Back in the early 1990s, when Jean Louis Louvel was working as a salesman and technician in France, he received instructions from his boss that turned out to be the launch point for a new business. Today the business is the largest pallet company in France.

Ordered by his boss to discard empty pallets left over from his palletized shipments of water treatment supplies, he quickly discovered companies that were interested in buying the used pallets. In addition, he also learned that other businesses were willing to pay to have their own excess pallets hauled away.

This ideal situation — getting paid to remove pallets and getting paid to sell them — didn’t last long as pallet recycling continued to grow, but it provided an important point for Groupe PGS to enter the pallet industry at that time.

Along with Gilles Hermann and Michael Modugno, the three men launched a pallet recycling company in 1993. Their business, Groupe PGS, was founded with pallet management in mind — PGS is an abbreviation for the French equivalent of ‘Pallet Management Services.’

In their first year, the trio did about $180,000 in business with no other employees. Now, with about 360 employees, they do that much business in a day. Customers include such well-known grocery manufacturers as Proctor & Gamble and Nestle. Groupe PGS has a combined network of pallet manufacturing and recycling operations that has become the largest pallet company in France.

The three partners, all in their 30s, expect 2006 sales to come in at around $75 million, which would be an increase of more than $9 million from 2004 sales. Total pallets sold per year numbers about 15.5 million units, including about 5.5 million new and 10 million used.

EPAL (Europallet) pallets account for about 20% of volume, but other important components of the business include CP (chemical) pallets, VMF glass pallets, a variety of pool pallets, as well as custom pallets.

The company’s three main pallet manufacturing plants are located in Brittany, Normandy and the east of France – all of them acquisitions. One of the plants makes the pallets that were the original impetus for the entry of PGS into the pallet business.

"We saw and nail in each plant, we have different types of machinery from France, Italy and Spain," Michael explained. Equipment is often jointly designed by Groupe PGS and machinery suppliers to meet specific requirements of Groupe PGS.

The company buys lumber from mills in Eastern Europe. All the pallet manufacturing facilities are equipped with dry kilns to provide heat-treated pallets for export, and recycled pallets are fumigated with methyl bromide for export applications. Both treatment methods meet international phytosanitary standards.

Groupe PGS also manufactures about 1 million pallets annually from four facilities throughout France that utilize handicapped people. "It takes two or three people to do the work of one, but they do everything by hand to produce as many jobs as possible," Michael explained. "It is important for us to make a social contribution."

The company also manufactures pallets from recycled lumber that it recovers in its pallet recycling operations. Bandsaw dismantlers are used to disassemble mainly 800mmx600mm half-pallets, which Groupe PGS rents to grocery retailers. Stanley-Bostitch or BEA power nailing tools typically are used in the recycling operations.

As in new pallet manufacturing, recycling capacity is strongest in the north, although Groupe PGS has continued to expand across France and elsewhere through a number of new recycling facilities. The company has about 28 locations in France with additional facilities in other European countries, including Belgium, Spain and Italy.

"Customers are asking us to expand all over," Michael said. Groupe PGS plans to add about five locations each in Spain and Belgium, which would increase employment to about 500 in 2006.

"Two hundred kilometers (124 miles) away is a target for distance (between sites)," Michael explained. "It is important for our business to be very close to customers." Location is driven predominantly by two factors – being in or near cities where key customers require service and other major industrial cities.

Groupe PGS has taken an interesting approach to motivating managers at its facilities. "Each time we create a new site, it is a partnership with 51% PGS control," Michael explained. The partnership arrangements typically involve two or three sites in the same region. PGS retains control yet local management has an owner’s motivation to succeed. Each plant benefits from being part of the PGS network.

Groupe PGS is confident that it can quickly build sales wherever it locates. Its focus has been on establishing new locations on its own rather than through acquisitions of existing companies. The partners feel this approach is more cost effective and is a better fit at the corporate level.

As part of its careful attention to marketing, Groupe PGS decided very early that it was important to have a professional appearance in the eyes of customers. It was the first French pallet company to run new trucks, according to Michael. All truck drivers wear uniforms. "To us, it is important," Michael explained. "To be different, we decided on a new look all over France with the same truck and the same brand. We are very attentive to be seen in a good light." The company operates about 60 tractors and 400 trailers. As part of its marketing efforts, Groupe PGS also advertises in some major magazines.

The company’s administrative functions have been centralized. For example, sales and finance are handled at the corporate level, along with major purchasing decisions, such as lumber, nails and trucks. Each site reports its inventory on a monthly basis to headquarters, which allows the company to move stock from one location to another as needed.

"One of our strengths is the ability to resell or relocate pallets where needed," Michael emphasized. "Logistics is the future."

With its many locations, Groupe PGS offers a ‘virtual transfer.’ Groupe PGS can retrieve customer pallets at one location in its network, and release the same type of pallet in repaired condition to the customer at another location — eliminating the costs of physically moving pallets across the country.

"EPAL is a good system," Michael noted, referring to the large Europallet exchange pool that numbers 300-500 million pallets across Europe. "Today there is not another system that is as cheap. Our system is two Euros cheaper than rental."

Groupe PGS will often quote a combination of mixed price new and used pallets when used pallets are in short supply. "We can’t always find used," said Michael, "so a mix of new and used is quoted."

Groupe PGS also sells around 200,000 large shipping bags annually in addition to several thousand plastic pallets and crates. It also supplies new and used steel shelf racking.

The company continues to grow rapidly yet deliberately. "Growth is very fast and in control," Michael summarized. "We have good financials." In fact, the partners are exploring the possibility of taking the business public and selling stock in Groupe PGS. "It will be a way for us to grow faster," said Michael.

The ambitious young company’s plans for growth may even include North America. "We are interested in visiting American companies and finding out how it works there," Michael said.

Groupe PGS provides a good example of how a progressive company with a professional approach to customer service can utilize a multi-site formula to build competitive advantage.