Memphis, Tennessee—
The Pallet Factory – Changing to Meet Challenging Demands
I recently had the pleasure again of visiting The Pallet Factory’s (TPF) pallet plant in Memphis. The company serves as a good example of one that started as a pallet recycler, added new pallet manufacturing, and expanded into the realm of pallet management. Mike Doyle, president of TPF, went into business as an entrepreneur in 1977, the same year that I started publishing products for the wooden pallet industry.
While it is common for a pallet manufacturer to see the opportunity and move into recycling, it is less common for an established recycler to move as big into manufacturing as has TPF. A major recycler will often manufacture new pallets in small quantities, especially using nailing tables and pneumatic tools; it is less common for one to move into new manufacturing with the commitment displayed by TPF.
Mike launched his pallet business by brokering used pallets from somebody who had a pallet disposal problem to another person who owed a pallet debt. These people came from his contacts in the fruit juice industry where he owned a franchise. Mike’s company expanded in the Memphis area which is one of the biggest distribution hubs in the United States. Mike started with hammers, nails, and dreams and moved to the more automated position of a major pallet manufacturer with three VikingTurbo 505 nailers. Today TPF is one of the largest manufacturers, probably the largest pallet manufacturer, in western Tennessee.
Like all pallet companies, TPF has adjusted to meet today’s economic challenges. For example, during my visit Mike was studying his health insurance options. The company has been offering a tier structure of health options, including covering an employee and his family, covering only the employee, and covering part of an employee’s premium. With the coming Obamacare, Mike understands his tier structure will not be allowed, so he was in the process of changing the structure of his insurance offerings. Mike is concerned that he is having to take away some employee benefits because the government is forcing him to do things the company cannot afford.
Recently TPF has gone from keeping its company cars for three years to keeping them for five. The uncertainty of our country’s economy is causing businessmen to be cautious when it comes to big capital expenditures.
TPF used to pay employee bonuses, but had to cease that practice two years ago. Mike is looking forward to the day when he can reinstate bonuses. He used to pay half of each quarterly bonus and hold the other half until the end of the year when employees had options of how to use their money.
Mike gave a good example of the fear in our economy today. He is looking to hire a good pallet salesman. One man who applied for the job has a vast amount of experience over the past thirty years in the forest products industry, particularly in sawmilling. He has worked for several different companies but showed stability in his work record. Every time he left a company it was due to the job no longer existing. The forest products industry has been going through some difficult times; many established players are having to shut down or downsize to meet changing needs.
To serve specific customer accounts, TPF had expanded in the past to include five different locations in Memphis, Nashville, and Jackson, Tennessee and both New Albany and London, Kentucky. To stay competitive, Mike closed operations that were no longer needed and concentrated on his Memphis and Nashville locations, the two plants that serve the widest spectrum of the pallet industry. Memphis serves as the company headquarters, and Mike’s son Josh runs the Nashville location.
Moving Toward New Pallet Manufacturing
In the early days of pallet recycling, people made good money. As recycling became increasingly competitive, Mike noticed that new manufacturers who attended the annual pallet meetings seemed to be prospering in spite of their complaints about profits being tight. Because Memphis is such a big distribution city, progressing more heavily into pallet manufacturing was a natural move, particularly when a large manufacturer in the area closed. Mike wanted to add more services so he started with a Viking Champion nailing machine and grew his nailing capacity as needed until today he has four Champion nailers (two in Memphis and two in Nashville) and three Viking Turbo 505 tandem nailing systems in Memphis. Today The Pallet Factory is about 50% new pallets and 50% recycled pallets. Like all pallet companies, they are working hard to maintain business levels. Before the recession they were shipping about 40 tractor trailers of product a day; now 30 tractor trailers is a more common day.
