Redefining the Pallet Business: PALNET Offers National Interface, Local Service to Major Accounts
PALNET Interview: Michael Smith, COO of PALNET, talks about professionalism in the pallet industry and what his company is doing to change the way customers think about pallets.
By Chaille Brindley
Date Posted: 6/1/2009
It’s been tried in the past and met with limited success. But the founders of PALNET seem to have found the secret formula for offering non-rental pallets by independent companies on a national basis. PALNET started with a handful of founding companies in 2004 and has developed a network of 68 companies capable of nationwide service.
More than just a single company, PALNET resembles a nationwide cooperative of pallet companies that work together to serve large customers. This approach allows PALNET to offer local service with the shared infrastructure, professionalism and national organization required by major accounts.
Michael Smith, President of PALNET, said, “Over the last four years, we have assembled a network of companies that are the cream of the crop. We have brought a new level of professionalism to the industry. We have reinvented the pallet business from the ground up by instituting standards, accountability, transparency, innovation and honesty.”
From centralized billing and national account management to the establishment of strict procedures to ensure quality and customer responsiveness, PALNET has tried to live up to its mantra “The pallet business redefined.”
A major hurdle has been that most national pallet customers have two very distinct groups of people that must be served. First, is the corporate side that likes to deal with one national contact and runs by strict policies and detailed reports. The second side is the local contact at individual plant and distribution center locations, which wants on-time delivery, direct access to the supplier 24-7 and personal service.
Corporate and local contacts tend to speak almost different languages in terms of the level of communication required. It can be very difficult if not impossible for one local pallet company to do both well.
Michael explained, “Corporate America is very different than the local contact who works at a distribution center for a manufacturing plant…Our organization has senior level corporate experience combined with quality local management expertise that the average pallet company just can’t match.”
Measuring Performance Improves the End Result
PALNET’s approach starts with understanding customer needs and culminates with innovative solutions that focus on pallets and other not-for-sale reusable packaging material. A major focus for PALNET is the development of standards and measurements to ensure compliance by the individual companies serving various locations.
Michael said, “Customers love that we come in and spend human energy to understand their business, and we report back to them in a manual with fully documented procedures, specifications, contacts, processes, etc. There is a corporate version and a version for each of the local sites. Many of the customers have no idea what their requirements are. Now they have one manual that describes their entire pallet processes.”
The nature and function of pallet and container management has changed radically, especially in light of today’s increased emphasis on cost containment and reduction. What were once expendable shipping platforms are now accountable parts of the supply chain. When properly managed, these necessary expenses become assets that contribute to the bottom line.
One PALNET innovation is Accu-Count, a comprehensive accounting system that uses strictly enforced and monitored policies to ensure accurate pallet counts. Michael said, “It is pallet counting with accountability. No longer do customers have to count on the accuracy or attention span of the guy on the loading dock to do their counting. Our system guarantees an accurate count every time.”
Given PALNET’s 3-stage validation process, Michael claimed that most PALNET customers choose to use its counts even though customers can base the transactions off their own numbers.
Another unique service of PALNET is “Accu-Track” — an asset tracking system that allows customers to know precisely where their pallets are at any given time. It uses an online software system to provide customers 24-7 access to this information. This tool serves primarily to track shipments between PALNET and its customers although one customer is utilizing it to track pallet flows throughout its business. For extra convenience, this data is easily downloadable so that a customer can incorporate it into its own reporting tools.
PALNET’s system has a number of advantages over traditional pallet counting and tracking approaches. This includes reduced asset management costs, reduced risk of missed or inaccurate transfers, the ability to compare performance between facilities to identify best practices, and user friendly controls that can be customized to meet various customer needs and reports.
Michael commented, “One thing we obsess over is measuring our performance to ensure that our customers are confident that we will deliver on our promises… What it boils down to is professionalism. We have created a pallet business that is as professional as the customers we serve.”
PALNET’s Unique Structure
PALNET is unique in terms of the companies offering national service. It does not rent pallets. It does not own its individual member locations. The companies at the heart of its service are independently owned and managed. But they have come together for a greater good to supply accounts that they otherwise would not be able to service on a national basis.
As independent operations, PALNET’s members are close to the local customer and understand the ins and outs of the pallet business. These are local, family-owned companies that back their service with their personal touch. Yet, PALNET doesn’t just allow any company to join its network. There is a rigorous interview and inspection criteria that must be met to establish that each company can fulfill the PALNET standard for quality and customer service.
