CLC’s Kathleen Dietrich was asked to speak on PalletCentral’s spot for Industry Leaders Perspective future on the wood packaging sector:
“I would venture to say that labor, or lack of it, will continue to be the #1 problem for most pallet employers. As a result of that, I do believe that more and more people will turn to forms of automation and the domino effect will obviously be that equipment manufacturers will continue to create machinery that will work in the pallet industry domestically in the United States. I also believe that this will be a major factor in companies being acquired by larger companies as we are already seeing trending across the nation.
Production employees will continue to be a necessity for pallet companies and the competition for that type of labor pool will become more and more competitive. I do believe that as a result you will see employee benefits changes, such as higher wages, incentives, vacation times, more affordable healthcare benefits, and an overall better work environment. Our continued appreciation of current employees helps attract new ones, but more importantly, we retain our workers. I even wonder, when I’m thinking really far ahead, if someday we’ll see trade schools for the pallet industry. That would really be awesome!
Regardless, it is sure to be a very interesting and exciting future for our industry.”
With October named as the national celebration for women in small business, Pallet Central appropriately sat down with many of our female industry thought leaders in the wood packaging sector who share their stories that inspire us all. We applaud these women, and their accomplishments and drive have made a lasting impact on the industry.
Here, we highlight seven of these notable women.
By Andy Brown
Good Things Happen to Those Who Hustle
VICE PRESIDENT AND CO-FOUNDER
Mia Allen thrives on meeting new people, so after graduating from college she naturally began a career in sales. Six years ago, she and her sister Amy cofounded Rose Pallet and have since built it from the ground up. “Every anniversary is a milestone for us because there has been a lot of sweat, laughter and tears that have gone into our company,” she says.
Building a business from scratch is a challenge for anyone, whether it’s in the pallet industry or not. The key is to implement good business practices while remaining adaptable. “Business is always changing, I’m grateful I can adjust and don’t mind doing it. I’m always learning and that is what feeds me,” she says.
Mia also encourages more women to get involved in the pallet industry, saying that having different perspectives makes the industry stronger. “The future is bright for women in the pallet industry. Every NWPCA Conference or event I attend year after year I see more and more women joining the industry,” she says. “There are amazing opportunities out there if you are willing to hustle.”
Prove Yourself, Until You Don’t Have To
Carolyn Beach got into the pallet industry by way of her father, who started Westside Pallet. “He really started growing when I was expecting my second child. I wanted a more flexible job and I knew he was going to need someone to run his new office,” she says. “I never expected that pallets would be my career.”
When her father passed in 2009, Carolyn continued to oversee the company. “My management team have been with the company from the beginning, so they are the ones that keep the day to day operations going. I still work in the office but mostly I deal with customer relations, pricing and problem solving,” she says.
The business continues to thrive, with a new 3.5-acre expansion to their current facilities. “It’s been great to look across the street and watch our pole barn go up for more production room. And the rest of the land will be for pallet storage,” she says.
Earlier in her career, Carolyn did feel she had to prove herself more than once. “In the beginning, it was assumed that my husband was the one in the industry and questions about the business were automatically directed toward him. He quickly referred them to me,” she says. “I always found it amusing. But that doesn’t happen much anymore simply because I’m more known in the industry.”
As the pallet industry evolves, she also looks forward to a multiplicity of voices and perspectives. “Any time you have a variety of people involved in the industry, it is a positive thing. Not just female voices. We need both men and women, veteran pallet manufacturers as well as the younger generation coming in. And we need voices from all regions of the US,” she says. “It just helps get new perspectives on the issues that the pallet industry faces.”
Just Try to Keep Getting Better
A PALLETABLE SOLUTION
Debra Berry and husband Peter co-founded Berry Industrial Group in 1984. “Peter had decided to start a company, but internal business process and protocol was not his forte. That’s not what he does, so I came in to organize the business, start building the foundations – production, accounting, legal, banking, HR – and that’s how we started,” she says.
The journey from start-up to established business has been a process of continuous improvement. “I’m always looking to improve what I do and who I am,” says Debra, who recently completed an exclusive mentoring program sponsored by Monsanto that dives deeply into every aspect of business. “It’s one of the most intense programs I’ve ever done. Anytime I had a question related to what I was doing, they would find somebody in the organization to help,” she says.
Among her proudest accomplishments is the work culture that sustains the business. “Our employees define our success,” she says. “It’s a small company with an open-door policy, and I‘m a strong proponent of work-life balance.”
