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Mexican Brothers Build Thriving Pallet Business South of the Border
Inamex Group: Mexican brothers have developed a thriving pallet company south of the border, adding plants and planning more facilities to service major U.S. and Mexican businesses.
By Staff Writer
Date Posted: 3/1/2001
MEXICO CITY — During the 1992 presidential campaign, independent Ross Perot criticized the North American Free Trade Agreement, known as NAFTA. He direly predicted that American jobs would disappear south of the border with a "giant sucking sound" — a phrase that immediately became perhaps one of the best known ‘sound bites’ of that presidential race.
American businesses did in fact head south. Many set up manufacturing plants in northern Mexico.
There were no massive layoffs, however. In fact, the results of the trade pact with Mexico and Canada have been good for business and consumers. One report, issued several years ago just prior to the three-year anniversary of NAFTA, rated it A+ in terms of trade growth, growth in U.S. exports, growth in U.S. employment, and output gains for U.S. manufacturing.
Mexico is an important trading partner. Not only have U.S. companies set up manufacturing operations there, but Mexico is a big customer for products made in the U.S. And manufacturing and distribution spell...pallets.
There is no Mexican counterpart to the National Wooden Pallet and Container Association in the U.S., no organized trade association of Mexican pallet manufacturing or recycling companies. If the Inamex Group is any indication, however, the Mexican pallet industry is thriving.
Inamex is owned and operated by four brothers. The company initially was started in Mexico City by two brothers, Patricio and Charly Molina. In 1988 Patricio had a business friend who talked to him about the difficulties his company had in staying adequately supplied with quality pallets. At the time, Charly had a warehouse and operated a coffee processing and trade business. Patricio talked with Charly about the opportunity, and they decided to become partners. The warehouse was split up, half for the coffee business and the other half for pallet manufacturing. After a year, the pallet business had succeeded so well, and the brothers believed it had so much more potential, that they closed the coffee business and forged ahead with their new venture.
Today, according to the Molinas, there are about 100 "serious" pallet companies in Mexico. Inamex now has six plants where it manufactures and recycles pallets plus a sawmill. Its plants produce a combined 142,000 pallets per month. Annual sales are in the $7 million range. Inamex customers include some of the biggest names in both U.S. and Mexican business. The company’s plants employ 300 workers plus a management team of 25.
The company’s operations are very labor-intensive — not unlike many U.S. pallet companies. Labor is considerably cheaper in Mexico, however. In addition, some technical conditions limit the use of machinery. Virtually all of the company’s machines are shop-built.
The Inamex plants are equipped with a combined 25 bandsaw dismantling machines, which would seem to speak volumes about the importance of recovering and recycling pallet lumber in Mexico. The company’s plants also are equipped with 10 trim saws, four chamfering machines, and eight notchers. All pallet assembly is done by hand with power nailing tools.
About 64% of the company’s volume is new pallets. The remaining 36% is recycled pallets — either pallets made of recycled lumber or used pallets that have been repaired. A large percentage — 40% — of production is GMA-size pallets, 48x40. The company also makes a small percentage of hybrid pallets that are made of a combination of both wood and plastic components.
Today Patricio and Charly are in business with two other brothers, Ricardo and Victor. Patricio, 40, who serves as sales manager, used to be a clothing salesman. Married with five children, his main hobby is jogging. Charly, 39, is general manager and chief executive officer. Educated with a bachelor’s degree in industrial engineering, he has a wife and four children and enjoys competing in marathons and triathalons. Ricardo, 34, who has a bachelor’s degree in mechanical and electrical engineering, oversees operations and also is manager of the company’s plant in Guadalajara. He is married with one child, and his main hobby is soccer. Victor, 32, is the company’s customer service manager. The lone bachelor of the four, he lists opera as his chief pastime.
In describing their business, the brothers strike themes that many U.S. pallet companies would find similar.
"We are devoted to service our customers," said Patricio. "We are part of their success."
"When they need us, we are there," said Ricardo.
"We have to improve technology to be better than our competitors," said Charly.
"Getting customers like the ones we have...takes time and effort," said Victor. "The main thing is...to keep them happy. Now the challenge is growth."
Inamex grew rapidly from the start. Initial production at its first location in Mexico City was only about 1,000 pallets per month. Within two years, however, monthly production was at 8,000 pallets, and by 1992, when they expanded into recycling, 12,000 pallets. The brothers opened their second plant, in Guadalajara, in 1993. A third plant, in Toluca, opened the next year. Inamex opened its sawmill in Tecpan in 1995, and today it supplies about 30% of the lumber its operations require. In 1997 it opened another facility in Mexico City dedicated to pallet recycling, and in 1998 Inamex added another Mexico City location and another plant in Zacatecas. Toluca is a mere 62 miles outside Mexico City while Guadalajara is located 315 miles west and Zacatecas, 376 miles northwest.
As it has grown, the company has located plants strategically to serve its growing customer base. The plant in Zacatecas, for example, is located near one of Inamex’s most important customers — the largest brewery in Latin America and brewer of Corona beer. Other plants are similarly located to serve customers.
In recent years pallet production has increased at an annual rate in the 25-30% range. The leading production facility is the Mexico City recycling plant, which repairs about 25,000 pallets monthly and assembles another 12,000 pallets of recycled lumber. The company’s plants normally operate a single eight-hour shift.
The company’s fortunes are heavily tied to only a handful of high-volume customers. The company has accounts with such U.S. businesses as Pepsi-Cola, Coca-Cola, Wal-Mart, Kraft, Avon, and Hewlett-Packard. Inamex prefers to deal with customers that order at least 3,000 pallets per month.
Many of the company’s pallets are used to ship finished products for export, Charly noted, and supplying these export customers with quality pallets is a high priority.
In addition to operating its own sawmill to manufacture pallet stock, the company buys lumber from other mills and remanufactures it to pallet stock.
Like recyclers in the U.S., Inamex parks trailer vans at some customer locations to be filled with excess pallets, then retrieves them. The company has seven trailers and also contracts with trucks for hauling services.
Scrap wood from pallet dismantling operations is sold to various outlets.
Inamex manufactures about 3,000 of the hybrid pallets per month at one of its Mexico City plants. The pallets have wooden deck boards and iron-loaded plastic stringers.
Employees who assemble pallets work in teams of two. The company provides considerable training of new employees. Inamex offers a variety of incentives to workers to increase both production and quality.
The brothers are interested in U.S. pallet industry practices and have availed themselves of opportunities to learn about U.S. pallet operations. For example, Charly has attended some NWPCA activities, and Inamex has been a member of the NWPCA for several years.
Like some American companies, Inamex also has a Web site (www.inamexx.com.mx) and Internet e-mail (email@example.com).
In the near future, the brothers plan to open additional locations. They intend to open three plants near the U.S. in Matamoros, Juarez and Tijuana. The company also may seek participate in some formal quality control program, such as ISO certification.
The brothers also want to make improvements in their operating systems for greater automation and efficiency.