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Gal Pallets Looks to Expand to Meet Israeli Market Demands
Israeli pallet manufacturer, Gal Pallets, focuses on quality and looks to expand to a new, bigger facility to meet a growing export market.

By Chaille Brindley
Date Posted: 3/1/2010

            Location, location, location. Even though Israel is a fairly small nation, about the size of New Jersey, location has been a major benefit for Gal Pallets Ltd. (www.galpallets.com), a growing pallet manufacturer serving the export market in Israel. Founded in 1987, Gal Pallets is located in the Northern part of the Industrial zone of Ashdod, the second largest port city in the country behind Haifa. Preparing for the future, Gal Pallets is looking to move into a much larger facility in nearby Sapirim industrial park in about a year.

            Yossi Ostrov, co-general manager of Gal Pallets, said, “Our strategic location provides us with inherent logistics advantage of raw material supply and efficient transportation options to provide the best service to our customers.”

            Even though Israel is much smaller in size than the United States, the high cost of fuel in Israel makes every additional kilometer traveled a major hurdle for shippers and exporters.

            Since its founding in 1987, Gal Pallets has grown to become one of the largest pallet manufacturers in the country. It serves a large number of top-notch clients including Haifa Chemicals, Dead Sea Works, Rotem Fertilizers, Periclase, Agan Chemicals, Teva Medical, Agresco and many others. The company is led by Yossi Ostrov and Daniel Levy, whose father helped start the company.

            Certified to produce the Chemical Pallet (CP) by the European Pallets Manufacturers organization, Gal Pallets has developed a large customer base in the chemical sector, which is one of the primary export markets for Israel. Like the other large, automated pallet companies in Israel, Gal Pallets serves the large export market because the domestic market is dominated by small, very localized pallet companies that manufacture or repair pallets by hand.

            In terms of pallet flows, Yossi said, “The majority of pallets are going out, only a few pallets are coming into the country.”

            Gal Pallets works closely with its customers from the early design stage to ensure that the optimal solution is chosen. There are a lot of specialty sized pallets made to supply customers with no real dominant footprint, such as the 48x40 in the U.S. market. Yossi pointed to Israel Chemical LTD as a perfect example because it uses 40 various sized pallets. The most common sizes used in Israel are 1.2 m x 1.0 meter, 1.1 m x 1.1 meter and the CPC #1&3 pallet specifications.

 

Company History

            Gal Pallets was founded in 1987 by Daniel’s father Moshe Levy and Yossi’s father-in-law Itzhak Omer. Moshe Levy passed away a few years after the business was established. Then Daniel joined the company and ran it along with Itzhak Omer until May 2005 when he retired. After Omer’s retirement, Yossi joined the company.

            Yossi’s background includes mechanical engineering and sales. Prior to joining Gal Pallets, Yossi was vice president of marketing and sales for AMACOR in Indianapolis ( recycling of magnesium metal) and the representative of Dead Sea Magnesium in North America working mainly with the die-casting industry ( car components) and aluminum smelters.

            As co-general managers, Daniel and Yossi now share the responsibilities of leading the company. Daniel is more focused on the financial and the import of raw material sides while Yossi is responsible for the sales, marketing and production aspects.

            Yossi credits the company’s success to a number of factors. He said, “I believe that throughout the years we have demonstrated a high level of quality, production capacity and service that our customers have learned to appreciate. In addition, we have a certain advantage with our raw material supplying policy due to the fact that we have been keeping long term relationships with our suppliers around the world.”

           

Upgrading the Facility

            Currently, Gal Pallets operates out of a cramped 1,500 sq. meter facility. The company plans to move into a 3,500 sq. meter building and over 10,000 sq. meter storage yard at its new location. Limited space at the existing facility requires Gal Pallets to rent land 2 km. away for some of its lumber storage.

            Yossi said, “The size of the new plant will allow us to work more efficiently. It will be a big modern plant.” The new facility should also allow the company to process long length timber that it cuts to the desired length.

            Although the company will likely add a new nailing line when it moves, Gal Pallets currently uses an old Vanderloo line for stringer production and a Bhom Kruse semi-automated system for block pallet production.

            The newest addition is a single head notcher from Baker Products. Yossi said, “The reason for buying the Baker notcher profile was a specific request from one of our customers to get better forklift entry. The Baker notch was more suitable compared to what we were able to achieve with our previous notcher.” 

