COLDWATER, Michigan – When the economy began going south a few short years ago, Jon Slack took his pallet business, Union Pallet & Container Co. Inc., in the opposite direction.

   At a time when many companies –regardless of the industry — may have cut back to reduce costs, Jon was forging ahead, investing in plant, equipment and personnel resources.

   His decisions paid off.

   The company steadily grew from sales of $925,000 in 1998 to $1.6 million in 2002, increasing an average of $169,000 annually during that four year period. In 2003, the company leaped to $2.6 million.

   The biggest factor in the company’s growth in recent years – growth that came during the recession – was Jon’s decision to add a full-time salesman. Before adding a sales professional, sales were handled by either Jon or his wife and co-owner of the company, Twyla – the only employees in the office. Unlike Jon, the company’s salesman was able to devote his full efforts to marketing and selling.

   Jon made the hiring decision in the fall of 2002. “As the economy started to slow down, I figured if we were going to survive, we would have to ramp up our sales efforts,” he said. Those efforts began to bear fruit in 2003. The company’s sales growth came from “knocking on a lot of doors,” said Jon. “Believe me.” He and the company’s sales representative took a fresh look at the businesses in the company’s geographic market area and picked up new accounts by calling on them.

   If he had been forced to make layoffs, “The last area I would cut would be sales,” said Jon. “They are the people who are out there, banging on doors…If you’re going to rebound (in a bad economy), you have to work at it.” Some other pallet recycling companies in the region went out of business during the same period, he noted. Union Pallet also acquired a small competing pallet recycling company during that period, buying its rolling stock and picking up the customer accounts.

   Union’s geographic market area has contributed to the company’s success, Jon believes. The company is located in south-central Michigan, about mid-way between Chicago and Detroit and also Lansing and Fort Wayne. “We have a lot of opportunities to do higher volumes,” said Jon.

   Union Pallet, which moved into a new, 33,000-square-foot plant on a 10-acre site in 2002, is primarily a pallet recycler – new pallets account for less than 10% of sales. About 70%-75% of the company’s volume is recycled pallets – pallets that can be readily repaired and sold or pallets that can be re-sold without repairs. About 10%-12% of sales are custom pallets made from recycled lumber, and another 10%-12% are new pallets and dunnage. The company does a small volume in crates and containers.

   Although Union Pallet sells 130 pallet and skid footprints and sizes, it is fairly heavy in the GMA market, with about half its sales in GMA pallets. Another 25% are footprints that are fairly common in particular industries. The remaining sales are for custom pallets. “We do a lot of custom footprints,” said Jon, orders for 20, 50 or 100 pallets.

   Union Pallet operates two shifts with about 31 full-time and five part-time employees. It processes an average of 4,000 pallets daily and dismantles from 750-1,000 pallets daily to reclaim used lumber. The company also reclaims about 400 pounds of cardboard each day; it is bundled into 1,000-pound bales and sold to recycling markets.

   Union Pallet, which has a fleet of three tractors, 57 trailers, a stake truck and a pick-up truck, does business with nearly 200 customers.

   Jon worked in middle management for a manufacturing business when he began recycling pallets in his spare time in 1991. His employer made soft high and low density foam that was supplied to the automotive, medical and athletic shoe industries, among others.

   He had a weekend shift at the plant and had a lot of free time during the week. To earn extra money, he cut firewood. One of his firewood customers suggested a swap: firewood for used pallets. Jon knew a purchasing agent at another plant and called him and asked if he was interested in buying some used pallets; the answer was yes. At the time, he was earning $35 for a load of firewood. He made considerably more money by selling the pallets he received in the swap. At the foam plant, Jon’s employer was giving away surplus pallets. He quickly arranged to take them off the company’s hands and sell them to his customer, which would buy as many as he could get. His only cost was hauling the pallets.

   Jon got other business as he was referred by the purchasing agent to other companies that wanted to buy used pallets. He also did business with pallet recycling companies. “It found me,” Jon said of the business opportunity. “I didn’t find it. I started out doing this as a hobby, and it took on a life of its own.” By 1993 he had moved to a 3,200-square-foot pole barn in Girard. He bought a forklift, an air compressor, and began leasing three power nailing tools from Bostitch.

