Savvy S. Carolina Manufacturer Shows He Is Adept at Adapting: Decision to Consolidate, Sell Some Accounts Propels Pallet Makers Forward
Pallet Makers: In the case of a South Carolina pallet manufacturer, downsizing led to its best growth, and selling off certain customer accounts strategically positioned the business for the future.
By Peter Hildebrandt
Date Posted: 2/1/2009
HARTSVILLE, South Carolina – Downsizing can sometimes lead to the best growth.
When Hamlet Fort, owner of Pallet Makers Inc., joined the company in 1985, Pallet Makers was a small, one-plant operation located about seven miles west of Darlington. The company, run by Dave Hopkins, served some 25 customers and did about $2.5 million in annual revenues.
Hamlet became plant manager by 1989, and that year he decided to buy an equity position in the company.
Pallet Makers acquired two other pallet companies in 1989, Beaufort Wood Products and Coastal Pallet Co., which continued to operate under their own names. The acquisitions tripled the size of the company overnight. Now it had three plants with a combined 90 employees. From 1989 to 1996 Pallet Makers had annual revenues of about $9 million, each location roughly contributing about $3 million in sales.
In 1996, Hamlet decided it was time to consolidate operations in order to gain some efficiencies. “We had three maintenance departments, three plant secretaries and three plant managers,” he noted. When Coastal Pallet and Beaufort Wood Products closed, Pallet Makers began serving their customers out of the Hartsville plant, which it expanded to accommodate the increased volume of business coming from the two closed plants.
Although the company trimmed its locations and operations, revenues continued to grow through 2000. The consolidation helped the company to become more efficient and profitable, and annual sales peaked at $12.8 million.
When the 2001 recession hit, sales declined, and Hamlet made another strategic business decision.
Sold Accounts, Changed Focus
He sold certain accounts representing about 80% of his sales volume to another pallet manufacturer – a competitor — in the Carolinas region. The move reduced sales of Pallet Makers to about $2.8 million, which was close to the level when Hamlet started with the company.
The accounts he sold were customers that essentially bought standard pallets that were assembled on nailing machines. Hamlet had decided to concentrate on businesses that bought custom pallets – like a customer that buys a truck-load of pallets containing eight different sizes. “The deal we made with the other company was the right choice at the right time,” he said.
Technically, Hamlet sold an off-balance sheet asset. The move also allowed him to sell off certain equipment, such as automated nailing machines, that he no longer needed. He had four Viking nailing machines at that point and sold two. At the same time, Hamlet bought out his partner.
Pallet Makers was ‘reborn’ as a specialty and niche market pallet supplier. “This development has all been very positive,” Hamlet said. “As owner of the company, I’m thrilled with this reinvention of Pallet Makers following the sale of our customer list. Now I am serving more of a niche market. Also, I now work with our rival instead of against them. Now we are collaborating, not competing.”
With the change in market direction, Pallet Makers went from $2.8 million in annual sales in 2002 to about $5 million in 2008.
The company underwent other changes. It reduced labor from about 120 employees to 30. Cut-up and pallet assembly operations were moved into another building, and the maintenance area was converted into administrative offices.
“What makes the story especially interesting is that, unlike most other companies, we started small and grew but then reduced our size,” said Hamlet. “For most people, their goal is to grow the business. I made a move diametrically opposed to this model in deciding to be small once again. You can grow yourself broke, too, because it’s very expensive to grow a company.”
Hamlet is a leader in the pallet industry. He is a member of the National Wood Pallet and Container Association (NWPCA), the industry’s leading trade association, and in February he completed a 12-month term as chairman of the association’s board of directors.
Using More Pine
Pallet Makers manufactures custom pallets and crates and other wood transport packaging products, such as heavy-duty skids to move steel coil and grooved wood components to band together loads of pipe. The company will make pallets and crates of virtually any type and size. It produces pre-cut stock and sells it to other pallet manufacturing businesses, and it is engaged in brokering pallet sales.
The company is located on 30 acres and has 45,000 square feet under roof. Some of the building space is vacant, but it is available if Hamlet needs it in the future.
The front buildings on the property originally comprised an International truck dealership, and the back building was an old sawmill. When the company was in expansion mode, all the buildings were occupied. Now, operations are contained in one building.
Before Hamlet sold some of his accounts, pallet assembly operations were housed in a 17,000-square-foot building. Now he rents it to a customer as warehouse space, using some area to store pallets for the customer and other areas to sort and repair pallets.
Pallet Makers uses both hardwood and softwood material for pallets. At this point it is using more pine than ever before. “I think the inability to procure hardwoods is to blame for this,” said Hamlet. “Though we are located in the middle of the hardwood belt, they’re getting harder and harder to find.” The company buys raw material from sawmills in the Carolinas, mainly cants and low-grade lumber.
