News - McAdow's Inaugural
This Is Not Your Father's Pallet World
Christopher Columbus reported to his king and queen of Spain that the world was round, and he went down in history as the one who first made this discovery.
Thomas Friedman, the Pulitzer Prize winning author, in his recent book, now says the world is flat.
While we were sleeping, a lot of things came together and the result is Globalization.
And if you think our industry can be reactive, rather than pro-active, look at what happened to the American auto industry by being reactive.
Twenty-five years ago, our pallet industry was manufacturing new wood pallets, being sold locally to a customer that we personally knew. Today's pallet industry:
- More pallets are being purchased as recycled pallets than new manufactured pallets.
- In the United States, a wood pallet rental pool of 90 million is being leased several times a year.
- A plastic pallet pool of several million pallets is being established.
- All wood pallets imported or exported are required to be heat-treated or fumigated.
- Customers are bidding their pallet business on the internet and sometimes on a national basis.
- Our customers' pursuit of the world's most efficient supply-chain equipment, some designers are creating specifications that are difficult for a wood pallet to comply.
I think each of us should post the following African proverb on each of our factory floors:
Every morning in Africa, a gazelle wakes up.
It knows it must run faster than the fastest lion or it will be killed.
Every morning a lion wakes up.
It knows it must outrun the slowest gazelle or it will starve to death.
It doesn't matter whether you are a lion or a gazelle.
When the sun comes up, you better start running.
Like the gazelle and the lion, the pallet industry has to run faster and faster and run in a herd. That herd formation is the NWPCA.
As demonstrated in NWPCA's annual report, Bruce and his staff have been running fast.
- Keeping the focus on performance standards, instead of arbitrary factors like size.
- Conducting practical research that can be applied to our company operations.
- Representing our industry in Washington when laws and regulations are being formulated.
- Providing industry-specific information that's timely and relevant.
What has made the association so effective the past few years is that it has positioned itself to anticipate, and when anticipation is not possible, to respond with lightening speed. It's done that in part by developing important contacts, alliances and coalitions.
Take for example the Emerald Ash Borer problem. After meeting with the USDA, it was clear to the NWPCA staff that the bug scientists working on the regulation have no concept of the trade side of this, so the NWPCA picked up the phone and talked to their contacts at the Commerce Department.
NWPCA made these contacts with a proactive approach, and now when they need to react, they've got a rapid response team in place. Do we, as individual companies, have our team in place? How are we coping with sudden changes in the market?
Albert Einstein had this thought:
Out of clutter, find simplicity.
From discord, find harmony.
In the middle of difficulty, lies opportunity.
How many times have you heard from business peers the phrase: Just in the last couple of years and they mean just in the last couple of years they had been able to do things they had never dreamed possible before, or they were being forced to do things they had never dreamed necessary before.
As Einstein said, In the middle of difficulty, lies opportunity Let me suggest where I think the opportunity lies for our industry in the middle of the current difficulty.
We have all heard the terms outsourcing, off-shoring, supply-chaining; but the best opportunity for our industry is called insourcing. A perfect example of insourcing is UPS.
UPS today is not your father's UPS. Yes, they still deliver 13.5 million packages a day from point A to point B. But consider this:
If you own a Toshiba laptop computer that is under warranty and it breaks, and you call Toshiba to have it repaired, Toshiba will tell you to drop it off at a UPS store and have it shipped to Toshiba, and it will get repaired and be shipped back to you. But here's what they don't tell you UPS doesn't just pick up and deliver your Toshiba laptop. UPS actually repairs the computer in its own UPS-run workshop dedicated to computer and printer repairs at UPS, Louisville, Ky. hub.
Several years ago, UPS said to Toshiba: Look, instead of us packing up the computer from your customer, getting it to our hub, then flying it from our hub to your repair facility and then flying it back to our hub; and then from our hub to your customer's house; let's cut out all the middle steps. We, UPS, will pick it up, repair it ourselves, and send it right back to your customer. It is now possible to send your Toshiba laptop in one day, get it repaired the next, and have it back the third day. The UPS repairmen and women are all certified by Toshiba; and its customer complaints have gone down dramatically.
Have you eaten at Papa John's pizza lately? If you see the branded Papa John's supply trucks go by, ask who's dispatching the drivers and scheduling the pickup of supplies, like tomatoes, pizza sauce and onions. Answer: UPS comes inside a lot of companies now and takes over their branded vehicles to assure on-time delivery, which, in the case of Papa John's, includes the pizza dough from bakeries to outlets at exactly the right times each day.
Or, if you order a pair of Nikes on line at Nike.com, the order is actually routed to UPS; and a UPS employee picks, inspects and packs and delivers your shoes for Nike from a warehouse in Kentucky, managed by UPS. Ditto for Jockey.com. UPS employees, who manage Jockey products at a UPS warehouse will actually fill the order, bag it, label it and deliver it to you.
What's going on here? It's a process that has come to be called insourcing a whole new form of working with your customers and creating value horizontally.
The same insourcing is evolving in the pallet industry. Total pallet management is nothing but a form of insourcing. You are handling all their pallets, not just the pallets you provided. This can be done on-site or off-site.
Now customers are demanding more than pallet management; they want total reverse logistic management.
Wal-Mart is opening nationwide reverse logistic centers in which a pallet provider has to manage all the recyclable returns from the stores, which include white wood pallets, CHEP pallets, plastic pallets, RPC's, baled corrugated, stretch film and consumer bags.
Kroger is doing the same thing at their salvage depots.
Manufacturers are requiring some pallet providers to fasten corrugated bulk bin boxes on pallets and ship on a just-in-time basis.
Some pallet providers are pre-assembling some parts for delivery in a plastic bulk container on a pallet. And, some pallet providers are packaging finished parts in corrugated boxes on pallets for customers to ship.
The future is coming at us. We, as an industry, better put on new shoes and go fetch the future.
We have to position ourselves to anticipate and respond to market demands. Now is the time to seriously explore new ways of doing business with our customers.
For the moment, we have the luxury of studying new technologies new distribution and logistic methods new materials that can be incorporated into our wood pallets and containers for strength, durability and serviceability. But it is just a moment, because I sense time is running out on us as an industry if we do not open our minds to new possibilities, and adjust our relationship to the market in inventive ways.
As I step into the chairmanship of the association, I challenge each and every member to move away from your comfort zone. It takes courage to stop doing what you have always done, to entertain new ideas.
Look at the business climate through your customers' eyes, your competitors' eyes, your suppliers' eyes, the trucker, the warehouse, the retail store, the forklift driver, maybe even the final consumer of the products being carried on our pallets.
Recognize that the first person to do something new can appear foolish at the start. You may have to struggle with the insecurity of proposing and defending new ideas and new ways of doing things.
I challenge every member to join me in reaching out to everyone in the supply chain, and most especially to those in the association to ensure we establish that shared vision, united goals perspective that moves our businesses forward.
In exchange I promise to spend the next year looking beyond my own company to the farther horizon that impacts all our businesses. I will do this with our committees, our board and our staff to keep the momentum that has been demonstrated and discussed today advancing forward.
It is with a certain degree of apprehension, but a great deal of determination that I assume the Chairman's role of NWPCA. But we are in this thing together, and I am proud and pleased to serve you, my industry colleagues, in this way.
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