Mike said, “With new pallets it is easier to know what your costs and margins will be. With recycling, it is more difficult to figure margins now. At best you are breaking even today on #2s. Most recycling margins are made on As and odd sizes. For some reason Memphis has not seen the pressure on core supplies that so many markets have experienced. The market for recycled pallets has dropped so dramatically that we have not been able to reduce core costs to compensate for it.
“A lot of manufacturing has gone overseas. Tennessee is generally a very business friendly state. Our local and state governments have done a good job of attracting business, but the federal government is killing us with greater regulations. Unfortunately nobody in our federal government seems to blink an eye. Cleo Wrap was a large Memphis manufacturer of gift wrap. They are now gone. Nobody did anything to keep them.
“People today are waiting until the last day to place orders. Buyers are not allowed to order until the last minute. A week ago a competitor went out of business. He had been selling #2s for under $3; we helped the customer out at $3.30, a price below where we can make any money. The customer complained that we were taking advantage of the situation and they could not afford that much for a pallet.”
Mike thinks of Memphis as the distribution capital of the world. More air freight passes through the Memphis airport than any other airport in the world, mostly because it is the home of Federal Express. TPF has over 500 trailers in its fleet, 500 closed vans and 25 flat beds. Most are drop vans. Some customers need flat beds because of their facilities. The company runs 20-21 tractors.
Mike said, “Everything has gone to just-in-time. Customers do not have anything in their warehouse any more. We call on customers and don’t see anything in storage. Everything is picked over. Memphis used to be a great market, but it isn’t any more. IFCO is flooding our market, just like it is a number of markets around the country.”
There are two facets to the pallet lumber issue, both pallet cores and new lumber. Today pallet manufacturers are concerned about new lumber supplies, both for today and tomorrow. To shore up his supply of new lumber, a few years ago Mike purchased a Senatobia, Mississippi sawmill, which they named Southern Timber. Wes Doyle is his jack of all trades over operations who manages the mill. Their sawmill was an old one, but with a lot of attention and upgrading, they have been able to improve it enough to cut and ship about 60,000 bd.ft. of pallet stock a day to the Memphis plant. It also cuts and sells about three or four tractor trailer loads of crossties a week. The mill had been poorly maintained; Mike indicated it was a mess when they bought it.
Now TPF is heavily dependent on its own mill. Mike said, “Depending upon other mills had become a very risky proposition. They are so independent. It was not easy, but we have become sawmill people. The sawmill industry is a cash business. They expect to be paid on Friday for what they shipped that week.”
TPF’s Senatobia mill has two Hurdle circle mills, made not far away in Moscow, Tenn. A Baker double end dogging scragg mill cuts pulpwood into pallet stock. Other equipment includes five Baker resaws, a Baker double head notcher, a Brewer resaw, and two Newman KM16 HD multiple trimsaws. TPF also has a Brewer double Eagle chamfering machine. Two Morbark chippers are used to grind material and produce wood fiber products. The wood dust they generate goes to three different markets, wood pellets, charcoal, and fuel. Most of the chips at TPF are used either for boiler fuel or as a raw material for Litco’s INCA presswood pallet manufacturing plant at Sardis, Mississippi. TPF does very little lumber processing at its Memphis plant. It focuses heavily on pallet assembly, heat treating, and pallet recycling.
The Doyles were very complimentary of the bandsaw blades they buy from Kilgore Saws in Arkansas. Kilgore has supplied TPF with bandsaw blades for their pallet dismantling machines for years. When the company got into the sawmill business it was natural for them to turn to a supplier they trusted. Sawdust had been a problem for the mill when the Doyles bought it. They tried Kilgore Saws’ Lenox blades and were amazed at how much of the sawdust they removed. Wes Doyle said, “These blades must have removed 90% of the dust. We had had a dust problem in spite of dedusting efforts. The little notch in the end of each tooth just drags off the dust.” Mike agreed, “I couldn’t believe the difference.”
