Shipping Pallets: What keeps PalletOne’s CEO up at night

On the heels of Modern’s annual pallet usage reader survey and a related webcast, I had an opportunity to talk to Howe Wallace, the CEO of PalletOne.

Headquartered in Bartow, Florida, and with over $200 million a year in revenue, PalletOne is one of the largest, if not the largest, manufacturers of new pallets in the country. The company produces more than 15 million new pallets a year and operates 17 plants and four sawmills in eleven states. While its heritage is in new manufacturing, PalletOne also recycles wood pallets in selective markets.

Wallace and I had a chance to touch on a variety of topics impacting pallet users and the pallet manufacturers that supply them.

Growth of the market: Pallets are a lagging economic indicator. Companies stop using pallets after the economy has slowed because warehouses are full of product and manufacturers are no longer running their lines full tilt. Pallet usage picks up only after the economy begins moving again and those warehouses have emptied out. According to Wallace, the growth in pallet usage has been slow, steady and stable since the economy bottomed in 2009. “There has been no massive growth,” Wallace says. “But we’ve seen a general 2-to-3% increase in pallet usage and it’s been stable.” Wallace adds that PalletOne’s own growth has outpaced the increase in pallet usage as competitors have fallen by the wayside.

System-based approach to unit load design: In the last few months, I’ve written a fair amount about several leading pallet manufacturers embracing the system-based approach to unit load design developed at Virginia Tech. Count Wallace as one of the converted. PalletOne is both a believer and an investor, as one of the backers of the development of Best Load, a new unit load design software package. “We have had some success stories with customers that had an over-designed or under-designed pallet,” Wallace says. “We were able to show them where they can save money and get immediate results.” However, Wallace adds that it’s a longer sales process and is generally successful with companies that involve a team. “You really need to have packaging, engineering and plant personnel involved along with purchasing to see the value in the approach,” Wallace says.

Building a better mousetrap: Since we cover pallets and packaging, I receive a regular stream of emails from inventors and entrepreneurs who have come up with the alternative to the wooden pallet. So far, we haven’t seen a product that is as versatile as the wooden pallet at a comparable price. Wallace agrees. “I try to keep an open mind and look diligently at the ideas that come across my desk,” Wallace says. “So far, I haven’t seen anything that changes my opinion that there will always be a place for the wooden pallet for a long while.” The reason, he adds is simple. The pallet has to endure weather, racking, floor stacking and all types of modes of transportations. What’s more, it’s a relatively minor expense if it’s lost or stolen. Most of the alternatives are either far more expensive, or only perform well in niche applications. “The game changer could be if the risk of product contamination from a pallet outweighed the cost savings from using wood,” Wallace says. “If we reach the point where you can extrude plastic as cheaply as we can process wood, then plastic may be a viable alternative. But, we get better at processing wood all the time.”

What keeps Wallace up at nights? “Materials, markets and manpower,” was his short answer. The longer answer: “My biggest concern is whether our industry as a whole will be able to meet demand when the economy comes back,” Wallace says. “I worry that without an immigration policy, we won’t have enough labor to sustain sawmills and pallet plants. During the recession, we’ve seen a downsizing of the lumber industry and the support system for pallet makers. What I wonder is whether it will be possible to open up the mills and plants that have been shuttered during the recession.”

At the same time, he adds, meeting the demands of a booming economy is a challenge most of us would welcome.