CHICAGO – If you want to grow your business, you cannot invest soon enough in good employees and good equipment.

That is a lesson 25 years in the making for Walter Pollack, president of Northwest Pallet Supply.

Walter started a pallet recycling business in the Chicago area more than 25 years ago, and Northwest Pallet enjoyed steady, incremental growth. The business eventually expanded to two locations and by 1997 reached $4 million in annual sales. Most sales, however, were generated by word of mouth as new customers called or came to the company to order pallets.

In 1997, Walter began a series of key hiring decisions, including the company’s first full-time salesman. The impact on the company was dramatic, and business grew exponentially. Northwest, now with four employees working in sales, has annual revenues of $25 million, according to sales manager Jim Riff.

Walter previously was reluctant to hire administrative and sales personnel, he admitted. "It’s very difficult to hire office staff, like an office manager and sales personnel, because in one sense they are unproductive."

In retrospect, though, the people he hired strongly benefitted the business. "The better people you hire," said Walter, "and the sooner you hire them, and the better equipment you buy, the better off your business will be."

Northwest Pallet Supply remains predominantly a pallet recycling business with about 80% of sales coming from recycled pallets. The company expanded into new pallet production, however, and also produces natural mulch and colored mulch.

Today the company’s operations consist of three facilities near Chicago: its main recycling plant, a second recycling plant organized as an affiliated business, and a sawmill that produces cut stock for the company’s pallet manufacturing operations. The sawmill also houses most of the company’s pallet manufacturing business. The combined operations employ over 200 people.

The main recycling plant is a new, state-of-the-art facility equipped with a high-volume automated sort and repair line supplied by Industrial Resources. For automated pallet assembly, Northwest relies heavily on Viking Engineering with five Viking nailing machines.

In addition to the 80% of revenues generated by sales of recycled pallets, about 18% comes from sales of new pallets. The remaining revenues are derived from mulch sales.

Northwest deals in over 100 pallet sizes, estimated plant manager Brian Pollack, although it is heavily in the GMA market. The company prefers to do business in truck-load quantities, and in fact about 95% of orders are for truck-load quantities. Northwest inventories pallets for customers and provides pallet remanufacturing services for customers.

The company’s customers represent such industries as food and grocery, automotive, and "nuts and bolts" manufacturing businesses, said Brian. Although its principal market area is the Mid-West, Northwest ships and receives pallets to and from the entire country.

Walter, 53, a Chicago native educated in business management, worked in management for a meat packing company when he saw an opportunity to enter the pallet recycling business in 1977. Unlike many other entrepreneurs who began building or recycling pallets in their spare time, Walter resigned his job to begin working in his business full-time.

Prior to the late 1970s, Walter recalled, new GMA pallets sold in a range of under $4. But with inflation in the late 1960s and early 1970s, lumber prices increased along with price of new GMA pallets. The rising prices created a niche for recycling used GMA pallets. "I just saw that opportunity kind of blossoming," said Walter. When he started his pallet recycling business there were only about 10 other pallet recycling businesses in the Chicago area. Today there are about 450, he estimated.

"We started small," said Walter. His initial investment was about $40,000 plus a year’s worth of his labor. He leased a building in Elk Grove Village, a community on the northwest edge of Chicago, on a site near O’Hare International Airport and invested in two Rogers un-nailers to dismantle pallets. He hired one truck driver and three men to repair pallets. Walter obtained loads of miscellaneous pallets. He and his crew disassembled odd-sized or bad pallets and recycled the lumber for repairing GMA pallets.

It took nearly a year to grow the business enough to develop good cash flow. Walter did not pay himself a salary during that start-up phase. "Around Thanksgiving, my wife asked me for money to buy Christmas presents for our kids," he recalled. The couple virtually had no money left in their checking account. That was when Walter began paying himself. "It was a lean year," he said. "There’s no doubt about it." By the end of the first year, Walter had about 15 men working for him, repairing pallets.