Generally, PALNET has opted to work with some of the bigger players in various markets. This ensures that orders will be processed in a fairly automated, accountable and professional manner.
PALNET is made up of its original investment group, equity owners, members who are in the process of becoming equity owners, and members without interest in equity ownership that supply a valuable service for a customer. Although PALNET has a fairly extensive network of members, the company is always looking for quality suppliers that could add to its network or provide value to the enterprise as a whole.
Even though PALNET is a separate company from its members, it works with them closely to ensure customer service: they are intimately woven together. Generally, PALNET holds the contracts, establishes the operating procedures, handles all aspects of transactional reporting and provides dynamic billing options. The individual members fulfill the orders and deliver the daily back door service. According to one member who wanted to remain nameless, PALNET has been a lot better to work with than brokers because of its level of professionalism, low overhead cost and the respect it has shown individual members by not going after their customers.
Beyond simply working together on national accounts, PALNET facilitates sharing of expertise among members and is even working on cooperative purchasing to take advantage of economies of scale. This cooperation is facilitated by its private member only web site, regular conference calls, regional meetings as well as annual meetings of its membership.
Michael explained that PALNET has worked when other similar attempts have failed because of the quality and focus of the companies involved. He said that the organizers are willing to put the collective good ahead of the individual return for one or two members while respecting that each member is its own entity with critical relationships that should not be compromised.
PALNET Products & Services
More than just a pallet company, PALNET promotes its logistical expertise and ability to improve asset management. Its member fleet has over 200 tractors and 2,800 trailers to provide efficient pallet transfer for its customers. Although capabilities may differ depending on the individual location, its network has widespread expertise. Typical solutions and services include the following:
• Used and New Pallets
•Needs Analysis and Consulting
•Pallet Management Educational
• Accu-Count and Accu-Track
•Dock Sweep and Store Pick-Up
• On-Site Sortation and Repair
• Transportation and Reverse Logistics
• Environmental Mentoring
• ISPM-15 Compliance and European Pallet Expertise
• National Heat Treating Services
PALNET aims to take are of pallet problems for customers so they don’t have to worry about them. This allows customers to focus on things other than pallets. Pam Wozniak of International Paper said, “They are just one of those companies that I don’t think about and you don’t know how good that is for me! Very rarely am I talking to PALNET.”
Turning Waste into Green
A very promising part of the business is PALNET’s expansion into recyclables beyond just pallets. Increasingly, PALNET is working with its customers to turn waste into recyclable material that has significant value if properly sorted and marketed. Michael said, “What really excites customers is the ability to handle non-for-resale recyclables, such as strapping, paper, stretch wrap, film and plastic. We have become educated in that process and are learning more every day.”
Traditionally, waste material has been treated as merely waste and not a potential revenue stream. By sorting and identifying material with higher resale value, reverse logistics shows promise to help companies boost profits in a struggling economy.
Pallet companies are the logical provider of these services because they are already familiar with the back side of customer locations where this waste material is usually processed.
Michael said, “Customers like the ability to put everything on one truck and dealing with one supplier to handle their not-for-resale recyclables.”
PALNET ensures that material which may otherwise go into a landfill gets reused.
Michael commented that more than 80% of the world’s recyclables don’t get recycled. PALNET helps to turn this material into a revenue stream, while reducing waste going into landfills. This is a plus for both the bottom line and the environment.
Our Real Value Proposition
Commenting on the pallet industry in general, Michael said, “Our industry is the most efficient logistics system anywhere in the world. It is amazing what we do on a daily basis.”
The challenge according to Michael is getting out the message. He said, “We have had difficulty pulling ourselves together as an industry to sell that benefit to the world. That is one of the things that PALNET is trying to do.”
Collaboration is a bigger part of the future according to Michael. He pointed to the inventory imbalances that customers have in terms of getting pallets to the right place at the right time. Increased cooperation even among competitors can help to improve the supply chain for everyone.
Michael believes that the benefit of the pallet industry may not always be understood by its customers. He said, “The pallet industry does things very efficiently. We are always moving packaging, effectively using backhauls, etc. We have very few empty miles, and you can’t really say that about the rest of the transportation world.”
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