Pallet Makers has an assortment of machinery and equipment to produce pallet and crate components from cants and low-grade lumber.
Cants and lumber normally are cut to length on either a Brewer Inc.-Golden Eagle single-head cut-off saw, a Newman KM-16 multi-trim saw, or a Brewer five-head multi-trim saw. The company is equipped with three Brewer Inc.-Golden Eagle gang saws – two double-bay machines and another gang saw with a movable top arbor. Pallet Makers also has a Cornell (now Pendu) center linebar saw, a Brewer horizontal bandsaw and a Morgan double-end trim saw. Other equipment includes a West Plains double-head notching machine, two Newman notching machines and a Brewer chamfer machine.
Pallet Makers ships several truck-loads of grooved components weekly. To make this product, it starts with a 3-1/2x3 cant that is cut to length on the Brewer single-head cut-off saw. The pieces are split on the Brewer horizontal bandsaw into two pieces 1-3/4x3, and then they go through a Brewer gang saw with a dado groover to cut the groove.
The company has four tables for assembling pallets by hand. It uses Max pneumatic nailing tools and Mid Continent Magnum collated nails. Pallet Makers is equipped with a Third Man nailing machine, which in essence is a jig with pneumatic nailing tools and features a nailing gantry that moves with the aid of a counterweight. The company also assembles pallets with a Viking Champion nailing machine using Mid Continent Magnum bulk nails.
Pallet Makers is certified to supply export pallets, and for customers that need them it has an SII Dry Kilns pallet heat-treating system. The company’s heat-treating procedures are audited and certified by Carolina Inspection Services.
In the cut-up building, a pair of barn sweep conveyors collects saw dust from the gang saws. Scrap wood, like trim ends, is collected and conveyed into a top-fed Cresswood grinder. The grindings and saw dust are loaded into open-top trailer vans and sold for boiler fuel. Nothing goes to waste.
“We salvage every piece of lumber possible,” said Hamlet. “Scrap recovery is as important a manufacturing process as cutting or assembly.”
Strictly speaking, Hamlet’s company is not involved in pallet recycling. However, he buys 48x40 pallet cores that can be used again. He sells them by the truck-load to one customer.
“Sixty percent of the pallet’s cost comes from raw material,” said Hamlet. “We simply cannot waste this material or fail to use it. Wasted boards really eat into our profits.”
Pallet Makers uses the NWPCA Web-based safety training. Employees view the training materials on a computer. Tests are taken online, and the scores are stored for five years in the system.
Hamlet has little trouble finding workers when he needs them. Typically he gets new employees by word of mouth. “When word gets out that we’re hiring, prospective employees typically show up,” he said.
Hamlet handles marketing for his company. He has worked with many of his customers more than 15 years, and continues to call on new prospects regularly. He has a beneficial relationship with his competitor, too.
“I collaborate with the company that bought my customer list instead of competing against them,” he explained. “We try to work together. If I need a truck-load of machine-built pallets, I prefer to buy theses from them rather than build them. Additionally, there are specialty products that I can provide for them. What we try to do is utilize the strengths of our companies to provide total pallet solutions to the market.”
On the home front, Hamlet calls his wife, Alice, and three children “clearly the light of my life, and the people I most like to share my free time with.” He is not necessarily looking for any of his children to join the business.
Hamlet is an avid outdoorsman. He enjoys hunting and fishing and has a cabin in the Blue Ridge Mountains of North Carolina. He also is an automobile enthusiast and enjoys reading.
A graduate of the University of South Carolina, Hamlet also completed the Young Executives Institute program at the University of North Carolina-Chapel Hill. The six month program proved quite applicable to the pallet industry, he said.
Hamlet has been a member of the NWPCA since 1989. He has been especially active the past four years, serving on the board and its various committees.
“I have loved having a leadership position within the association,” he said. “It has been as instructive as any other part of the pallet industry. The staff of the association is second to none.”
Through his work with the NWPCA, Hamlet has met with leaders of the Grocery Manufacturers of America and the Refrigerated Food Marketers Institute. He’s also attended trade shows in the U.S. and around the world, helping to represent the NWPCA and its member companies.
“This is a great industry with 5,000 producers and recyclers in the U.S.,” he said. “We are an entrepreneurial industry that performs a critical service to the supply chain.”
Like other businesses, Pallet Makers is feeling the effects of the recession, noted Hamlet. “At Pallet Makers, we serve all kinds of different industries. Some are doing fine and others are not. As a group, the numbers are down. Palletization typically occurs at the point of manufacture. When the manufacturing sector of the economy declines, pallets are the first thing they stop purchasing. On the other hand, it’s the first thing they need when business improves.”
Despite the downturn in the economy, Hamlet believes it is temporary. “It’s like a big pendulum,” he said, “and we’re just at the wrong end right now. It will come back around.”
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