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Recycling: One More Hat?
Markets in Transition
By Rick LeBlanc
Date Posted: 10/1/2001
Some 20 years ago, when I was first breaking into warehousing and a career of being a pallet Ďuser,í we used to pay the fellow who took away the warehouse garbage to also take away the non-48x40 pallet cores and the worst of the 48x40 as well. Sid took about one or two straight truck loads of pallets to the dump daily ó or to whoever would take it free as firewood.
Only a few years later, however, a few important changes occurred that Sid didn't see coming. First, the DC purchased a garbage compactor in order to greatly reduce the number of loads of garbage that were hauled out. In addition, the new garbage containers were incompatible with Sid's truck. Number two, the pallet recycling industry was starting to get going, and the early recyclers were suggesting that they could take the non-48x40 on a no-charge basis if we included them with the other regular 48x40 cores.
Within three years after I started at the DC, Sidís full-time job of clearing our docks had turned to nothing. He no longer had the garbage, and he no longer had the pallets. He wasn't quite ready to retire, but he ended up selling his truck a few months later.
The point of the story is that here was a guy in the business of sweeping that DC's dock, including garbage and unwanted pallets. Then things changed quickly, and Sid didn't react to the arrival of that new world order. Rightly or wrongly, he was out of a job.
So what really is the business of the pallet recycler? The old answer used to be the pallet business. A more recent answer has been the pallet customer service business.
Increasingly, recyclers position themselves to be a total pallet solution, including a complete dock sweep of every unwanted pallet. That dog's breakfast of cores from the customer's dock is taken back to the recycler's yard to be sorted, dismantled, rebuilt or refurbished as needed for standard products or for special orders. The unwanted mix is evacuated from the customer's dock, brought back, and processed into a number of specific products that have significantly greater value to other customers.
This is nothing that hasn't been said before, but recently I was reminded that the pallet recycler's domain might not just be a total pallet solution, but maybe a total dock sweep and warehouse clean-out solution. It might include other distressed assets that could follow the same process of pickup, sortation and accumulation, and then efficient full load shipments.
Last month I was researching a series of articles for Unit Load Management magazine, which is also published by Industrial Reporting, and I started a conversation with a reverse logistics company that was doing some work in the automotive industry. To give some background, rebuilt automotive parts comprise a huge industry, relative to pallets. In 1998 the U.S. market for recycled automotive parts was $36 billion dollars, according to Dale Rogers and Ron Tibben-Lembke in their book, Going Backwards: Reverse Logistics Trends and Practices. By way of example, about 90-95% of all replacement starters are rebuilt units, and on average, 50% of the original starter is reincorporated into a rebuilt unit.
In our interview, the reverse logistics company talked about picking up cores and carefully sorting them by category. It sounded an awful lot like a pallet conversation I had heard many a time, but it wasn't. The conversation was about transmission cores, differential cores, and the like. The sweep was at automotive dealers, allowing the service department to get rid of the unwanted clutter of old parts on a regular basis without the inconvenience of accumulating specific types for return to specific reconditioners. The result was the service department cleaned out more often so it could concentrate on its primary business. Freight savings were realized because the reverse logistics providers were able to ship full loads back to the reconditioner instead of the partial loads that went out from the dealerships in the past. An extra bonus: the reverse logistics provider shipped only the correct cores to the reconditioner, eliminating previous shipping mistakes that resulted in extra handling and wasted freight.
It is important to note that the reverse logistics provider in this case already had a relationship in the industry, being in the business of hauling inbound to automotive assembly plants.
However, the similarity of the recovery and sortation services led me to wonder if there may be other assets out there cluttering up the customer's warehouse. Perhaps there are other assets that are not handled particularly efficiently, and if swept from the warehouse and processed by a professional recycling company (of which I know a great many, all of them readers of this magazine), would have value in secondary markets.
First pallet business, then total pallet service business, and perhaps in the near future, reverse logistics business. Most of us complain about having too many hats to wear, but it's another one worth thinking about.