As the business has grown and changed, so has the industry. “When I was younger, I felt like we had a lot of corporate buyers in the oil and gas industry. I would go to these meetings and feel like they were patting me on the head,” she says. “That was the business world then. It’s easier now. I’ve seen the difference, how that generational thinking has been phased out. Younger generation professionals are used to dealing with women in business.”
Work Hard, Have Passion
COMMERCIAL LUMBER AND PALLET COMPANY
Kathleen Dietrich just wanted to earn some extra money while attending school, so she answered a Help Wanted ad for a receptionist at a local lumber company. That fortuitous decision led to a career in the industry when she joined Commercial Lumber and Pallet Company.“It was super exciting watching the company grow and utilizing so many day to day opportunities to increase my knowledge of the company and the pallet industry, and be a part of the innovation and initiatives that allowed the company to evolve from the then current technologies to what we have today,”she says.
Kathleen rose from an entry level position to become operations manager, vice-president and a partner in the company.“[Owner] Ray Gutierrez called me into his office at our new facility and thanked me for all of my efforts and years of service and contribution, and wanted to thank me by making me a part of the foundation of his new company. He made me a partner,”she recalls.“My heart was full of pride and gratitude.”
She cites hard work and a collaborative spirit as the keys to a happy and successful career.“ I just worked really hard side by side with the key people to progress the growth of the Pallet Division, learned everything I could about the process from start to finish of what it takes to manufacture a pallet,provide quality service to our customers, and offer fair pricing in order to be competitive,”she says.“I paid attention and educated myself by reading industry publications,watching forecasts and listening. I’ve always felt that I just needed to know of what I speak, listen to others and learn, and most importantly care about your employees and the peers you work with.”
Set Goals That Matter to You
Before she sold pallets, Molly Gordon bought them. As the purchasing manager for a label manufacturer, it was one of her duties. When she was ready for a career change, her supplier – Pallets Unlimited – was happy to bring her on board.
For the past 18 years, she has helped grow the company’s sales. “My proudest moment is when I won my first my $1 million contract. It took a lot of time, and it was a team effort with the company,” she says. “Accomplishments are not reached by yourself. It’s always a team effort, from the person on the floor to the person who collects the money. Getting to that level was not easy, but eventually we got there.”
She advises young women entering the pallet industry to set goals that matter. “Motivation is the key to achieving goals,” she says. “So when you set goals for yourself, make sure they’re important to you, that there is value in achieving them. If you have little interest in the outcome or they are irrelevant given the larger picture, the chances to make them happen are slim.”
She also offers a word of warning that stereotyping still exists. “The perceptions of jobs and roles has always been stereotyped. However, there are women who have broken through barriers and made significant inroads in the male-dominated industries, dealing with some customers who were accustomed to doing business with only men,” she says. “I believe patience, concentration, quick decision-making, alertness and follow-up are required to succeed. You have to prove yourself a thousand times over. You have to bring something to the table that’s not just about selling pallets.”
Every Job Is Equally Important
NATIONAL ACCOUNTS MANAGER
VALLEY PALLET INC.
Though her dad owns Valley Pallet, Lindsey Shean didn’t think she would get into the family business. An accomplished golfer, she took a shot at the pro circuit while working part-time at the company’s Phoenix location. “As I dove into it, I enjoyed the business. I enjoyed the challenge of getting orders out and working with customers,” she says.
Concluding that she no longer wanted to play golf, Lindsey took on more responsibility with the company, eventually managing accounts in Arizona and the southwest as a regional sales representative. Two years ago, she moved to the main plant in Salinas to take over as the national accounts manager and sales manager role. “I oversee our sales team and kind of handle our national accounts and oversee all that activity, anything from customer service to overall account management,” she says.
One of her concerns is getting the next generation of workers involved in the industry. “Our industry will continue to evolve. Society will continue to evolve. I think we do need more women leaders. I think it’s about getting more involved and getting new blood and new ideas,” she says.
Her advice to the next generation is to adopt a team mentality. “I think really what I’ve learned as I worked my way through the positions is to make sure you’re playing as a team,” she says. “My biggest thing has always been to respect every single position in our company. Everybody’s position is important, from people in the yard to building products to drivers delivering the load. Everybody’s job is as important as the others.”