   In 1995 he moved the business again, this time renting 12,000 square feet in a 250,000-square-foot plant. He hired five workers, bought a 22-foot truck and invested in a Rogers A pallet dismantling machine.

   He continued to work at the foam plant until the end of 1998. By that time, he was earning twice as much money from his pallet recycling business. Still, it was not an easy decision to leave. His employing company provided excellent benefits and was “a great place to work,” Jon recalled.

   As the business continued to grow over the next five years, Jon rented more space when growth warranted expansion and added employees and equipment. He bought his first warehouse in 2000 and the following year broke ground for the new plant, which began operating in late 2002.

   The new facility has approximately 14,400 square feet of production area; the indoor warehouse storage area is approximately 18,000 square feet and is used for storing most finished pallets along with some raw material. At the rear of the plant is a lean-to shed that houses a grinder and vacuum system.

   The company also has a Morgan cant saw that it uses mainly for cutting SPF and hardwood 2x4 to length and equipment to compress cardboard into bales. In addition, Union Pallet recently received a pallet heat-treating system from Nyle Dry Kiln Systems and was in the process of having it installed at the time Jon was interviewed for this article.

   In an industry known for its low profit margins and in a competitive climate, profit margins have shrunk further in recent years, Jon noted. “Innovation has helped, certainly,” he added. Investments in pallet recycling machinery from suppliers such as Industrial Resources and Smart Products have helped increase production while controlling or reducing labor.

   Jon also expanded the company’s services over time. “We got into warehousing,” and the company now owns two fully leased buildings.” Union Pallet also added cardboard recycling to its operations, and it is beginning to supply commercial dunnage. In the dunnage market, there is good demand for 2x4 and other material cut to length for corner posts and boxes, and for spacers for shipping steel, plastics and other goods, according to Jon. To take advantage of this market opportunity, Jon is adding a couple of bunk sheds and plans to invest in a package saw.

   The company also added a 4,000-square-foot building for maintenance operations for its truck, trailer and forklift fleet. Union Pallet will provide truck and forklift maintenance service for other businesses in order to keep its mechanics busy full-time.

   In the company’s pallet recycling operations, most incoming trailers, which contain about 95% GMA pallets, go to the main sorting area. The first shift supervisor is responsible for unloading the trailers, sorting the pallets, and moving them to the appropriate work station. He completes an audit of each load during the process and also keeps track of the number of pallets that are taken to each pallet repair station. The entire process of unloading the trailer and sorting the pallets is recorded on closed-circuit television.

   The company has six repair stations along a 95-foot conveyor, and pallets are moved to each station in stacks of 10. The repair stations are equipped with a table, power nailing tool, pry bar and hammer. As the stack is repaired, the supervisor replenishes it with another stack. Each repair worker is assigned a letter and uses a crayon to mark a completed pallet with his letter. As a pallet is repaired and marked with the letter, the worker slides it across the table to the conveyor, which carries it to the grading station and three Industrial Resources stackers.

   At the grading station, a quality assurance worker inspects each pallet to ensure it has been repaired properly, and grades the pallet according to the following classes: food grade, No. 1, No. 2 or No. 3. He directs the pallet to the appropriate stacker by grade. These stackers use electric over hydraulics. The machines push a full stack out on a roller system. The stack rolls to the base of the roller conveyor, ready to be moved by forklift to the warehouse.

   Depending on the product mix of a trailer, it may be taken to a warehouse to be unloaded. A worker in the warehouse unloads them and sorts them to segregate broken pallets and re-stacks the ready-to-go pallets.

   Jon pays the pallet repair and builder staff by piece rate. “I’ve always done it that way,” he said. Employees running the dismantlers and chop saws and warehouse workers are paid an hourly rate.

   Odd-size or damaged stringer pallets that can be dismantled for recycled lumber are taking to the lumber recovery area while block pallets are sorted out and moved to the grinder.