            About 80% of its inventory is heat treated to comply with international plant heath regulations. Gal Pallets uses a Nardi dry kiln made in Italy to treat its pallets for export. Depending on volumes, Gal Pallets may add a heat treatment capacity at its new facility.

 

The Israeli Lumber Situation

            Obtaining lumber used to be more difficult in Israel. But Daniel, who does all the timber buying, says that it has gotten easier as lumber imports have grown.

            Daniel explained, “You can’t buy logs harvested here. There is very little forest land in Israel. Most timber comes from Eastern Europe and some from Canada.”

            Top wood sources include: Russia, Ukraine, Latvia, Canada and Astoria. Long length material, such as 16x75 cm., 16x90cm., come from Finland or Sweden.

            Pallet companies in Israel tend to buy mainly SPF with very little hardwood material. Daniel commented, “The Israel market doesn’t like hardwood because it comes wet and due to the humidity can get easily stained by mold or mildew.”

 

A Competitive Market

            Competition has increased over the years as more, small companies have entered the market. Although Israel’s export market is dominated by 5-6 large manufacturers, including Gal Pallets, small players do dapple in those areas.

            Yossi said that many small producers took advantage of the recent economic recession to try to attract new customers with low quality products. He stated, “Exporters were under financial pressure and in order to save some cost have accepted that quality. Recently, we have noticed some change and the major exporters prefer to work with major producers such as Gal Pallets that are able to provide quality products and reliable service.”

 

Quality Is the Standard

            One thing that Gal Pallets stressed is the commitment to quality and appearance that is required in Israel. Daniel stated, “Here the pallet quality standard is much higher than the American market. Worm holes, blue stain, huge knots, and wane are not acceptable in this market. We are exactly like the European market in terms of quality.”

            Yossi explained, “Here customers look at a pallet as part of the general appearance of their product.”

            That explains why only a handful of companies, including Gal Pallets, has dominated the export market. It requires a certain level of sophistication and expertise to service the export market. The two dominant export industries in Israel are fresh and processed agricultural products and chemicals. Domestic pallet requirements are much less stringent in terms of quality.

            Both block and stringer designs are used depending on the customer. Daniel added, “Block pallets are the most dominant pallet in the Israel export market because they are easy to load into cargo container. And the two-way, stringer pallet mainly goes to the chemical industry.”

 

The CHEP Effect

            CHEP, the large global pallet pooler, entered the Israeli market in 1998 and worked with Gal Pallets to establish its presence in the country. Daniel said, “CHEP grew very fast. In 2003, CHEP completely stopped doing business in Israel due to overcapacity in Europe.”

            CHEP also ran into difficulties negotiating with retailers in the country. Once CHEP left, no large pooler has returned. The majority of domestic pallets are one-way pallets designed around a variety of sizes. Even though CHEP only stayed in the market for five years, it left an impact.

            Daniel said, “One thing CHEP left here, all the agriculture exporters started to build perimeter-based designs because previous block pallets were not perimeter-based designs.” Exporters preferred this design because it was easier to load. The CHEP zero pallet was 1 meter x 1.2 meters, a perimeter-based block pallet.

 

Building on the Past

            Although the current leaders of the company were not there at its inception, they have taken over the reigns and are working to keep Gal Pallets a top producer. From marking pallets with various colors to differentiate them for customers to specialty sizes and high quality standards, Gal Pallets has worked to establish a strong reputation among exporters. 

            The Israeli market suffered just like other parts of the world due to the recent global economic downturn. However, the recession was a little milder than what has taken place in the United States and Europe. Things may be finally starting to turn around in the Middle East. Israel is just beginning to see some life come back to its two big export areas that use pallets, according to Yossi. He said, “During the last few months we could notice some improvement in the market place and the volumes have increased significantly.”

            The future of the Israeli export market is likely to include some challenges that could favor larger players who can maintain tight quality control standards. Yossi said, “Since Israel is a relatively small market and the fact that its economy relies on exports we are pretty much affected by what is happening in foreign markets and regulations and standards that prevail on those markets. I believe that gradually we will see more regulations on both production and consumption sides. We will probably see fewer pallets types and more unified pallets.”








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