Texas Pallet Recycler Counts on Quality, Service for Success: USA Pallet & Logistics Inc. Is a ‘Total Smart Products Shop’
USA Pallet & Logistics: When Pete Murphy talks about his Texas pallet recycling company, topics like quality and customer service come up a lot; company is a ‘total Smart Products shop.’
By Tim Cox
Date Posted: 2/1/2009
DALLAS – When Pete Murphy talks about his pallet recycling company, USA Pallet & Logistics Inc., topics like quality and customer service come up a lot.
Also, he has a couple of ‘catch phrases’ that keep cropping up in the conversation. The most frequent seems to be: “Everybody thinks I’m crazy, but…” Crazy because he does some thing different – make that innovative.
Having been in the pallet business more than 20 years, Pete has seen major changes in the industry, particularly the dynamics between pallet companies and their suppliers and customers.
USA Pallet & Logistics is located on three acres in south Dallas with a 110,000-square-foot building, where all recycling operations are performed and all pallets are stored. The company maintains about 50-60 employees. Its principal customers are warehouses and distribution centers in the Dallas-Fort Worth metropolitan region.
USA Pallet & Logistics is a family-owned and operated business. Pete is joined in the business by his wife, Del Marie, who manages the office; a son, Mike, who managers overall production operations; and a daughter, Krissie Hoselton, an administrative assistant. Company management has a combined 45 years of experience in the pallet industry.
Pete grew up in the Houston region. He was a banker for over 20 years in Dallas and the surrounding region. By 1988, spurred by a rash of bank consolidations, he decided to make a career change. His brother, Jim, owned and operated a pallet business, Texas Pallet, in Houston. Pete spent the summer of 1988 with Jim’s company, learning the fundamentals of the pallet recycling industry, and then returned to Dallas.
“We came up here, rented a yard with a small building, and put up a sign that said we buy pallets, and that was the beginning,” he recalled. “We were totally on our own.” He left his job in banking to get the business off the ground. “I just rolled the dice and decided to go out on my own.”
After about six months, Pete had a big enough inventory of cores that he could begin selling pallets. The company has moved twice since then as it grew. At previous locations, pallets were stored outside in a yard. Now, all repair operations and storage are inside to keep pallets clean and dry, making operations more efficient.
When Pete began making sales calls, he quickly realized that “you don’t go after the big guy right away.” He focused on warehouses and began calling on small warehouses. He got established with a few customers and built a solid reputation. From there, word-of-mouth advertising propelled his business forward. Warehouse managers in the region talked to one another, he found. If one of Pete’s warehouse managers learned that another warehouse was having problems with a pallet supplier, he would refer them to Pete. In fact, so strong was his company’s reputation and so effective were the referrals that Pete did not hire a full-time general sales manager until 2008.
“My philosophy has always been: service and quality above everything,” said Pete. That was the guiding principal when he began his business, and it continues to this day.
“We don’t sell on price at all,” he said. “We always sell on quality and service.”
One thing that set apart USA Pallet & Logistics, and probably still does, is that someone is available to answer the phone 24 hours a day, seven days a week – and they provide deliveries 24-7, also. After normal working hours, phone calls are forwarded to a company officer, and they rotate the responsibility.
Another thing that distinguishes the company’s operations is in the duties and responsibilities of the foreman and assistant foreman. At many pallet companies, a foreman or supervisor is on a forklift, moving pallets in addition to supervising workers. At USA Pallet & Logistics, the foreman and his assistant are “on the ground,” and their primary duties are to monitor pallet quality and production control. “In this type of volume,” Pete said, “quality is number one.” The foreman is currently using Pete’s golf cart to get around the plant.
When he talked with Pallet Enterprise, Pete turned again and again to service and quality. “Anybody can sell pallets,” he said. “Anybody can sell pallets by price.” The reason for the company’s successful growth, however, comes down to strong pallet quality and service to customers. That’s precisely why USA Pallet & Logistics was recommended and referred to other warehouses looking for a better pallet supplier.
As the business has grown, Pete has picked up customers in other business sectors, such as manufacturing, but the majority of his business remains with warehouses. The reason for focusing on warehouses and distribution centers has been two-fold, he explained. Large warehouses are a good source of cores, and they also are good customers for buying pallets.
Like other recyclers, he keeps empty van trailers at some customer locations so they can fill them with surplus used pallets. “We go in with a full load of pallets, and we bring back a load of cores,” he said. “We try to never go back empty.”
