Productivity of employees, labor costs, and the availability of capital head a list of factors that will impact whether pallet companies in the Southeast may expand production capacity, according to a new survey.

The factors ranked most important, were, in order, labor productivity, labor costs, the availability of capital, workers’ compensation, and proximity to raw materials.

The purpose of the study, conducted by the Louisiana State University Agricultural Center, was to characterize the pallet industry in the Southeast and to provide competitive information to pallet manufacturers.

Surveys were mailed to 599 pallet manufacturers in 11 states: Arkansas, Louisiana, Mississippi, Tennessee, Alabama, Georgia, Florida, South Carolina, North Carolina, Kentucky, and Virginia. One hundred and forty-six companies responded.

Asked to evaluate reasons for success, most companies emphasized customers, product quality, and their own reputation. Assessing which reasons were "very important," more than 85% of the respondents identified long-term customer relationships. Eighty-four percent singled out company reputation, and 82% identified product quality. The other reason that drew the most response was customer service, 77%.

Companies that participated in the survey generally were larger businesses; 58% had gross sales of $1 million or more in 1998. Another 21% reported sales from $500,000 to $1 million.

The majority of the companies manufacture hardwood pallets (77%) as opposed to pine (22%). The average volume of raw material used was 1.2 million board feet of oak, 1.3 million board feet of other hardwoods, and 579,000 board feet of pine. The majority (63%) purchased raw materials from sawmills not owned by their company.

"The ability to recruit and maintain a quality workforce, as well as motivating that workforce, are challenges the industry will face well into the future," the study’s authors wrote.

Despite facing challenges, "the pallet industry is prepared to expand and adapt to an ever-changing marketplace in the 21st century. Producers expect to hire more employees in the next five years. They also expect to purchase more equipment, particularly equipment that will help them produce pallets more efficiently and utilize recycled material."

The pallet industry "is optimistic about future growth opportunities, as long as there is a viable work force and the capital available" to take advantage of expanding or emerging markets.

The authors of the study were Michael Dunn, forest economist with the Louisiana Cooperative Extension Service, Richard Vlosky and Todd Shupe, associate professor and assistant professor, respectively, of the school of forestry, wildlife and fisheries.

For more information about the study, call Dunn at (225) 388-2373 or e-mail at mdunn@agctr.lsu.edu.