PORTLAND, Oregon — In an industry known for stiff — sometimes cut-throat — competition, Precision Wood Products has demonstrated the ability to survive and prosper. It has adjusted to market vagaries and remained profitable for more than four decades, during which time many competitors have come and gone.

            The keys to its success have been an emphasis on customer service, a balanced approach to equipment and financial risk, and a policy of tangibly rewarding loyal employees, according to company vice president Marley Petersen Jr., whose father founded the company in 1964.

            “A delicate balancing act is required to profitably manufacture pallets over the long term,” said Marley. “It has not always been easy, but we have been, and remain, committed to this business and those we serve.”

            Tim Darrow, a Precision employee for 35 years, is the company’s only supervisor. “Customer service is not a passive motto for us,” said Tim, “but is truly the major factor in every decision we make. We understand that offering good customer service requires long-term retention of skilled employees and having equipment that performs to the standards we insist upon. With that base to rely on, we can make it easy, pleasant and profitable for our customers to do business with us.”

Compound Challenges

            Precision has adjusted to two major transitions in recent years. In 2005, with real estate values escalating because of the expansion of nearby cities, Precision decided to lease its six acre facility to a lumber mill that needed more room. Relocating the pallet operation to a smaller site (three acres) required streamlining the company’s equipment mix and instituting close inventory management of raw materials and finished pallets.

            The second change was in family leadership. When Marley’s father anticipated retiring, some were concerned the company would simply dissolve. Instead, Marley took control of the reins, and the company continues to flourish.

            “Everyone respected Marley Petersen Sr. for his business savvy and is grateful for the opportunities he made available to them,” said Tim. “When Marley Jr. stepped up to lead the business, the employees demonstrated commitment to the company’s continuing success, and they’ve been rewarded in turn by ownership’s commitment to the firm.”

            Precision began manufacturing pallets in 1964. At the time it used FMC nailing machines as it filled military contracts for pallets during the war in Viet Nam. At the company’s peak, it employed 100 people and produced 80,000 pallets a month for the military in addition to pallets for regular customers.

            When the war ended, business with the military shriveled up. Precision’s management team learned a lesson that still informs the company’s approach to doing business, according to Tim.

            “Having a major customer can be great,” he said, “but when they are lost, it can be devastating.” Today the company goes to lengths to ensure that no single customer comprises more than 20% of its business.

Three Leg Approach

            Precision has been successful because it focuses on three things, said Tim: customer service, balancing equipment and financial risk, and rewarding loyal employees.

            The Precision staff makes weekly calls to customers to check on their inventory of pallets. This helps minimize rush orders. It also gives Precision advance notice if a customer decides to buy pallets from another supplier.

            “Even when that happens,” Tim explained, “we want to stay in touch. We assure the customer we are here for the long run and are ready and willing to serve them again if their new arrangement does not work well.”

            Competition is part of the business in the pallet industry, Tim acknowledged. There is a certain ebb and flow as customers occasionally move between different pallet suppliers.

            “It is just part of the industry to lose customers to other manufacturers,” he said. “Some manufacturers cut corners on materials, hire illegal immigrants and pay low wages. We don’t, so sometimes we might seem to be at a competitive disadvantage. We’re not willing to give pallets away just to get customers. When a customer does decide to change, it is our goal to part on good terms, assuring them we will be here if they need us in the future.”

            Precision’s ability to provide strong customer service and quality products is closely linked to having employees who are dedicated, skilled and experienced. “Many of our employees have been with the company for over 20 years,” said Tim. “Even though we moved the business across the state line, adding a commute through sometimes snarled Portland traffic, all but one employee made the move.”

            Precision pays higher wages, and it provides medical insurance and dental insurance and up to three weeks of vacation. Those benefits provide returns in the long run because Precision benefits from having dedicated employees who do their job well and need minimal supervision, said Marley.

            “Because our employees are self-motivated, we only need one supervisor,” said Marley. “Tim does the purchasing as well as overseeing the whole operation. The money other companies spend to pay additional supervisors, we can use to pay to our employees a little more.”

            He continued, “I know companies with low wages and few benefits that have lower labor costs than we do, but they ultimately spend more money because of labor disputes, more workers compensation claims, higher insurance premiums, retraining employee and employing more supervisors.”

            When Precision hires a new employee, it chooses someone who has demonstrated skills, reliability and character while working for the company as a temporary employee through an employment agency.

Equipment, Machinery

            Technology is the third area of emphasis for Precision. Marley seeks to strike a balance in equipment by controlling costs without under-investing.