A Good Team Equals Growth
PRESIDENT AND CEO
TIMBER INDUSTRIES LLC
Annette Walter brought her background in banking and operations to the pallet industry when she bought Timber Industries in 2013. “I was drawn to this industry because there’s so much opportunity to elevate process and efficiencies and innovation in this space,” she says.
She describes her initiation into an industry filled with legacy companies as warm and welcoming. “As a new owner, a transition owner in this space and being a woman, I felt nothing but open arms and welcoming support and camaraderie from its members.”
At the same time, she thinks it’s important for women in leadership positions to embrace their responsibility as role models. “It’s important to show younger women that no space and no industry is not reachable or attainable. You can really stand wherever you want to stand as long as you have the discipline, the thoughtfulness, the integrity, and the tenacity and hard work ethic to build a company,” she says.
And the key to any successful venture, she says, is to work hard and stick to your mission. “If you step to the plate, you’re going to gain rewarding and profitable relationships from everybody. That’s what it’s all about,” she says. “We’re doing what we can to serve our customers and get people their products.”
Moreover, Annette advises business owners to discover the right way to conduct business without taking on everything themselves. “My philosophy is, if you grow a strong team, they can grow you to new levels.” PC
Commercial Lumber and Pallet Company donated pallets to People’s Care, a support service and program for adults with intellectual and developmental disabilities. Their programs also expand to Health Systems, including their Behavioral Health Service for Children and teens with autism spectrum disorder or other behavioral disorders as well and Home Health and Hospice Services. The Pallets donated were utilized in their Education and Employment Service department to help individuals learn building skills together.
For more information on People’s Care, please go to www.peoplescare.com
At Commercial Lumber and Pallet, we recognize that we could not do what we do without our amazing employees. They are our number 1 Asset! Every July we try to hand out something that helps get them through the hot temperatures while trying to maintain safety as our number 1 priority. This year we chose safety T-Shirts and Cool Hats as our giveaway to all of our employees.
Thank you Team for all of your hard work and efforts!
By Houston Smith
Member of the National Wooden Pallet and Container Association (NWPCA) took to Capitol Hill on Tuesday, June 20th, 2017. Armed with a schedule packed with meetings with congressional and committee offices, the Association contacted nearly 9% of the United States Congress in one day.
The NWPCA along with Lobbyit, a professional lobbying firm, helped guide members through the maze of the House and Senate Buildings, plugging members into offices that represented their home state or even home district. The primary issues covered in the meetings included the Cary Institute report and the defense of ISPM 15. Out of these issues, members were briefed on the facts and how best to address their representatives: ISPM 15 works, and the Cary Institute needs further evidence to back up its claims, Labor, immigration, and health care also became important talking points, and ones that congressional staff were especially receptive to.
Kathleen Dietrich, a member of both the NWPCA and the Western Pallet Association (WPA), spoke directly to the staff of her Senator, Kamala Harris (D-CA), about the effect that these issues had on her business. Other WPA members in attendance included Jim Schwab, Pallet Logistics of America; Mike Hachtman, reLogistics Services; LeRoi Cochran CHEP; Howe Wallace, PalletOne; and Scott Vipond, Girard Wood Products.
In addition to the House and the Senate, members met with the U.S. Department of Agriculture (USDA) to discuss pest management, and the Department of Labor to discuss the Occupational Safety and Health Administration (OSHA) and its relationship with the pallet industry.
Throughout the discussions between the Association and its representatives, it became clear just howimportant it is for members of government to meet face-to-face with the people who make up the industry. By reaching out and visiting the capitol, members also encouraged their congressmen to return the favor, and tour their wood pallet and recycling facilities themselves.
The U.S. and Canada have long disputed over the issue of Canada softwood lumber being imported into the United States. While there are nuances to the issue, the main cause of the disagreement is that much of Canadian softwood forest is publicly, owned, compared to most privately owned forest land in the United States. Consequently, the provincial governments of Canada have greater control over stumpage fees, where U.S. lumber producers are subject to supply and demand market forces to set the pricing. With different forces driving price, the two countries continue to disagree over the existence of competitive advantages in the marketplace for softwood lumber.
