, he insisted that wood is the most renewable resource available (See article page 40).
Attendees also had the opportunity to stroll through the exposition area and learn about 51 of the leading industry suppliers. Given the many important topics and key business strategies discussed at the meeting, our staff has compiled some of the best lessons learned from the various speakers.
Automation Vs. Manual Repair
The first major installation for VF Automation, L & R Pallet Service of Denver, looked into the automation question and opted to invest in the technology. More than a year into their adventure, James Ruder, vice president of L& R, discussed their trial and error experience and the benefits of automation. Pallet Enterprise featured L & R Pallet in its February 1998 issue, page 6.
For starters, automation has created a competitive selling advantage for L & R Pallet. Ruder said that once a potential customer sees their facility, the high tech operation frequently sells itself. Ruder gave these other reasons for automation:
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Increased production• Control tracking of employee performance
• Improve accountability to customers and quality control
• Reduce the number of decisions that employees have to make
L& R’s facility starts with 3 inspectors at up-enders. They examine the pallet, prep it, sort it and send it to one of four lines. “Three guys now make 90% of my decisions,” said Jim. “I used to have 14 sorters on my day shift. I now have 3.”
The conveyor lines eliminate walking and carrying pallets which improves efficiencies and reduces the number of accidents. Repairs are made at 12 different stations. Finally, an inspector examines pallets and sends them to automated stackers. During each step of the process, the system collects data and sends information to a central computer.
L & R pays its personnel, except the inspector, on a piece work basis. Each repairer has a different color nail they use. If a pallet is caught by the inspector for poor quality, the repairer is docked for the pallet.
“I might pay well, but I penalize heavy. We use a 5 to 1 ratio, so if a guy has 10 bad pallets in a day, he’s losing 50 pallets off his total,” said Jim.
The colored nail may have also been the major cause for the company’s 50% reduction in nail usage. L & R does not pay repairers differently based on the grade they handle. Actually, he tends to put the trainees on #1s because they require less experience to process.
“I make so much more on a good pallet then I used to, and I am able to repair a whole bunch more,” said Jim.
Opportunities in Selling Alternative Products
As customers start looking to alternatives to wood pallets and the market becomes even more competitive, some progressive manufacturers are changing the way they do business. Going beyond just selling wood pallets, some companies recognize that they can leverage existing relationships to sell a variety of other products including plastic, metal, and corrugated pallets. No longer just in the pallet business, these leaders are in the transport packaging business.
Many of these products are related to the shipping platform such as stretch wrap, dunnage, boxes, straps, containers, corner boards, etc.
Bill Schneider, vice president of sales for Remmey – The Pallet Company, encouraged NWPCA members to be open to new opportunities.
“Just because we don’t recognize it, doesn’t mean that it does not exist out there,” said Bill.
Capitalizing on this attitude, Remmey has developed a successful alternative products program that now makes up 2-5% of its gross sales. Picking the right alternative product to sell all starts with your customers. Find out what other products your pallet customers buy. Frequently, the pallet buyer is the newest person in the purchasing department. By offering solutions and a wide selection of products, you can generate additional sales. After all, if your customer is going to buy a plastic pallet for a specific job, he might as well buy it from you. Bill warned to be careful what product lines you represent.
“When you pick a partner and sell their product to your customer, it is your relationship that you are putting on the line,” said Bill.
Investigate opportunities by looking through material handling publications and attending major trade shows such as the PROMAT & North American Materials Handling shows. The Pallet Enterprise will run a special section on alternative products in its April 2000 issue. Carefully investigate specific partners by talking with other pallet manufacturers that work with them. Find out how customer service and billing would be handled. Also, inquire about their warranty and customer quality guarantees. Ask prospective partners why you should sell their products with all the various choices out there.
