Schaefer Box & Pallet Mixes Experience with Innovation
Schaefer makes major changes by becoming employee owned and instituting a new JIT inventory system.
By Diane Calabrese
Date Posted: 10/1/1999
HAMILTON, Ohio — Experience counts. Innovation matters. Mix the two and expect continuous improvement. Stan Schaefer does.
Stan is chief executive officer of Schaefer Box and Pallet Company, which is located in greater Cincinnati. He has spent 30 years in the custom pallet, box and crate business. The three decades provide a solid foundation for cutting edge approaches to management. Stan uses his experience accordingly as he strives for better and better results — continuous improvement.
During the last two years alone, Schaefer Box and Pallet made two big changes. Employee ownership was one. Signal (card) coding of pallet components — called the Kanban system, a scheme that meshes with just-in-time production — is another.
Manufacturing accounts for 20% of the economy in the greater Cincinnati area, a population center that spans two states, Ohio and Kentucky. The Ohio River bisects the metropolitan region in which about 1.5 million people live.
Since its beginning in 1968, Schaefer Box and Pallet has focused on designing and building custom pallets, boxes and crates. Pallets — the company manufactures about 1,200 per day — account for 70% of output.
Frank Schaefer, Stan’s father, started the company and Stan has been involved from the inception. Stan became part owner in 1978 and began running the business. He eventually became full owner.
Schaefer Box and Pallet introduced an employee stock option plan in 1998 and became an employee-owned company with Stan retaining 65% ownership. The organizational structure means there are 19 employee-owners among the 26 full-time and three part-time workers. A worker is eligible to participate in the plan after being employed full-time for one year.
Employee-owners have high expectations for one another. In addition to learning exacting job skills, they are cross-trained to provide more flexibility to the company’s operations.
"We have a high turn-over in the first three months of employment," said Stan, noting that it is not easy for newcomers to meet the multiple demands. The work is hard and "we only keep the best." Those who make it past three months usually stay with the company a long time.
Schaefer Box and Pallet’s operations are contained in two 9,000-square-foot buildings on a 10-acre site.
The company purchases mainly cants for raw material. Cants are bought from sawmills in Ohio, Indiana, Kentucky and West Virginia; Eastern hardwoods are the dominant species. The company also buys some Southern yellow pine, Eastern spruce pine fir and Western pine material.
The cants are cut to size on a Brewer Inc. cut-up line, and the sized material feeds directly to a Brewer Inc. double arbor gang saw. Stringer material is notched on a Kenwel-Jackson double-head notcher. Deck boards that require chamfering are put through a Brewer Inc. chamfering machine. The company also is equipped with a Whirlwind pop-up saw, a Clary E-Z saw, a swing saw and two table saws for small production runs.
For automated pallet assembly, the company has a Viking Duo-Matic nailing machine. Pallets assembled by hand are built at eight tables by workers using Duo-Fast or Stanley-Bostitch nailing tools. "We have two tables in operation almost all the time," said Stan. "The number depends on what we are making. The two guys that run the Viking can move to assembly tables."
Schaefer Box and Pallet personnel service all the machines, which have held up well. "We haven’t bought too much lately," said Stan. "The equipment lasts a long time because we do custom work."
"It’s not unusual to do one custom item at a time," said Stan. Customers are willing to pay more because they want a pallet built precisely to their specifications.
"We do not compete with high volume GMA producers," he said. "Our niche is custom pallets and boxes with an emphasis on quality and service." Schaefer Box and Pallet makes a wide range of pallet sizes. Some unusual sizes include 24x24 and a 20-foot pallet that requires 6x6 stringers.
Boxes and crates also span quite a wide range of sizes. "On the larger side, we made a couple boxes — 17 feet by 8 feet by 9 feet — for carbon dioxide liquid storage vessels...for shipment to South America," said Stan.
Exhibitor display boxes that are easily opened and repacked at trade shows and expositions are also a part of the company’s container business. Manufacturers and industrial sites are among the company’s key customers.
Schaefer Box and Pallet supplies a small volume of GMA pallets; it sells them, typically in small lots of about 50, as a service to customers. But Stan emphasized, "Our niche is custom products. Their (GMA pallet makers’) niche is standard products. We don’t try to compete" with them.
Schaefer Box and Pallet uses the Pallet Design System (PDS), the computer program developed by the National Wooden Pallet and Container Association and the Virginia Tech pallet and container laboratory, for most common designs. An in-house designer tackles unusual ones. "Tim Runck does the design of items that fall outside what the PDS can do," said Stan. Runck’s efforts contribute to the company’s growing database of designs. "Once we have got the design in the computer," explained Stan, "it’s possible for others besides Tim to change the dimensions – width, depth, height – and quantity, and to come up with the proper design."
Schaefer Box and Pallet has a small fleet of trucks to deliver its products, three tractor-trailers and three flatbeds. The company employs three full-time truck drivers.