The modern framework of the dispute can be traced back to 1982, when the first countervailing duty (CVD) petition was filed by U.S. softwood producers, claiming that Canadian softwood lumber was unfairly subsidized. Nothing consequential came from this petition because of technicalities, but a second petition was filed in 1986, where the International Trade Commission (ITC) and U.S. Department of Commerce (DOC) determined that Canadian Lumber was subsidized by a rate of 15%. This determination lead to a memorandum of understanding (MOU) between the two countries until 1991, where Canada agreed to impose an original export tax of 15% on softwood lumber. Canada withdrew from the MOU in 1991, after which came several years of dispute that included required cash deposits and a CVD that totaled 21-26% on Canadian lumber. In 1996, the first Softwood Lumber Agreement (SLA) was established between the two countries to normalize trade. This SLA set a tariff-rate quota (14.7 billion board feet) on much of Canadian lumber, and shipments that exceeded the quota were taxed by the Canadian Government. If prices exceeded a “moderate level,” Canadian lumber could enter the U.S. tax-free. The U.S. reciprocated by not imposing a CVD or other restricting action.
The SLA expired in 2001 amid allegations that Canadian lumber companies were making slight modifications to the lumber so that it would classify under exemptions to quota. Upon expiration, the DOC and ITC reviewed petitions by the U.S. lumber industry against Canadian lumber entering the U.S. where the original determination was made that it would be subject to a CVD and anti-dumping duty (AD) totaling 27.2%. Canada made several appeals in the subsequent years, which resulted in reductions in payments.
The second SLA came into effect in 2006, where the U.S. agreed to terminate both CVDs and Ads. Canada agreed to collect taxes and made quota restrictions on lumber exports. Fees were assessed from 2.5% to 15% based on the region of production and prevailing retail price. Both U.S. and Canadian entities were scrutinized for proper enforcement over the following years, but the agreement held until its expiration in October 2015.
A one year extension was put in place while two countries attempted to reach a new deal, but one was not reached. As of October 2016, softwood lumber had been entering the U.S. freely without a duty or tax. Soon after, the U.S. Lumber Coalition filed another CVD/AD petition with the threat of retroactive duties limiting the amount of lumber crossing the border from Canada.
April 2017 Duties Announced
On April 24, 2017, the Trump Administration took retaliatory action against Canada over the softwood lumber issue. Commerce Secretary Wilber Ross announced a preliminary countervailing duty (CVD) rate of 19.88% will be levied against Canadian softwood lumber exports to the United States. Individual rates will be assessed to the five companies that were investigated. They are: West Fraser, 24.12%; Canfor, 20.26%; Tolko, 19.5%; Resolute, 12.82%; and J.D. Irving, 3.02%. The weighted average of those five companies’ rates determine the “all other” Canadian companies, which means those duties will be retroactive 90 days from when the CVD determination is published in the Federal Register Notice. Mr. Ross said the tariff would be applied retroactively and imposed on Canadian exports to the U.S. of about $5 billion a year. Commerce Secretary Ross said the dispute centers on Canadian provinces that have been allegedly allowing loggers to cut trees down at improperly subsidized costs and sell them at lower prices.
The Future of U.S. & Canada Softwood Lumber Trade
In talking with various leaders in this industry, we have heard different stories about what to expect next. There’s a feeling among some players that nothing can be done about the tariffs, which will inevitably rise. Others believe that it can be fought, reversed, or negotiated.
There is more room for negotiation potentially coming up this year, and with the tepid response from Congress to Trump’s recent outline of priorities on this treaty, almost any outcome is still on the table.
The U.S. softwood producers have shown strength in their win this round, while forces on the other side are quickly mobilizing. They realize that, in a battle like this, if you don’t show up to fight, you could easily become a casualty. The players in favor of the increased tariff include virtually all of the U.S. lumber producers and their trade groups, lawmakers from logging states, local community leaders from those areas where U.S. logging jobs are based, plus the entire economic supply chain related to U.S. logging. They’re happy with the early action taken by President Trump.
On the other side you’ll find (unsurprisingly) all of Canada (logging to them is like movie-making or the software coming out of silicon valley). But also, there are plenty of U.S. interests that are opposed to the tariff: homebuilders, lawmakers who believe in free-trade (which includes most Republicans in the Congressional majority), some retailers that sell lumber. Even the Heritage Foundation has opposed this, pointing to harm that will occur to other sectors of the economy and how Canada could sell their lumber to Asia while the U.S. ends up with higher prices in the long run. Then there are some Canadian lumber companies with a large presence operating the U.S> that could benefit either way.