After researching heat treatment machinery options, TPF selected Converta Kiln, located not far away in Bartlett, Tenn. It now has two Converta Kiln heat treating chambers; each uses 3.5 million BTUs to heat treat 660 48×40 pallets every hour and a half to two hours. They have two rails that feed the kilns. They prepare one load while the other is cooking. This avoids down time as one load enters a kiln when another exits.
Conway Robinson provides heat treating certification services to the company. Reese Blowers has been very helpful to The Pallet Factory with its products and services, including helping with fans, vacuum systems, etc.
TPF started as a recycler and remains actively involved in this arena. They use an AMS sortation line that they have had for over ten years. When business improves, Mike anticipates the possibility of replacing this with a new system. Today the new pallet lines and recycling lines are in the same physical building. The city has approved a new building, but TPF is waiting for economic conditions to improve before constructing it. Mike expects to separate the new pallet and recycling pallet lines at that time. Right now conditions are pretty cramped. TPF has added three Viking Turbos and two Viking Champions into the building which was originally built for its recycling operation.
TPF repairs about 4000 pallets a day. They sort out a couple of thousand ready-to-use pallets before sending repairable 48x40s down the line. Odd sized pallets are separated out and sent to repair tables. The company collects and delivers to CHEP about three truck loads of CHEP pallets in a typical week.
The company takes a monthly inventory. Bobby McDaniel, the plant
manager, conducted my tour. While we were walking through what he called his “pallet graveyard,” he said, “If a customer wants it, there is a good chance we have it. In spite of the large number of pallets here, we can find just about anything that we have pretty quickly.” Mike indicated that Bobby does a tremendous job.
The Pallet Factory confirms that the key to survival in the pallet business is being a low cost provider.
Pallet Leadership and Management
The Pallet Factory was one of the eight founding members of PALNET, a network company composed of recyclers. It was initially formed to help secure a more dependable core supply because cores have almost always been an issue in the recycling industry. PALNET includes some of the best known leading pallet recycling companies, so it was natural for them to consider establishing a national pallet company that can service national accounts. Thus, the PALNET organization has grown since its beginning to form business relationships with a large corp of cooperative pallet companies. Shareholder companies provide as many of the services as they are positioned to handle, but the network has expanded to include many other pallet companies to provide pallets and services.
PALNET has expanded quickly and has successfully weathered the current difficult economy. It promises to serve as a positive role model for other interested pallet companies as to how to run a successful nationwide network of recyclers. PALNET has reportedly been profitable and expanded during this difficult recession. The organization took an interesting direction when it decided to become a pallet nail supplier. The Pallet Factory buys its bulk and collated nails and pneumatic tools from PALNET.
Michael Smith, a man with vast experience in pallet pooling and rental from his time working with PECO, is providing the leadership to help PALNET grow. This company should be an interesting one to watch as our industry undergoes more change in the future. As it has changed its thrust, PALNET is kind of like a brokerage business that tries to get as much business as it can into its members but needs the help from other companies where it has no service coverage. Today PALNET has grown to have over 125 member stakeholder locations and it is growing steadily with over 10,000 trucks ready to roll and service its customers.
Mike Doyle has become well known in the pallet industry as one of our industry leaders. The Pallet Factory is an active member of the National Wooden Pallet and Container Association (NWPCA) and the Western Pallet Association (WPA). Mike has served several terms on the NWPCA Board, including Board chair and on the association executive committee, and has served on the WPA Board. Mike said, “Being a board member of the NWPCA and WPA has been valuable. The more active you are, the more proactive you can be.”
The Doyles and our staff have had a particularly good relationship through the years. The friendly leadership characteristics that Mike exhibits have matched well with our own intentions. Mike Doyle and Ed Brindley have a natural bond because Ed was born and raised in Memphis and both men are graduates of Memphis State University. We share a belief that our industry is made stronger by good friendships between conscientious people who have the interest of the overall industry at heart. Mike keeps his eyes toward the future and how to adjust to make his company successful in a dynamic marketplace.