Sharing information with employees and delegating to them decisions is a top priority for Stan. "We give our employees as much information as we can," he said. "They know very much what the schedule will be. For example, our gang saw operator has the full schedule one week out." The information helps machinery operators decide what to cut and when.
Schaefer Box and Pallet also has an active suggestion program. In the past year, the company implemented over 60 suggestions from employees.
The company tries to minimize waste. "The first thing we do is to try to have as little waste as possible," said Stan. "We only deal with quality sawmills. Then, the gang saw operator cuts up to four different sizes at the same time to maximize the use of each piece." Scrap generated at the cut-up line or the gang saw is sold for firewood. Sawdust is sold for horse bedding. Culled deck boards or stringers are hauled away by a company that grinds scrap wood into mulch.
Stan studied business in college, left school to become a carpenter, and later entered the wood products business. He’s never stopped learning and is a keen observer of the industry. (Stan considers the introduction of the gang saw the most significant innovation in his 31 years in the pallet industry.) He continues to study formally: he takes advantage of educational programs of the NWPCA and classes offered by Ohio institutions of higher education. For example, he studied total quality management through an NWPCA program. He also is an avid reader of business books.
Stan is also enthusiastic about experiential learning. An idea he saw in action at a visit earlier this year at Cincinnati-based Senco Inc., a manufacturer of power nailing tools, has resulted in some dramatic changes at Schaefer Box and Pallet. It was at Senco — which won an America’s Best Plants award from Industry Week in 1997 — where Stan saw the Kanban system in operation. He adopted it to enhance production at Schaefer Box and Pallet.
Japanese auto maker Toyota introduced Kanban, a manual method of signaling a preceding station in a production line as to how many components should be made. In the Kanban system, the signaling is done with cards. It is an inexpensive way to keep just-in-time production running at top efficiency by reducing waiting time, counting, and inventory. The essence of the Kanban system is to produce only what is needed, when it is needed. Inventory is considered waste because it ties up capital and takes up space.
"We converted 26 of our most frequently built pallets to a Kanban inventory system," said Stan. "We no longer count boards." The 3x9 cards hang on hooks by the gang saw and indicate how much material to cut and how to cut it. As sawn material exits the gang saw, the cards are attached to each pallet of cut material. "Kanban cards indicate the grade of lumber, the size, the quantity, and the storage location," said Stan. "We cut until we run out of cards." Kanban eliminates a lot of counting and calculating, and it has achieved outstanding results for Schaefer Box and Pallet. Another practice that helps eliminate counting and calculating is the use of wall charts that specify how workers are to stack finished pallet parts.
The beauty of the Kanban system is that it can extend beyond the production line to suppliers. Kanban can be expanded to order materials from suppliers, and in finely integrated purchasing schemes, companies can send cards to suppliers to order what they need.
Schaefer Box and Pallet decided to make the Kanban cards from Masonite although they may be purchased.
Stan began implementing the Kanban system just this year but already is pleased with the progress. It is just one facet of his focus on continuous improvement.
Stan has been able to devote more of his attention to novel management methods because president Joe Spitzmiller has been supervising operations on a day-to-day basis. "It has freed my time to work on the business instead of in the business," said Stan.
Joe previously worked as a controller for two different companies, including 21 years with an international materials handling company. He had extensive experience in management, accounting and computers. After joining Schaefer Box and Pallet as finance manager four years ago, Joe was elevated to president. His duties are those of a general manager; he oversees all aspects of the business. Middle managers in charge of operations, manufacturing, sales, and maintenance report to him.
Stan and Joe have been friends for about 20 years and were drawn together when their daughters played on some of the same athletic teams. Joe has had an association with Schaefer Box and Pallet that began about 10 years ago when he set up the company’s computer system and computerized accounting.
Stan also singled out the efforts of sales manager Dude Harper. "In a business such as ours, it is extremely important to provide face-to-face customer service," he said. Dude gives that kind of service. For top customers Dude takes an inventory of their pallets, an idea the company picked up from a business speaker at an NWPCA gathering.
Besides introducing the Kanban system at Schaefer Box and Pallet, Stan used some of his time to restructure the company and develop the employee stock option plan. "The (plan) has tax advantages for myself and the company," he said. "And it’s been encouraged by the government for employees to become employee-owners." A bank loan enabled a leveraged employee buy-in, so workers did not have to put up cash to buy stock.
Schaefer Box and Pallet employees work five 10-hour days and have weekends off. The company pays bonuses if profit goals are met. "We offer 10 percent at the end of each quarter," said Stan. "Either everybody gets (the bonus) or nobody gets it. It’s a team thing."
Stan instills in employees the importance of customer satisfaction. "I want employees to understand the customer," he said. Understanding the customer is the start of the process that ends with customer satisfaction.
The combination of employee-owners and innovation results in "99.3% on-time delivery rate,"according to Stan. First and foremost, he credited the company’s workers. "We have dedicated employee-owners," he said.
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