The U.S. Department of Commerce will play the primary role in tariff determinations, which are levied at specific companies or industries at their discretion (subject to U.S. law and treaties, of course). Secretary Wilber Ross has taken a conciliatory tone toward Canada on the tariff changes. The U.S. Commerce Department is expected to make a final determination to the anti-dumping case by June 23, 2017. There has been no progress to date on the Softwood Lumber Agreement or expected timeline for completion. On May 18, 2017, the United States officially indicated its desire to enter into discussions on renegotiating NAFTA, triggering a 90-day consultation window before formal talks begin. It is highly unlikely a new Softwood Lumber Agreement would occur prior to the NAFTA negotiations.
“We have not yet felt the impact, other than lumber prices skyrocketing as everyone speculates. As pellet kits are included for the first time, we are on a “wit and see” mode to see what changes occur once all the dust has settled. Countervailing but pallet kits? This is a whole new world.”
– Kathleen Dietrich
“Disruption for the sake of disruption? No. We are in full support of the concept of the 2017 softwood lumber agreement with Canada. The U.S. Dept. of commerce has stated that exporters of softwood lumber from Canada currently receive and have received subsidies between 3% and 25% which gives them an unfair advantage against U.S.-based companies. Furthermore, the vast majority of standing timber in Canada is owned by provincial governments, which are free to dump their lumber at virtually no cost in order to stimulate their forest industry. Naturally, resistance is heard from people who are profiting from this arrangement. I recently read that a mattress frame company said the wood they need has small knots and fine grain, a characteristic of softwood species grown in colder climates like Canada, and opposes the tariff. As far as I know, there are multitudes of other woods that can be used in lieu of “cold-grown” wood or perhaps something as simple as reengineering is in order. Either way, it’s not the end of anything, just a recalibration.
Will certain costs increase? It’s not only likely, it’s expected and encouraged. We support the leveling of the playing field to allow American companies to complete and succeed.”
– Anonymous Pallet Manufacturer
“The announcement on May 8th on Countervailing Duties (CVD) of 19.88% with a 90 day retroactive period against certain wood packaging products manufactured from softwood lumber (SPF) has affected a number of Canadian exporters adversely. In the wood packaging industry, the area most affected is the annual export trade of around 300,000 mbf of unassembled pallets (HTSUS 4415.20.8000) and notched stringers (HTSUS 4415.20.8000). Also affected are smaller volumes of softwood lumber pallet cut stock. Many of the manufacturers affected had anticipated the duties but early this year. Most have lain off staff, but some have closed operations altogether. The impact that will be felt by the U.S. pallet manufactures is considerable, they are faced with replacing long established supplies of high quality SPF raw material with substantially higher priced domestic material.
From an overall industry perspective, unassembled pallets and pallet cut stock exports represent 2% of overall Canadian wood packaging production but the recent CVD decision has created a large amount of confusion and uncertainty around other exports. It’s unclear whether assembled pallets were targeted in the Scope of investigations into Countervailing Duties and Antidumping (assembled pallets trade using the same HTSUS code as unassembled pallets as historically they were both considered finished products and exempt from duty.)
Exporters are also experiencing confusion at the border and transportation delays are expected. Exports of non-targeted species such as aspen pre-cut material has seen prices rise and demand strengthened in the last few months.
This trade dispute was supposed to be about softwood lumber exports of dimensional lumber but a wide variety of finished products made of softwood have been targeted as well, and the CVD announcement has forced many secondary producers who cannot pass on the increased costs to look for alternative markets.”
– Brian Isard, Canadian Wood Pallet & Container Association
We would like to share some photos from the NWPCA Congressional Fly-In which our very own Kathleen Dietrich, participated with Government legislators, representing Commercial Lumber and Priority Pallets. This was an event in with issue-briefings, Capitol Hill visits, Federal agency meetings, and lots of networking.
Did you know that 95% of all Pallets in the United States are Wooden Pallets? Over 1.3 trillion dollars in merchandise is transported by Wooden Pallets Annually. Wooden Pallets are Sustainable and Recyclable and do not enter into landfills. They are the only shipping platform that has been deemed as Bio-Preferred by the USDA. In the United States, over 50,000 people are employed in the Pallet Industry. The Pallet Industry uses 45% of all hardwood lumber and 15% of all softwood lumber produced!
Leadership Roundtable: A group of industry leaders discuss key issues from human resources to changes in the pallet lumber and core markets to robotics and competitive challenges. This is the first article in a multi-part series.
A group of industry leaders discuss key issues from human resources to changes in the pallet lumber and core markets to robotics and competitive challenges. This is the first article in a multi-part series.