The lumber recovery operations generate about 2,500 stringers and 6,000 deckboards daily.

   Union Pallet is equipped with only disc-type pallet dismantling machines – two Industrial Resources Pass-One machines that are situated side-by-side. Jon prefers disc-type machines for dismantling pallets – for one reason because the blades do not require daily replacement; the blades on the Pass-One machines are replaced about every six weeks.

   In the lumber recovery area, pallets are dismantled and the components are sorted as follows: stringers longer or less than 42 inches, and deckboards longer or less than 40 inches. The reclaimed stringers and deckboards are put into carts and later moved to two work stations equipped with Smart Products chop saws to be cut down to the appropriate length. Production is adjusted according to what the company needs. For example, if there is a need for 40-inch deckboards, both workers cut that size.

   Scrap pallets are dumped by the hopper into a Challenger grinder. The grindings are sold to another company that uses them for making mulch and colored mulch.

   Jon also owns an interest in some Amish sawmills. He supplied equipment for the mills, and they cut for him and supply him with the limited amount of new lumber required by Union Pallet. “The Amish can do it cheaper than we can,” he said. The company keeps a small inventory of random length 3 ½-inch, 5/8-inch and 5/4 lumber to be cut into new deckboards and stringers for special or ‘hot’ orders. In addition to new lumber supplied by the Amish mills, the company also buys dimensional pine from mills in Georgia or Canada.

   All pallets made from new or used lumber are assembled by hand with power nailing tools. Jon once invested in a Pallet Chief entry-level nailing machine with a stacker to speed assembly of new GMA pallets for a customer. However, the company later lost the business. The machine sat in the warehouse for two years, and Jon eventually sold it.

   Orders for new pallets, both hardwood and softwood, typically are short runs. “We’re seeing more softwood for short runs because a lot of companies switched over” because of global requirements for treating wood packaging.

   With the advent of global requirements to treat wood packaging in order to prevent the spread of wood-eating insects, Jon initially was not interested in serving that market. “I wasn’t going to get into it,” he said.

   However, his thinking has changed. “I have customers that need those kind of pallets,” he said. In addition, Union Pallet began getting calls from other businesses, asking if they could supply heat-treated wood packaging.

   Union Pallet uses Stanley-Bostitch power nailing tools and fasteners. “They make a good nail,” said Jon. For repairing cracked stringers, the company uses a heavy bridge staple from Stanley-Bostitch, fastening one staple about every inch for the length of the crack.

   “Stanley-Bostitch has been very good to us over the years,” said Jon. A service technician visits Union Pallet weekly and always has plenty of tools.

   Circular saw blades are supplied by Country Saw & Knife. “Their service is excellent,” said Jon. “We’ve been with them forever.”

   The company has an old single-head notcher. “It does what we need,” said Jon. Union Pallet uses Econotool heads for notching stringers.

   The closed-circuit television system has benefited Union Pallet in a number of ways, Jon explained. The system records the process of unloading and auditing the pallets from each incoming trailer as well as the loading operations of outgoing trailers. If there is a discrepancy either in a load received or a load shipped, the company has the ability to review the videotape and verify either. “It doesn’t happen very often,” Jon noted, and discrepancies usually turn out to be an honest mistake by a customer.

   The company has been using the system in its new facility, which it moved into about 18 months ago. The other benefits the system provides are monitoring activities in the production area, including recording incidents where a workmen’s compensation claim may arise, and an added level of security when the plant is closed. The closed-circuit television system cost about $2,500 to install, and camera locations are changed at regular intervals. There are additional cameras at the grinder to help detect if the machine clogs or backs up and outside on the company’s yard. One videotape records everything daily; videotapes are kept for about two weeks, erased and used again.

            Union Pallet employees wear hard hats, safety glasses and ear plugs. Jon took a pro-active approach to working with OSHA, inviting the federal safety officials to visit his plant and make recommendations. “If you invite them in with a spirit of cooperation, they can tell you anything they want fixed” and give a company the opportunity to remedy unsafe practices without citing it for regulatory violations, said Jon.