Walter opened up a second facility in Marengo, about 25 miles further west, in 1982. "What we tried to do was expand our sales area" by adding a second location, he explained. With the opening of the second recycling plant, the company invested in additional machinery to take advantage of the economies and efficiencies they could provide. The company equipped the Marengo shop with four Industrial Resources disc-type dismantlers and four Smart Products band saw dismantlers. Walter invested in a Viking Champion nailing machine in 1988 so the company could produce new pallets although the machine was used to assemble both pallets of new and used lumber.

With two locations, Walter began focusing more on management. "We hired young, smart managers – people that have ‘steam.’ They are progressive in their management style and have a good work ethic."

In 1993 Walter purchased a sawmill business out of bankruptcy. When the opportunity arose, Walter and his management team did a critical analysis of the investment and the possible return. The company had been brokering sales of new pallets for several years to take care of customers who required an increasing volume of new pallets. The acquisition of the sawmill, located in Alden, about 50 miles northwest of Chicago and near the northern Illinois border, ensured Northwest a steady supply of components to manufacture new pallets. "That helped propel us," said Walter. "A lot of customers were starting to develop a need for new pallets."

At the time it was purchased, the sawmill produced about 10,000 board feet of lumber per week. With improvements in machinery, the mill now cuts about 125,000 board feet of pallet stock per week. All the pallet stock produced by the sawmill is used by Northwest in its new pallet assembling operations.

The company made several machinery additions to the sawmill. Two gang saws – one supplied by Cornel and one from Sherman – were installed along with two Baker Products horizontal band saw lines, a six-head line a three-head line. The company also added dedusting equipment from Froedge Machine & Supply Co. to eliminate sawdust build-up, which can freeze in the cold Illinois winters.

The sawmill, which does not produce any grade lumber, buys low-grade hardwood logs that are 12 to 24 inches in diameter and range from 8 to 16 feet long. Logs are not debarked because the bark is essential to making high quality hardwood mulch, according to Walter.

Logs are broken down on a Corley head rig that removes 4-inch and 6-inch slabs to square up the logs. The slabs are routed to Sherman and Corley edgers to be processed into four-sided cants. The cants are conveyed to a Corley chop saw to be cut to length, and the resulting pieces are directed to either the gang saws or the band saws for resawing. Stringers are cut on the gang saws and deck boards are cut on the band saw lines.

The cut-up operations also are equipped with two machines from Morgan Saw Co., a double-head notcher and a chamfer. Northwest uses two suppliers for the cutting tools on the notcher: the heads are supplied by Econotool and the tips, from Profile Technology.

The sawmill facility also has space for pallet assembly operations and is equipped with two Viking Champion nailing machines and a Viking Duomatic nailing machine. The nailing machines are operated on two shifts. Orders for 100 new pallets or less are assembled by hand at two benches with Bostitch power nailing tools.

The sawmill employs about 65 workers, which includes the pallet assembly operations, mulch production, truck drivers and officer staff, and is supported by a fleet of 10 trucks for hauling logs and delivering pallets and mulch.

Northwest added an eight-man Industrial Resources automated repair line to its Marengo plant in 1997 to become more efficient. Just four years later it expanded the Industrial Resources system to a 16-man line when Northwest relocated its Marengo plant to Belvidere, located about 70 miles northwest from the heart of Chicago. The move last fall into the 125,000-square-foot facility gave Northwest the space to allow the company to expand its business significantly, and the investment already is paying off. "The building is really catapulting our business," said Walter.

The move to Belvidere was prompted by two considerations. One, the company was outgrowing its location at Marengo, and the Belvidere site would provide it with plenty of room. Second, Northwest was offered considerable financial incentives from the state and local governments to relocate. The site was in an Enterprise Zone, and Northwest was eligible for a low-interest loan from the state to purchase the property and also tax advantages for hiring workers. Walter and his managers analyzed the incentives. Even though the property cost more, the incentives made the move economically attractive.