As has become a recent tradition, the Enterprise editorial staff has moderated a roundtable discussion with key industry leaders from all aspects of the pallet supply chain and turned the discussion into a series of articles for the magazine. This lively discussion covers many key trends and current issues affecting the U.S. pallet industry. It provides a great snapshot of where we are today and what lies ahead.
The discussion was moderated by Chaille Brindley, publisher of Pallet Enterprise, and it addresses key concerns from the pallet lumber market to machinery to customer expectations and much more.
A special thanks goes to those who participated in the roundtable this year. Each participant is an accomplished industry leader who has something important to say. The panel includes: Kathy Dietrich of Commercial Lumber & Pallet, Ansir Junaid of Prime Woodcraft, Bill MacCauley of John Rock Inc., Bob Swan (father) and Rob Swan (son) of Battle Lumber Co., Bill Hildenbrand of Pallet Express, Lindsey Shean of Valley Pallet, and Nick Wenner and Luke Wenner of Pallet Services in Minnesota.
Pallet Enterprise: If you could wave a wand and fix any machinery or equipment challenge that you face, what would it be, and why?
Bill Hildenbrand: Being a recycler mainly, I have found that automation can fix problems, but it also creates new ones for us. It hasn’t been a cure-all. We have two plants, and one has an automated repair line. Automation in our recycling helps save a lot of space in the building. If you have a confined space, it cuts down on forklift traffic. It can also help you maintain quality control. But it doesn’t resolve any problems that have to do with employee attendance — worker absenteeism.
From my perspective, automation has created issues and solved them. Overall, it’s been good, but it certainly is not a cure-all.
Lindsey Shean: Our biggest bottleneck comes at the tear-down process. In a perfect world, if there was some sort of magic cure to speed up and automate the tear-down process and to make it safer for our workers, that would be something we certainly would like to see.
Bill MacCauley: We’re pretty automated, but you can always do better. I’d like to see more robotics put in. The labor force is a constant challenge. You go from needing the labor to needing an electrical engineer to maintain the equipment. It all gets down to labor, and how do you cut labor out or use it more efficiently. I would like to see more robotics in the sawmill process. Grading and culling lumber is a challenge, but how do you do it with machines?
Pallet Enterprise: How has your mixture of lumber types and dimension changed over the past few years? For example, are you using more softwood compared to hardwood? Are you using more cut stock or cants? What about recycled lumber? For pallet recyclers, have your core sources or supplies changed much? Why? How have raw materials and supplies changed lately, and where do you see them headed?
Kathleen Dietrich: We’re kind of waiting for the dust to settle with the countervailing duties on Canadian softwood lumber. We’re in a very foreign area right now. We haven’t had to deal with it in a long time. We’re in a wait-and-see mode. We buy cut stock and dimension lumber. Like everybody else, we have to fly by the seat of our pants and see what makes sense cost-wise. Price increases are really tough for us and our customers to swallow.
Lumber prices have risen 45% since last fall. When you have a customer and need to raise your price 25 cents, that’s one thing. When you have to raise it $2-3, it sends everyone scrambling. We have to wait and see what happens.
Lindsey Shean: The one thing that’s going to happen…I think we’re going to see a lot of customers go to a low-grade pallet…an expendable pallet if that’s an option for them.
We’re sort of in a different position right now. We’re not hurting for recycled pallets, but the impact of softwood pricing is going to drive more people to recycled pallets. We’ve already seen it happen with two larger customers. They loved the new pallet we were supplying, but they’re back on recycled because they don’t want to absorb the price increase for softwood. Some people may move to rental pallets; it’s a scary place to be in. There are so many unknowns.
Ansir Junaid: Our company is also involved in commodities, such as handling and recycling corrugated and shrink wrap. A notable change we see is that when consumers order merchandise online, they take the packaging and throw it away—instead of going back to the distribution center. It becomes consumer scrap. This may create a supply/demand issue.
We have seen approximately 100,000 storefronts dissipate due to growth of e-commerce in the last six months, and the need for pallets may go down. If you don’t have a store, the pallet will stay in the DC, and it will impact our supply chain in the long term. On the other hand Amazon is working to build another 25 to 30 distribution centers. In the short term, there will be significant growth. Even online retailers need a supply chain, and an infrastructure.
Bill MacCauley: No one likes the kiln-dried softwood increases. It’s driving people to look back at hardwood. From what I see, we’re making more and more knock-off 48×40 pallets because the quality of the cores is so low. So there’s more demand for one-way, 48×40 pallets.