Europe’s Taxing Situation
The most successful pallet design in the world is the Europallet according to John Mead, industry consultant and expert. Mead talked on the coming changes in Europe. Since the mid-1950s, the Europallet has been the standard across the continent. The railway authorities developed the specification and have policed it for years. To encourage those shipping products into Europe to use Europallets, the recycling laws have been changed to tax shipments delivered on pallets that cannot be reused or exchanged. Despite the value or quality of a pallet, most pallets coming from North America, including GMAs, do not match the Europallet standard. The coming tax may affect pallet manufacturers whose product is eventually sent to Europe.
“Because of this tax coming in… we are hearing that European receivers of goods from this country are asking their suppliers, your customers, for properly marked Europallets,” said Mead.
Manufacturers that offer Europallets will have a competitive advantage. However, the strict standards and high cost of manufacturing the Europallet may make it impossible for some companies to offer the product. As Mead pointed out, the block Europallet is a highly documented, controlled, specific standard measured in millimeters. The Europallet has the following requirements:
• Must be marked with branding on all six block faces
• Joints must be tested
• Wood must be kiln dried (no greater than 20% moisture content)
• 800 x 1200mm footprint
• 22mm board thickness
• Specially marked nails
• Four corners of pallet must be cut
• Initially, every load of pallets must be inspected.
The Europallet Council has been setup to manage the Europallet specification. Timber Products Inspection has been tapped as the inspection agency to handle the Europallet for the United States. The Europallet Council has set up an organization in the United States for managing the standard. Pallet companies looking to become a certified Europallet manufacturer should contact Sam Cauffield, chair of the U.S. Europallet Council, at (513) 522-8421.
Keys to Developing a Retrieval/Recovery System
Increasingly as customers hear about the success of Chep and other pallet pools, many users are approaching their suppliers looking for ways they can cut down on the number of pallets they lose and their total cost. John Lorentzen, president and CEO of First Alliance Logistics, outlined the pitfalls and basics of setting up a retrieval and recovery system.
A retrieval and recovery system is not for every customer. Lorentzen identified several factors that influence the feasibility of setting up such a program. The following are key criteria:
• Dollar volume
• Total pallet volume
• Focus distribution of pallets
Lorentzen identified three types of systems – closed loop from shipper, closed loop from receiver and open loop. In all three, the customer must buy-in to the concept for it to work. This can sometimes be difficult because users do not want to give pallet companies access to their customers. The system must also be easy and it must reduce costs.
Can a CPC Type System Work in the United States?
Currently, there are various standards such as SPEQ and CPR in place in the United States, but there are no systems in place to tie them all together. From standards to ownership, there is no way to hold companies accountable. The Canadian Pallet Council (CPC) is an organization that oversees the pool of orange grocery pallets in Canada. The CPC has established a specific pallet standard and procedure for tracking pallets in their pool.
One session explored the possibility of setting up a program similar to CPC in the United States. Several people in the audience were skeptical. However, the leaders made their case for the need and opportunity for such a program. They proposed an NWPCA bill of lading similar to the one currently used by CPC. The bill of lading would set up a structure for accountability and become a starting point for a white wood pallet pool. Most of those in attendance seemed to agree that the NWPCA was not the organization to oversee such a program. However, they thought the association should be involved in setting standards. At this point a CPC system for the U.S. is just wishful thinking. But with the ever increasing acceptance of pallet pools, a CPC type system may provide opportunities for independent manufacturers and recyclers.
Hiring Immigrant Workers
Labor continues to be the biggest problem facing pallet companies today. Eleanor Pelta of Hunton and Williams discussed the opportunities pallet companies have in accessing immigrant workers. The plain truth of the situation is that poor, lesser skilled workers are not the most sought after demographic by the Immigration & Naturalization Service (INS). It is much easier to obtain work VISAs for highly educated, skilled individuals such as professors, scientists and engineers. In the United States, labor unions have successfully lobbied against loosening immigrant standards for workers despite the lack of quality candidates.
