LONGVIEW, Washington — In the 1990s, pallet production at Applied Industries hit 160,000 a year, but with changing market conditions, production eventually dwindled to about 80,000 pallets annually.
Last year one of Applied Industries’ main customers, Weyerhaeuser, closed its nearby paper plant; Applied Industries lost a $1 million annual account that had purchased about 50,000 pallets annually. Applied Industries increased pallet prices five times last year – up 35%. It still suffered an operating loss of $236,000 in 2004.
The beginning of the end? Hardly. According to executive director Dale Novotny, sales have returned to 2003 levels.
What is notable about the comeback is that it was accomplished by workers with disabilities. Applied Industries, incorporated in 1959, was formed by concerned parents of children with disabilities. The organization provides training and employment for 46 people, some of whom have been there over 40 years. They are men and women, ages 21 to 73, most with some form of mild retardation or physical or mental handicap.
Applied Industries is a private, nonprofit corporation. Outside of small donations, however, it is financially self-sufficient. It receives no public funds or grants. Annual revenues are a little over $2 million.
Applied Industries has over three and a half acres with three buildings containing a combined 35,000 square feet. The organization’s four distinct operations utilize 19 different production saws. In one recent day, Applied Industries cut about 42,000 board feet of lumber; this year it will cut over 5 million board feet.
A key reason for the dramatic comeback this year, Dale explained, is that Applied Industries accelerated a process it already had begun to diversify its business from supplying pallets to specialty cut stock. For example, Weyerhaeuser invested $1 million in new planing equipment, and Applied Industries supplies the planing mill with battens. Applied Industries also supplies specialty wood products for a corrugated box company, web stock and vent blocks for a Canadian hardwoods business, specialty cut stock for three window manufacturers, cut stock for crating for a pipe manufacturer, cut stock for the housing industry, and other small industrial lumber products, such as stakes and wedges.
Applied Industries also has been involved in a variety of unusual projects. Once it built from eight 12×12, 30-foot timber mat working decks for a bridge construction project. It built a 29-foot crate for one customer and another time built a huge wood container to ship a turbine via air freight to Germany.
The organization also has manufactured custom pallets, including many over-size pallets. For example, it has supplied $200 pallets to ship newsprint to Hawaii. It has built and repaired pallets that were assembled with bolts – some as large as 180×80. Other specialty pallets were built to ship octagonal corrugated drums that hold 330 gallons of liquid; apple juice was shipped to Central America, and the liner was replaced and bananas shipped back to the U.S.
While it was continuing the path to more diversified operations, which helped Applied Industries quickly recover from losing the Weyerhaeuser account, it was fortunate to have enough cash reserves to offset the loss. "Of course," said Dale, "emergencies like this are why you try to have cash reserves."
Even though the organization has been moving steadily to diversify, the extent of the financial crisis meant "a huge change for us," said Dale. "We had to radically change our marketing strategies."
Helping to maintain efficiency and productivity through good times and bad, said Dale, has been the Verticut 2000-M cross-cut package saw from L-M Equipment Company Inc. in Portland, Ore.
He was introduced to L-M Equipment Co. and its Verticut package saw at a Pallets West trade show in Las Vegas about five years ago. "I thought this would be great for us," Dale recalled. "It took us awhile, but we got it."
Applied Industries uses the Verticut 2000-M for cutting to length entire bundles of lumber. For example, it will use the machine to cut a package of 8-foot 2×4 into two packs of 45-inch pieces. "It cuts an entire unit of lumber in two and a half minutes," said Dale. "It can go faster, but if you go too fast you’ll lose your tolerances. Cutting the same unit by hand would take a half-hour. We also use it to cut other units of lumber."
The Verticut 2000-M features hydraulic vertical guillotine length stops that can eliminate the need for a double even-ending unit. Standard features include safety guarding, operator’s platform, Stellite inlaid saw bar, automatic chain bar oiling, package alignment stands, and hydraulically powered saw bar activation through the cut. Standard models are available for 16-foot and 20-foot packages.
Options include laser light saw guide, modular package end squeeze, modular even-ending system, automatic strapping system, modular infeed-outfeed decks, electronic length measurement with digital read-out, and powered carriage positioning.
With a single operator, the Verticut 2000-M can complete a lumber package cutting cycle in 55 seconds, according to L-M Equipment Co. The short, stiff bar is guided vertically through the lumber, allowing it to consistently maintain cutting tolerances of +/- 0.040-inch. The specially designed precision chain saw’s thin 3/8-inch kerf provides efficient lumber recovery, and surface finish is comparable to a conventional trim saw.
L-M Equipment Co. has been engineering and manufacturing saws for the forest products industry for more than 60 years. The company’s other principal cross-cut package saw is the MS System 2000. The company also manufactures high-speed chop saws, deck saws, portable yard saws, and the LS2000 Log Splitter.
L-M Equipment Co.’s newest innovation is the LSV 2000, which is a combination of the LS2000 Log Splitter and the Verticut 2000 designed for multiple operation facilities. It can be converted from log splitting to a PET package saw in about 15 minutes.
Service by L-M Equipment Co. has been "exceptional," Dale added. Hollinger Construction erected the building to house the saw, installed the Verticut 2000-M and also installed a conveyor.
Other recent machinery investments include two used XL10 rip saws and a Producto resaw. Blum’s Saw Service in Puyallup provides new saw blades as well as sharpening and repair. Applied Industries relies on Stanley-Bostitch power nailing tools and fasteners.