As an example of the kind of service USA Pallet & Logistics provides, Pete referred to one customer, a warehouse, that asks for two loads of pallets to be stored on its premises at all time. Pete keeps four loaded trailers at the customer’s site, but USA Pallet & Logistics does not invoice the customers for them until the trailers are empty.
“Everybody thinks I’m crazy,” said Pete, “but the pallets are either sitting here, not making me any money, or they’re sitting at the customer’s place, where eventually they are going to use them and we’re going to make money.”
The Dallas-Fort Worth metropolitan region is a good place for business, according to Pete. Texas offers a good environment and is friendly to business, he noted. More Free Trade Zones are being established, and a lot of large warehouses are under construction.
The region supports a minimum of eight or nine pallet suppliers, according to Pete. There are about five companies similar in size to USA Pallet & Logistics and another three or four mid-level pallet suppliers. There probably are additional smaller companies, he indicated. “With so many customers in the area, it’s still a good quality market. Nobody can handle it all.” The market is still a “very soft,” he said.
At USA Pallet & Logistics, when a truck-load of cores is off-loaded, the forklift driver typically grades each pallet. The information on the load is recorded on a form that goes to the office, and the information is entered into the company’s management software—the Pallet Track system. Pallets to be repaired are moved to the repair work area, and scrap pallets are moved to the tear-down section.
USA Pallet & Logistics may be somewhat unique. All the company’s main pallet recycling equipment has been purchased over the years from one supplier – Smart Products. “We are a total Smart Products shop,” said Pete. USA Pallet & Logistics has been a customer of Smart Products for about 10 years, he estimated. Pete has found the supplier’s machines to be durable and reliable. “There is very little downtime on the machines,” he said.
In the lumber recycling area, where scrap pallets are dismantled and the lumber is remanufactured into usable pallet components, the company is equipped with three Smart bandsaw dismantlers, four Smart chop saws, two Smart chain-fed trim saws and a Smart single-head notching machine. Operations in this area employ about 12-15 workers.
The Smart bandsaw dismantlers are operated by two-man crews. “Our guys can tear down 1,000 pallets per machine a day,” said Pete. With three bandsaws going, that’s about 3,000 pallets per day being dismantled to recover and recycle used lumber. “The biggest problem right now is getting enough pallets to dismantle,” said Pete. The used pallet parts are trimmed to length on the manual chop saws or chain-fed trim saws.
All repair work is done manually. Broken leading-edge deck boards are removed with a pry bar or hammer. Repair stock is attached with pneumatic nailing tools. The pallets are stacked 20-high, and a forklift driver counts them. A foreman inspects the pallets for quality; if he finds any that do not pass inspection, the worker must repair it again. The pallet repair workers are paid piece rate, and if they have to repair a pallet a second time, they do not get paid for the second repair. About 15-20 workers are busy repairing pallets, depending on volume.
Repair stock is 100% recycled lumber. “You lose money when you put a new board on a recycled pallet,” said Pete. Typically, if the company has enough core volume, it does not mix components. USA Pallet & Logistics builds specialty pallets to customer specifications combining softwood and hardwood components – pine stringers and oak deck boards.
In the tear-down area, the men running the bandsaws also are paid piece rate. Piece rate pay give the men incentive to produce more, and the pay structure also contributes to the employees policing themselves for tardiness or absenteeism, Pete noted. If a man on a two-man bandsaw crew does not show up for work one day, his partner is not too happy about it because he is going to produce less and earn less, and he usually lets the other man know about it when he returns to work.
USA Pallet & Logistics also uses one brand of pneumatic nailing tools and collated fasteners – Stanley-Bostitch. And it buys saw blades from one supplier, Saw Service & Supply Co.
For the dismantling machines, the company uses a bi-metal bandsaw blade. “Saw Service has by far the best quality,” said Pete. “That’s how we can do 1,000 pallets a day per machine.” Notching heads are supplied by Profile Technology.
USA Pallet & Logistics does not use many connector plates for pallet repairs although it does do some plating. “If a pallet has a broken stringer…we try to staple it with a corrugated stapler,” said Pete. These kinds of repairs are performed with a Stanley-Bostitch corrugated stapling tool.
