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Lake States Lumber Supplies Pre-cut Stock, Has Grown Thanks to Value-Added Products
Midwestern lumber company grows through value-added products and offering mixed loads as well as less-than-truckload deliveries
By Tim Cox,
Date Posted: 6/1/2012
SPARTA, Wisconsin—Lake States Lumber Co. is known for its building products, but it also has an industrial lumber division that has become an important supplier of pre-cut components to pallet manufacturers and other companies in the Great Lakes region and Midwest.
The company was started in 1954 as a lumber wholesale business with its initial focus supplying retail lumber yards. The owners quickly bought a distribution yard in Sparta and another in Aitkin.
Customers’ needs for mixed and less than truck load orders was realized and in 1981 the first distribution yard was purchased in Sparta, Wi. In 1987 another was established in Aitkin, Mn. The core business during this period continued to supply the retail trade and a few industrial customers that packaged their own products.
The growth of the Manufactured Housing Industry and their need for special trims prompted an investment in 1992 of an L-M Equipment Co. (U.S.) package saw to cut lumber to length.
The owners of Lake States Lumber at this time were Roger Wilson and Keith Laugen. Roger is now retired, and his son, Steve, who owns the business with Keith are both active in the business.
Lake States Lumber has grown and expanded significantly over the years and developed or offered very specific building products. Its principal products for home building and remodeling are log siding and accessories, wood paneling and flooring, decking and railings, exterior sidings, shakes and shingles, and boards, dimension lumber and timbers.
“We found rather than just be involved in the commodity market…that we needed to branch out in other areas with value-added items,” said Steve Nichols, who oversees industrial lumber sales.
The company has its own facilities to process lumber into its line of products, such as cedar siding, log siding, and other specialty siding, and it also distributes products made by other manufacturers. For example, the company distributes MaxiTILE fiber cement exterior building products, including lap siding, panels, and trim.
Lake States Lumber now has operations at five sites in two states: Schofield and Sparta, Wis. and Aitkin, Brooklyn Park, and Duluth, Minn. All of the locations function as distribution yards. The company’s headquarters is located in Aitkin. Lake States Lumber employs about 180 people company-wide.
Industrial sales are in the range of $40-50 million annually, a figure that includes sales of random length 2x4 and other material. Industrial lumber sales account for about one-third of the company’s revenues, according to Nichols.
Sales of pre-cut components for pallets and wood containers are the company’s leading market for industrial lumber. The pallet and container markets represent about 90% of its industrial sales, and the housing industry, the other 10%.
In the pallet and container arena, however, actual pallet and container manufacturers are a minority in the company’s customer base. They account for about one-third of customers who buy pre-cut components for pallet and wood packaging. The other customers are manufacturing businesses that buy pre-cut lumber and use their own employees to build the pallets and crates they need. The manufacturing businesses predominantly purchase pre-cut material for crates and boxes; about 80% of the lumber that Lake States supplies to these customers is for wood containers, and the other 20% for pallets. Lake States also makes dunnage and blocking.
Lake States Lumber’s accounts include about 15-20 pallet and container manufacturing businesses in the Great Lakes and Mid-West regions – mainly Minnesota, Wisconsin, Michigan, Illinois, and Iowa. Customers for industrial lumber include the same states as well as the Dakotas.
Although the company has been supplying industrial lumber for pallets and containers since its inception, it’s entry into the pre-cut component market was somewhat by happenstance. While touring a manufacturing business in Wisconsin, Nichols noticed the plant had a sizeable amount of lumber. The company was buying lumber and using its own employees to cut the material and build wood packaging to ship its products. Nichols offered for Lake States Lumber to supply the company with pre-cut components and got the business. He quickly began calling on other businesses – both manufacturing companies and pallet and container manufacturers – to offer similar services. “They saw the value in buying pre-cut lumber,” said Nichols, who works out of the company’s Sparta location. At the time, Lake States had two distribution yards and about 30-40 employees.
The company’s business in industrial lumber components for pallets and containers continued to grow, and Lake States added staff to go after the market. As it did, it found more services and components it could provide.
The company’s initial foray into industrial lumber products for pallets and containers was strictly in softwood lumber, which continues to be its primary focus. Hardwood pallet manufacturers in the region all are generally supplied by small, independent, local sawmills, noted Nichols.
Lumber is remanufactured into industrial products at the company’s facilities in Sparta. About a dozen employees work in the Sparta plant; they work in two shifts.
The Brooklyn Park facility also makes some cut-to-size industrial components, and the Aitken plant has remanufacturing operations to produce panels and siding. The company operates a treating plant at Duluth and also has kilns for drying and heat-treating.