Walter also credited his bank with making possible the expansion to Belvidere. Harris Bank’s Ted Hardison was instrumental in providing financing for the building and equipment. "They showed us what we could do and have done a great job for us," said Walter.

Northwest typically strives to supply its customers from the incoming pallets it processes and recycles on a daily basis. If there is a dip in the number of incoming pallets, however, the company keeps a substantial inventory – about 50,000 – of cores.

The company’s Belvidere recycling facility has 20 dock doors -- 10 each on opposite sides of the building. Incoming pallets are unloaded and brought directly to the Industrial Resources line, recycled, then loaded onto trucks at docks on the other side.

The Industrial Resources automated repair line produces about 15,000 pallets daily. It consists of two separate lines with eight benches or work stations for each. Two tippers feed pallets to each line. Each line also is equipped with two lead-board clippers to remove broken leading deck boards. With a two-tiered conveyor system, incoming pallets move on the top conveyor to the benches while finished pallets are slid onto the bottom conveyor to be moved to stackers. One man works at each bench. (Workers performing pallet repairs are paid an hourly wage, like other workers.)

Repair workers put a bar code label on each finished pallet. The bar code label identifies the pallet as a No. 1, No. 2 or No. 3 and also identifies the bench number. A scanner down the line ‘reads’ the bar code label, capturing the data and allowing the pallet to be directed automatically to the appropriate stacker.

Wayne Kerrigan, formerly of Industrial Resources, was instrumental in designing and installing the recycling line, said Walter.

Northwest uses all recycled lumber for pallet repairs, so pallet dismantling and lumber recovery are critical aspects of the company’s operations. For recycling lumber the plant is equipped with six Industrial Resources Pass-One disc-type dismantlers and six Smart Products band saw dismantlers. Three Morgan Saw Co. double-end trim saws cut recycled lumber to correct length.

The Belvidere plant is equipped with another Viking Champion nailing machine and also a GBN nailing machine. Like the nailing machines at the sawmill and the automated repair line, the Viking and GBN machines at Belvidere are operated on two shifts. They assemble pallets of both new and recycled lumber.

About 120 employees work at the Belvidere plant, which is supported by a fleet of 12 tractors and 400 trailers.

The recycling operations at Elk Grove Village moved about 20 miles further west to Elgin in 1998 and organized as a separate company, Central Pallet Supply, which is managed by Harold Barnhill.

Residuals also are an important part of the company’s business. Within a year or two after acquiring the sawmill, Northwest added a Morbark Model 1300 heavy duty tub grinder. The Morbark machine is stationed at the sawmill to process waste wood material into natural mulch.

The latest machinery addition to Northwest’s mulch operations is a Rotochopper, which is stationed at the Belvidere plant. The Rotochopper grinds junk pallets and wood scraps and colors the wood fiber in one pass to produce colored mulch. "It’s a great machine," said Walter. Northwest uses Becker Underwood colorant in its mulch coloring operations.

The company sells about 150,000 cubic yards of mulch annually. It is marketed and sold wholesale to landscape businesses and contractors.

In addition to assembling a good management team, Walter attributed the company’s success to a willingness to scrutinize and question the way Northwest does business. "We are constantly analyzing what we do," he explained. "And we are constantly upgrading our processes. We feel we have a very innovative and bright management team here. They’re aggressive.

"We have a lot of fun on our team here," he added. "We come to work every day, and we enjoy it. We like bouncing ideas off each other."

A son, Brian, oversees the recycling operations. Another son, Walter, supervises transportation. A son-in-law, Mat Porter, directs the mulch operations. Other key employees include sales manager Jim Riff, production manager Terry Hatfield, chief financial officer Joe Keenan, office manager Jan Sisk, and sawmill managers Todd Hahn, Sam Dorsey and Mitch Linneman.

Walter is considering plans to expand the company further by establishing more facilities in Illinois and other states. "We are looking at putting more facilities in the central Illinois area and the central Wisconsin area within the next two or three years," he said.