Go into any pallet recycling plant and what do you see? GMAs! Ask anybody about the GMA market. All of them say the same thing. There isn't a lot of money playing the GMA game any more. So, why do we continue to focus on GMAs? Probably because we do not know a better way. Until now that is. This column will illustrate the best way to make money as a pallet recycler.

What are the rules of the GMA game? First, get the account. Then, work the account. You know that the truth is you have to find a way to make money on that account. But there is a better way than just playing the old GMA game. Consider, recons – the last frontier to make money out of pallets.

What is a recon? It is a pallet that is made from all used parts and new nails.  From my experience, recon margins run between 20% and 40%. Sounds too good to be true? It's all about the way you build and sell them.

Here is one of the most important ideas to remember. Used pallets and recon pallets have one major thing in common 'used' lumber. As long as the pallet is level and solid, it does not matter whether or not it is a used pallet or a recon pallet. Mixing your used and recons will prove to be extremely profitable.

In my years of experience, I have never seen a pallet recycling yard where scrap pallets are handled properly. From past experience, you pretty well know what to expect from an incoming load of pallets. If an incoming load typically doesn't have very many GMAs, you are likely to treat it as if it has no value. Straight to the hog it goes. Most of these decisions are made without any real examination of the load. Management's attitude is that if it is not a GMA, it has little to no value. The easiest thing to do is throw it in the hog. Anything else requires more management thought and takes more resources and more time.

I have found that recon pallets, those made totally from used lumber, can be your most profitable business. It requires that your business model looks at incoming scrap, odd-sized, and over-sized pallets in a different way. They hold the potential to turn scrap into your most profitable business.

Having doubts? As I said earlier, it is all about the way you build and sell. First, a recon pallet must be level, almost as good as new. No exceptions. This way, when you approach a new pallet buyer, you can show him a pallet that will not only work for him, but it only costs about two-thirds as much as he is paying for a new one. If you are building with used lumber, your pallet has to be level. They have to be level individually and have to stack nicely, just like new. How do you accomplish this?

First, you have to manage your scrap. A recycler cannot afford to buy new wood for pallet repairs and for building recons. You make money from your lumber if you can retrieve it and use it profitably. Used and scrap lumber should not automatically be hogged. Dismantled pallets produce plenty of useable lumber. The trick is to sort it according to thickness so you can use it to build and repair pallets. You have to control decking thickness in order to build level pallets. You need to choose pallets to tear up according to the number of boards and runners it will yield. You should be thinking "where can I use these boards?"

Keep in mind that if you are building thinner deck hardwood shipping pallets, you could offer thicker level lumber for less money than buying new material. So, you might use 5/8" or 3/4" used lumber instead of �"new lumber. You can give a customer used material for the same or less money, and they get a stronger pallet. How can he say no? For example, look at a 40" square with six boards on the top and three on the bottom and 1-1/4" stringers. New this pallet might sell for $8.00 with $0.80 profit. A recon might sell for $6.00 with a profit of $1.80. It's all about the wood. You cannot tell used pallets from recon pallets. Remember, it's all used!!!

Used and recons are basically the same. If you have some used pallets that fit a customer's needs, you can complete the order with recons. They all look the same to a customer because they all contain used lumber. Sell a customer on recons. You can get a recon price for both the used and the recons.

Most shops worry about the 40s for their GMAs and try to use everything left over on odds or combos. What often happens is they end up sorting the same wood over and over, trying to get level pallets. Some try to achieve uniform thickness with a machine, requiring even more handling and machining. Look at your lumber situation in a different way. Sort your lumber off a conveyor. With pallets we teach one touch or we loose money, why not the same idea on our wood? If all your wood is sorted according to thickness, just think of the possibilities. Clean whitewood could possibly be used on the bottom of new pallets or to built recons or great combos.

Consider all your 3/4" or 11/16" softwood boards. You have a lot of it. You can't use them on level GMAs, making them unstable. I used to build combo GMAs with new stringers and used 3/4" softwood decking. In 1994, we sold each pallet for $6.75. We picked up a new pallet customer from a competitor who had charged $8.50 for a new �" pallet. In addition, we received all of their used odd pallets for free.

Your dismantlers can produce 30% more material with the same people by sending all the parts down a conveyor, not stacking wood at the dismantlers. For example, assume you have three dismantlers dumping on one 50 foot conveyor with two people sorting and a trim saw at the end cutting 40s. Now we have two more people sorting wood. The trim saw is a wash; it's going to run anyway. Your dismantlers process 30% more; it's like a free saw without the expense; so you're even.

One wood sorter can handle the stringers. He can rack and stack by needs like thickness and height, and of course notched or unnotched. Short notches and some scrap can be sent to a chop saw to make half stringers for GMA repairs. I didn't include a chop saw in this analysis because there would not be enough volume to keep it running.

The second sorter would handle all the boards, pulling all 3/4" white woods or whatever you need for recons or combos and send short wood and scrap to be disposed of by means such as a hog, fire, or dumpsters. Whatever is left will travel to the trimsaw to be cut to 40". You will take advantage of this option only if you start looking at your scrap loads like you do your GMA loads. By keeping a little paper work, you can know what's in your scrap loads. For example, if you know a load is 90% �"and 5/8", you can pull one wood sorter and have him cut half stringers for that load and let the boards go to the trim saw. If a load is all short scrap, it can go straight to the hog. There are many possibilities.

If you know that a trailer is full of clean 5/8" mats, you can save it for a picky customer. Pull two sorters and let it go to the trim saw to be cut.

I know pallet shops around the country that say they never have enough 40” wood. When I look around their yards, they are hogging all kinds of material that could have been used. Management needs to spend time managing scrap instead of disposal. If you work the scrap, you can reap gold from material that for years served as mulch on your yard.

Go into this like you did GMAs when you started. Match your scrap to your accounts. With your GMAs, you know where to send softwoods and light GMAs. If your salesmen know how to price new pallets, they can price recons. Recons sell for 3/4s of the price for a new pallet. Your salesmen have to look over their territories and examine opportunities to go after certain types of scrap.

You may have stayed away from thicker and longer pallets. With recons you don't care. You can go after larger pallets if you can profit from them. You have to change your sales commission mentality from GMAs and new; this can be challenging if you pay a percentage of the total price. Your salesman is going to want the same amount for selling a recon that he would for a new pallet. We are in the junk business. We take scrap and make it into something useful. At a metal scrap yard, they don't mix copper and aluminum. They sort off of conveyors. We need to do the same thing.

Every recycler needs to understand that if scrap is left to your workers, they will take the easiest way out and send it to the hog - every time!

Clarence Leising is available for consulting. He is the author of Pallet Head, the first pallet recycling handbook ever written. While it is out of print until we can prepare a revised edition, the original is still available digitally for $24.95 and on CD for $34.95. Contact Clarence at 615/415-6781 for consulting advice. Contact the Pallet Enterprise at 804/550-0323 to order your digital copy of Pallet Head.