The L-M Equipment Co. package saw proved to be a good investment. The company continues to use it for cutting lumber to length.
However, entering the pallet and container arena, it quickly became evident the company would need to add the capability to resaw material into pallet deck boards and similar material. It added a McDonough band mill to resaw 2x4 and 2x6.
Resawing with the McDonough was relatively short-lived, though. The big band mill ran a blade with a very wide kerf; consequently, in splitting 2x4 and other 2x material, it produced thin components.
After a couple of years the company replaced the McDonough with a pallet industry stalwart, a Baker Products single-head horizontal band resaw. The thin kerf of the Baker resaw enabled the company to produce thicker deck boards out of 2x material. When producing thinner deck boards, it also enabled the company to get three boards out of 2x stock instead of two.
The company later increased its resawing capacity with the addition of a Baker Products two-head horizontal bandsaw. The two-head system is used for resawing 2x4 through 2x12 along with some occasional 4x4, 6x6, and other similar material.
In addition to the L-M Equipment Co. package saw and the Baker bandsaws, one of the latest additions in machinery was a Mereen-Johnson gang rip saw; it is used for ripping material to custom widths and remanufacturing wide material into thinner stock. The shop also is equipped with a couple of pop-up saws and other smaller chop saws.
For pallets, the company supplies mainly deck boards and stringer blanks. The company does not produce notched stringers; Nichols has found most pallet and container customers have their own machines for making notched stringers.
Lakes States Lumber produces mainly components for custom pallets, eschewing anything that would resemble the GMA market. “We do a load here and there of parts for standard pallets, but our focus is not on the GMA market,” said Nichols.
Lakes States provides a wide range of custom lumber remanufacturing services that includes resawing, ripping, precision end trimming, custom sizing for width and thickness, and grooves for banding and strapping.
The wood waste is fed into a grinder to produce material that is sold to dairy farmers for bedding for cows. The shop also uses grindings for fuel; they are fed by an auger system into a furnace.
Lake States Lumber’s specialty is the ability to ship a lot of very mixed loads of pallet and container components as well as less-than-truckload deliveries. It is not unusual for a load going to a customer with 20 different components on the truck, said Nichols, from 1x2 to 4x4 and everything in between. It’s not uncommon for such highly mixed loads to go out weekly to some customers with just in time service.
For its industrial operations, Lake States Lumber buys softwood dimension lumber and boards from mills in the U.S. and Canada – 2x4 to 2x12, 1x3 and other boards, and 2x3. It buys random length material from 2 feet to 20 feet or longer. Virtually all the raw material is kiln dried, ISPM-15 certified. The company rarely buys rough lumber. Softwood species include spruce-pine-fir, Douglas fir, ponderosa pine, Southern yellow pine and others.
Virtually 100% of its pre-cut components for pallets and containers is ISPM-15 certified.
Lake States Lumber also supplies a considerable volume of plywood and oriented strand board (OSB) sheets to industrial lumber customers. Plans for the future include possibly adding panel saws to allow the company to remanufacture plywood and OSB sheets into custom sizes. Those plans are on the drawing boards, indicated Nichols. “When it’s going to happen is the question,” he said. The company already has customers requesting custom panels, but not enough yet to justify the investment in an expansion.
Lakes States is clearly in the lumber business, Nichols noted, not the pallet business. “We don’t compete with them,” he said, referring to pallet manufacturing companies.
Nichols expects future growth for its industrial material will be in both market areas – manufacturing businesses, and the pallet and container industry.
Although the company’s business fell off a few years ago when the country plunged into a recession, Lake States has enjoyed some “minor growth” in the industrial lumber sector in recent years, according to Nichols. At least part of the growth has to do with the fact that other lumber remanufacturing companies went out of business as well as some pallet and container companies - or they at least experienced some contraction.
Some manufacturing businesses have been forced into making their own pallets and shipping containers in recent years, said Nichols, because of the contraction in the pallet industry. Some companies have their own in-house pallet and packaging operations because they believe they can do it more cost effectively and keep a competitive edge, he added.
Cracking the market for hardwood pre-cut pallet stock would be pretty difficult, Nichols conceded. There are a lot of small sawmills in the region, and the pallet companies are set up within 50-100 miles from them to be readily supplied. “There’s not a lot of room for someone else to get into the middle of it, if you will,” he observed.
Lakes States, which is a member of NAWLA, has its own trucking operations and also relies on some commercial carriers.
For more information, see the company’s website at www.lake-states-lumber.com or call at the company’s office in Sparta at 800/362-5864.