Applied Industries has a 30-year relationship with Weyerhaeuser, its key lumber supplier. RSG Lumber Products in Kalama is another key lumber supplier, and there are smaller sawmills that supply the organization, too.
"We used to buy from hundreds of lumber suppliers all over the Northwest and Canada," explained Dale. "But we found that if there is too much variation coming in, it’s difficult to control quality. That’s why we’ve cut back to the few we can depend on."
The Timber Products Inspection team comes in once a month to audit the company’s operations. "Last month we had a perfect score — zero rejections," Dale said.
Applied Industries typically buys economy grade lumber. Its remanufacturing operations generate about 12% waste. The scrap wood is not wasted, however. "One of our teams is a waste team," said Dale. "Its mission is to identify, reduce, reuse, and recycle wastes. We have reduced our waste that goes to the city’s garbage collectors." Scrap wood and sawdust are sold as hog fuel for pulp and paper operations. All employees of Applied Industries also
are eligible for free scrap material for firewood. Other wood scraps are sold
for firewood.
"We are a business first and a social service second," said Dale. Applied Industries started a comprehensive quality education program in 1992. It has three components: basic quality education, ZAPP-the lightning of empowerment, and shared values. The latter can be measured, Dale said.
"In a world class organization," he said, "out of 80 points, the employee’s values are 8.5 points removed from the company’s values. At Applied, the separation between the organization and personal values is 0.1." The values are fundamental ones, such as honesty, trust, truthfulness, new ideas, risk-taking, giving credit, selfless behavior, and mentoring.
Applied has 18 various teams and committees that work to better the company in any one of a number of ways, including planting and maintaining gardens and orchards on the grounds.
In 1993 the organization adopted a 100 year plan for the future, according to Dale. The plan is centered on providing exceptional customer service. "We believe in employee participation," said Dale. "Out of 474 employee ideas in 2004, 93.3 percent were addressed and implemented."
Applied Industries has received considerable recognition, such as from the national Kiwanis Club, which bestowed on the organization its highest award. Applied Industries has not had a loss time accident in five years, and 29 employees had perfect attendance in 2004.
"It’s a great group to work with — great safety, great attendance, and no conflict," Dale said. "Our number one mission for our employees is to provide them with job security. We have a great dental program, life insurance, and access to medical care."
Many employees get their medical care through Social Security or the state’s basic health plan. Housing is mixed. Some employees have their own homes, others rent, and others live with their parents. Applied owns a five unit apartment building that houses 10 employees. "For 27 years the rent was $75 a month," Dale said. "We just had to raise it to $100."
Pay is based on productivity. The minimum wage in Washington is $7.35 an hour, the highest in the nation. Some disabled employees can do only 25% of the work that an employee without handicaps could perform; these employees receive public assistance to compensate. On the other hand, the highest skilled are trained to drive a Freightliner tractor and receive a CDL license.
Applied Industries has many different types of educational programs, and employees are given plenty of recognition in the form of luncheons, dinners, certificates, plaques, trophies and other awards. "We give away as many as 600 $2 bills a year as a way of saying. ‘job well done,’ " said Dale. Most employees receive 22 days of paid vacation a year plus seven holidays. Applied Industries also has a retirement plan.
"There’s no limit to how much profit a nonprofit organization can make," Dale observed. "The limitation is how you use that profit. Some of it goes back into the company, such as through the purchase of new equipment. Other times it goes back to the employees. On two occasions the folks have received Christmas bonuses totaling $45,000."
Applied Industries is governed by a board of directors of nine people, and the organization also has a staff of five. The sales and marketing team is made up of the five staff and two board members.
"Communication is the key to our sales and marketing," Dale said. "One of our tools is a monthly newsletter with a circulation of 110. All of our customers and vendors receive it. I write the director’s corner, my soapbox. If I don’t do the preaching, who else is going to do it? In my column I constantly reinforce who we are, what we do, our values, mission, and people. Our big focus is customer service."
Dale keeps track of customer contacts and makes most of them himself. Last year he made 4,617 contacts with customers. He also believes in networking. He is past chairman of the Economic Development Council for Cowlitz County and is also a member of two other business groups, the Kelso-Longview Chamber of Commerce plus Washington Employers.
When Dale received his undergraduate degree in industrial education in Nebraska in 1975, he had been married to his wife, Danna, for two years. "I had intended to teach but came to the realization it would be difficult to earn a living and raise a family on a teacher’s salary," he said. "I had lived in Longview periodically and really liked the area, the beautiful scenery, close to the mountains and ocean, as well as Portland and the economic opportunity." Dale has two daughters, Wendy and Sarah, and twin grandchildren by Wendy, Donavon and Brianne, both 12. For hobbies, Dale said, "I enjoy traveling, love to do woodworking, and shoot competition pool."
Dale began working at Applied Industries in 1976, his first job out of college, and has been there ever since. He never looked back. "I wake up every morning loving my job and am happy to go to work," he said.
"We believe people want to be great," said Dale. "We create a partnership with our employees. That’s the real key to success. And we’re always working ahead at continuous quality improvement. This is really a very complex organization. I always describe my job as my duty to find how the pieces of the puzzle can interlock and work together."
Dale pointed out that the unemployment rate for people with disabilities is 80%. "Too many are just stuck in their homes or rest homes or state institutions," he said. "Our society does not provide for these Americans. I think there is a better way. I think we can provide opportunities. That’s what we’re trying to do."