            “We use equipment that provides the benefits of modern technology so we can be competitive, but we avoid being over-extended, so when the market weakens we can still operate and pay the bills,” said Marley.

            The company has two Viking automated pallet assembly systems. A 1980s-era Viking Duomatic is used to assemble runs of 1,000 or more pallets.  For shorter runs the company relies on a 1995 Viking Turbo 504, a programmable system that accommodates up to 220 different sizes.

            Orders for custom pallets are assembled manually by one full-time employee aided by temporary employees who work a few days per week.

            Precision buys bulk nails from Viking, Mid-Continent and Tree Island and buys Stanley-Bostitch collated nails.

            An important key to pallet quality and controlling costs is the ability to remanufacture cants and lumber into precise pallet components. To hold down costs the company prefers to buy cants. It normally buys red alder cants 4 inches thick, random width and 8-10 feet long and also purchases mixed Spruce, Pine & Fir (SPF) 2x4 and 2x6 lumber in 8-20-foot lengths.

            Precision’s move to a new location half the size of its former plant played a big part in how cants and lumber are remanufactured. The move reduced storage space by 75%, and it forced the company to evaluate every piece of equipment and get rid of machines that were unnecessary, inefficient or took too much space.  Precision’s millwright, Steve Hansen, has 40 years of experience with pallet equipment. His insight into what equipment was best suited for the new location was a key, according to Tim.

            In making the move, Precision installed two AWMV multi-head bandsaw lines (a four-head and a two-head), an L-M Equipment (US) package saw and a TigerStop TigerSaw laser-equipped crosscut saw system.

Cut-Up Operations

            Cut-up operations are normally conducted on two shifts. Raw material arriving by truck is unloaded and stacked in a staging area at the east end of the facility. Each day a lumber piece count is made for the next day’s orders, and the necessary raw materials are selected and staged.

            Packaged lumber is cut to length using the L-M Equipment package saw while the high speed TigerSaw cross-cut saw is used for other lumber. The L-M Equipment package saw cuts entire bundles of lumber with speed and precision, said Tim. The company recouped its investment in the TigerSaw in five months, according to Marley, because of faster production and reduced miscuts.

            Once cut to the right length, the AWMV bandsaw machines resaw the material to proper thickness for deck boards or stringers. Cants or lumber requiring fewer cuts are resawn on the AWMV two-head bandsaw while thicker material is run through the AWMV four-head resaw, which produces as many as five deck boards in a single pass. A pneumatic kicker sends remaining cant portions to an automatic return system on the four-head machine and back to the resaw infeed. A Pallet Machinery Group (formerly G. Wine Sales) ML2 stacker automatically stacks finished components, and the pallet parts are stacked and banded for movement to the pallet assembly area.

            The AWMV machines allow high production in a very small space, noted Tim, and the blades can be changed in minutes and easily and inexpensively resharpened.

            On the AWMV bandsaws, the company runs Wood-Mizer 1-1/4-inch blades with a .035-inch kerf. The thin-kerf bandsaws also have enabled the company to increase yield. Increased yield from the same raw material means less cost per pallet.

            Resawing with the machines is efficient, too. “A couple of guys can turn out a lot of lumber in a short time,” said Marley, “and that reduces costs as well.”

            For notching stringers, the company has a West Plains model 100 double-head notcher. The notching heads are supplied by Econotool.

            Each day pallets are assembled first to fill immediate orders. Then Precision’s crew turns its attention to assembling standard pallets to replenish inventories. Machine-nailed pallets are automatically stamped and stacked; pallets assembled manually are stenciled and stacked by hand. Finished pallets are moved onto trucks, put into inventory, or taken to the company’s Marshall & Henderson heat-treating system. Production averages about 2,500 pallets per day, and about half of them are 40x48. The company makes deliveries with a pair of Volvo semi-tractors and a 26-foot flatbed truck.

            Precision uses the Pallet Design System computer software to design pallets that are engineered for specific customer needs and applications.

            The company’s heat-treating system can heat-treat up to 440 pallets. The heat-treating process takes about two or three hours – until a probe inserted in the center of a stringer reaches 134 degrees. The heat-treating process, using propane for fuel, is computer controlled, and the system makes digital records during heat-treating. The computer system issues an audible alarm to signal when the process is finished.

            Having been in business over 40 years, Precision Wood Products is no stranger to the trials that come with market swings, economic slowdowns and other challenges to the business. Marley and Tim are optimistic that Precision’s approach to doing business will continue to serve the company well.