The repair operations are devoid of any automated equipment, including conveyors. Pete has looked into investing in automated equipment for pallet repair operations, but so far has decided against it. “I am a big believer in tying up my money in wood, not metal,” he explained. One of the biggest components of the cost of a recycled pallet is labor, he noted, labor costs are passed onto the customer in the sales price.” In addition, he noted, machines break down.
Pete did make an investment in computer technology, however. USA Pallet & Logistics uses the Innovative Data Systems Pallet Track software, referred to earlier. It is a major component in the company’s inventory database control process. Pallet Track is used to monitor inventory, production and payroll compensation. This year the company plans to phase in additional features available in Pallet Track.
Del Marie, who manages the company office, has been using Pallet Track about two years. It “absolutely” has been a big help, she said. “It has enabled us to better utilize our resources and enhance controls,” said Del Marie.
USA Pallet & Logistics is an authorized depot for PECO, a national pallet rental company known by its distinctive red pallets. The company has partnered with PECO for more than three years to provide pallet repair services to PECO customers throughout Texas, Oklahoma, Arkansas and Louisiana. PECO has high quality standards for its pallet and pallet repairs, said Pete.
PECO originally used stringer pallets in its pool but converted to block pallets several years ago. In order to repair the PECO block pallets, USA Pallet & Logistics added two other Smart Products machines specially designed for block pallet repair and recycling. The Smart Pallet Prep Plus machine is designed to remove any damaged board from a block pallet and some blocks, and it can be used with stringer pallets, too. The Smart Products Block Saw is designed to removed damaged perimeter blocks from a block pallet.
“They are top-notch machines that handle block pallets very easy for us,” said Pete.
“Everbody’s scared about repairing block pallets,” said Pete, who admitted “we didn’t have a clue” about the best, most efficient methods to repair and recycle them. Initially he bought some reciprocating saws to cut out damaged components, but he learned quickly that those power tools would not get the job done.
Repairing and recycling a block pallet “takes a little more work,” Pete acknowledged, but with the two Smart Products machines, “it’s not that much more difficult to do.” The workers who repair the PECO pallets earn a slightly higher piece rate because the process takes a little longer. “Once they learn the repair process,” said Pete, “it’s just like repairing a stringer pallet.”
Scrap material currently is being hauled away at no cost by a company that uses it for raw material to grind into boiler fuel. Pete is encouraged that, by the second quarter, with changing market conditions he will be able to sell the scrap to the same business.
The company runs six semi-tractors and has more than 80 trailers currently in service. Truck drivers are paid by the run; different deliveries have different values. The drivers were converted to this pay system several years ago. “They soon realized they could make more money, and productivity went higher,” said Pete. GPS technology is used to monitor the speed and whereabouts of the trucks; it has proven to be an effective management tool.
USA Pallet & Logistics provides employees with all OSHA-mandated personal protective equipment. Mike conducts quality control and safety training for all employees, and all forklift drivers are certified.
Earnings for USA Pallet & Logistics employees are 20-25% higher than many competing pallet suppliers, according to Pete. “I’m a big believer in keeping turnover low.” Paying more has enabled him to keep turnover low and retain good workers.
Pete is a member of the National Wooden Pallet and Container Association, the trade association of the pallet industry, and attends all its major meetings and conferences. He also is active in a local church, serving on committees.
When asked to provide examples of customer service, Pete described an instance about three years ago when a customer experienced flooding in a warehouse. Product that was stored on the warehouse floor needed to be moved and put up on pallets in racks – quickly. The company called USA Pallet & Logistics and said it needed nine truck-loads of B pallets immediately.
That phone call was taken by Mike. USA Pallet & Logistics has a phone tree system to contact other key employees in such cases, and they were promptly notified. Within one hour, the key employees were gathered at the company’s facilities.
“We always keep two loads of #A and #B already pre-loaded on the yard,” said Pete. Within a short time, another two tuck-loads were ready to go, and the six loads were promptly delivered. All nine loads were at the warehouse within two or three hours.
“We take our reputation very seriously,” said Pete. “We’re not out there to sell pallets based on price alone.” His philosophy is to “partner” with customers. “We partner with them and grow with them as they grow themselves.”
Pete continues to be involved in sales, but his primary duties now involve business policy and strategy.
“We do not take on more than we can handle,” he said. “We are not looking to be the biggest, just the best-run.”
“Our philosophy here is, when you forget about your customer, you might as well close your doors.”
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