Bill Hildenbrand: We’ve been working for Amazon for four years. Initially they were much more of a buyer. Ansir Junaid mentioned some of the dynamics taking place. Amazon has gotten to be more of a pallet producer, and they’re buying less. That’s tens of millions of pallets nationwide.
As Bill MacCauley said, the pool is terrible. The pallets going into the pool are inferior. This whole quality issue will continue to go on and on. Ultimately, what worries us the most is the big guns who are our clients, they are going to be driven by cost, and the total lack of cost and the availability of a rental system.
Rob Swan: Over the past few years, we have seen many of our customers reduce dimensions to save costs. We are still a majority hardwood sawmill, and most of our pallets are made of hardwood, but we have been utilizing more green southern yellow pine due to cheaper prices and easier availability. This has helped us lower costs and meet demand for our customers when hardwood was scarce.
Our customers are very price sensitive, so we do everything we can do to reduce costs. The Pallet Design System™ has been a great asset for us because it allows us to show customers ways to reduce costs without harming the integrity of the pallet.
Luke Wenner: We are using more kiln-dried softwood now than a few years ago. The main reason being customers need dried wood versus green material. Mold and moisture are becoming more and more of an issue for many of our customers, so the dried pine has proven to be the best option for most. Currently, with the high cost of kiln-dried and heat-treated lumber, some customers may switch to partial hardwood or all hardwood construction.
Pallet Enterprise: How many of you would say you’ve seen a significant move to rental pallets in the last year or two? Has that stabilized or do you have more customers looking into it?
Ansir Junaid: Many of our customers are shifting toward a pooled pallet—six customers in the last year switched to pooling companies. There is competitive pricing between CHEP and PECO—it is starting to compete again with prices for recycled pallets. Customers may prefer a rental pallet when it’s affordable and if recycled pallets have quality issues. Since new pallet manufacturing is stagnant, it affects the quality of recycled pallets.
Lindsey Shean: In the last two years, we saw two larger customers move, one from a new GMA and the other using a recycled pallet. Both customers went to rental pallets.
Pallet Enterprise: When customers move to rental pallets, what are the key drivers?
Lindsey Shean: For one customer, pricing was an issue. Another customer that used recycled pallets, their driver was more of a quality issue. It was all a material handling thing. Price and quality — both reasons came into play.
Pallet Enterprise: Almost everyone reports having problems finding good workers. What are you doing to address this problem? Is it working? Have you discovered any ways to improve performance of personnel or employee retention?
Bill Hildenbrand: We have found everywhere there is an epidemic of drug use. It’s worse than ever. We are trying everything in our power to eliminate people with a drug problem from coming into our facility. That’s become a massive problem. And trying to help people who become addicted or relapse…It’s an issue for hiring and retention.
Kathleen Dietrich: We’re early into an incentive bonus program. If someone refers a person for employing, they get an incentive bonus after the person has worked a certain number of days, and the new employee gets a bonus. We’ve seen a little uptick in hiring good people since then.
Ansir Junaid: We continuously strive to create an ideal work setting to have a better facility, superior forklifts, safer practices, and foster gratitude within the workplace. If employees feel like they work in a safe and clean environment, coupled with high spirits, it fosters retention. We benefit tremendously when our facilities are more safe and presentable.
Rob Swan: One of the many things we are doing to try to combat this issue is offering our employees more incentives. We started with an attendance-based system that allows the employee to gain extra vacation days for perfect attendance. This is a new system that we have just implemented, but it seems to be working so far. We also pay our machine operators on a production-based bonus system that gives them incentive and motivation to build more pallets.
Nick Wenner: We have made wage adjustments upwards, mainly in our plant personnel to compete with other employers (particularly manufacturers) for what seems to be a shrinking labor pool. We are also trying to more actively engage our employees wherever we can to try to make working here more than just a paycheck.
We all face many significant challenges in our lives, and coming to the realization that not everyone has positive resources for seeking wise counsel or support in a time of need is something we are trying to be more cognizant of. For some their place of work may be one of the few stable things in their life. We are looking for ways to build on that.
We are rolling out a chaplain program to offer resources to our employees in times of need and allow time for relationships to be formed. We’re also trying to be more intentional about celebrating successes, recognizing individuals and groups within the company and in general… just trying to show our people that they are loved and valued by our company and by our God.