There are two basic types of immigration – temporary and permanent. According to Eleanor, it is extremely difficult to bring over lesser skilled workers. However, there is one opportunity that may work for some pallet companies. An H2B VISA can be used to help with seasonal/peak work loads. Under this type of VISA, the immigrant worker can be completely unskilled. But the job must go away when the worker returns back home. Also, the period of stay can be no longer than a year.
The first step is to file with the Department of Labor and test the labor pool with an ad. If you get poor response, you can use the ad to prove the labor shortage. Then you would identify the immigrants you want to bring over and file with the INS.
Getting Along in the Family Business
Dr. Sid Barton of the University of Cincinnati spoke on the challenges of family businesses. Many of the companies in the forest products industry are family businesses. Mixing family and business can be a tricky thing. From succession to rules of entry, emotions can run high compounding the difficulty level of every decision.
Sid identified the key to successfully running a family business is to plan and communicate. Many problems result from the fact that family members do not establish specific rules forcing decisions to be made on the fly without a rigid framework. It is much easier to handle a problem if everyone agrees to the rules in the beginning.
According to Sid, every family business must decide its philosophy. Either it operates with the family first, business first or family enterprise mindset. The family first philosophy places the highest value on the family and the business first does visa versa. For instance, in a family first company every family member is guaranteed a job. The family enterprise philosophy runs somewhere in the middle. In this case, the family would guarantee everyone a job but maybe not in the family business.
Frequently, family members assume that others understand their wishes and never verbalize them. A lack of communication can hurt the business as one generation looks to turn the reigns over to younger family members. Grooming successors and establishing a communication about what everyone wants eliminates questions. The goals of some family members may run contrary to those of others. As the builders of the company approach retirement they may want to dip into the profits for leisure while the younger generations want to spend money on expansion.
Each family has a specific dynamic. A dominate patriarch may be the glue that holds everything together. If he or she dies or become incapacitated, the result may be chaos without a proper plan. Sid suggests family meetings to keep everyone talking and informed. First start by finding out each person’s goals. You might be surprised how different they are. Then develop a family strategy plan. It should include goals, values, philosophy, a charter outlining policies, and plan of succession. Having an independent mediator to facilitate discussion and provide an outside voice may help the discussion. A little bit of planning today may alleviate unthinkable heartache and family division tomorrow.
Cutting Your Power Bill
With deregulation of utilities on the way, you may be able to save big on your power bill. Walter Moore of Affiliated Power Purchasers (APP) has developed a program for NWPCA members that should be launched soon.
Deregulation will increase competition at the wholesale level. Already 23 states have passed deregulation. Virtually every state has pending deregulation bills. When states deregulate, each utility negotiates a shopping credit, the base price for electricity. The shopping credit is discounted from current rates which means that even if you do nothing your rates should decrease.
An even better way to take advantage of deregulation is to buy a big block of power as part of a group. APP combines the buying power of association members from various associations all across the country. They look around the market for the best prices based on the different rates for each type of usage. Your employees may even be able to save money on their home electricity usage. APP will not charge you unless they
get a discount below the shopping credit. APP only gets paid if they produce saving for you. This program has yet to be finalized by the NWPCA and it may not be available in all parts of the country right now.
APP also offers natural gas programs and a bill audit service. Both of these are now available for NWPCA members. For the audit service, they may be able to get you a refund if your power utility has misclassified your company. To find out about these programs and services, contact APP at (800) 520-6685.
Finding the Right Formula
From Dr. Moore’s enlightening presentation to roundtables on key issues, the Pallet Summit offered plenty of opportunities for everyone to learn something new. There were many new and young faces as pallet companies turn the reigns over to the next generation.
In recent years, the meetings have developed into outstanding networking opportunities. The changes in the industry have unified many different companies making networking the most important part of many NWPCA meetings including this one. Attendees have held informal meetings and branched out to interact with members they may not have otherwise known. If you missed the Pallet Summit, consider attending the next NWPCA meeting on February 26-29 in Marco Island, Fla.
