At Cresswood, we want to continue to stay connected with other leaders in the American made industrial shredders industry. Cresswood has been a strong proponent of the pallet industry for decades. Our commitment to serving the specific needs of the pallet industry makes membership in the National Wooden Pallet & Container Association a must. The NWPCA is recognized as the “go-to” resource for supportive research and expertise on the advantages of wood packaging and is a unifying voice for the global wood packaging industry. Its mission and core values mirror our own and make this a natural and mutually beneficial relationship. Members, government decision-makers, end-users, universities, and the consumer utilize NWPCA as the information source on wood packaging design and unit-load solutions.
March 1-3, 2023 our President, Ryan Butzman, attended the National Wooden Pallet & Container Association (NWPCA) Annual Leadership Conference in Fort Worth, TX, along with 720 other leaders in the industry. The National Wooden Pallet & Container Association (NWPCA) is the largest organization of wood packaging professionals in the world, with more than 700 company members in 28 countries who manufacture, repair and distribute pallets and wood packaging in unit-load solutions, or who supply products and services to the industry. The mission of the association is to provide an environment for members to succeed while promoting the wood pallet and wood packaging industry.
This year’s NWPCA ALC theme was “Embrace Uncertainty. Supercharge Results.” Linda Nazareth, a keynote speaker, and economist spoke about the rapidly emerging trends around the future of work, global economic change, and dramatically shifting demographics here in the US. She took a hard look at the challenges businesses face in the wake of the changes brought about by the pandemic, and ahead to mega-trends that are shaping the economy.
The topic of innovation was covered by Mike Paton, EOS implementer and top-rated podcaster, who ran a workshop for a deeper dive into EOS business management principles. And to round it all out the NWPCA hosted a Golf Tournament where Cresswood was a hole sponsor.
Fostering Relationships in the American-Made Industrial Shredder Tooling Industry
One of Cresswood’s primary strategic goals for 2023 is to grow our tooling revenue. We have over 1,000 machine assets currently in operation in the field, and having all the tooling and parts available to support our world class industrial shredders and grinders is a key reason why our customers value our brand. We’ve started off the year with a highly successful annual tooling sale, seeing an almost 50% increase in overall revenue year-over-year. Having a supply chain that can ensure your success during a growth cycle like this is tremendously important to achieving our strategic goals and limiting stock outs.
Econotool in Huntingdon Valley, PA has been our primary tooling supplier for many years, and we have a very strong and trusting relationship with the company owner Andrew Middleton. We are able to quickly communicate our constantly changing inventory needs to Econotool, and they quickly pivot their production schedules to meet and exceed our customer demands. Having this 100% Made in the USA supply chain is an essential piece in meeting our customer’s expectations, and doing our part to help grow a strong domestic economy. What is more, our tooling growth has allowed Andrew to add another talented young machinist to his workforce and purchase new equipment, a real win for everyone.
The Wood Pallet Industry is Experiencing a Major Shift in the Economy Post Pandemic
It was high-times for pallet companies during the pandemic. Due to massive increases in consumer orders from e-retailers like Amazon, trucks filled the highways with products and warehouses couldn’t keep pace with consumer demand. Pretty much everything that moves from point A to B in the supply chain moves on wooden pallets. Pallet inventories across the country dried up while demand for pallets reached historic highs. This resulted in record profits for pallet companies, even while raw material prices were spiking due to lumber shortages, they were simply able to pass those cost increases along to the buyer.
The FED began to throw water on the overheated inflationary economy with rate increases beginning in 2022. The end result of this, in combination with the end of COVID restrictions, has been to dramatically flip the script for domestic pallet companies. Where just a year ago inventories were at record lows, today most pallet distributors have bloated inventories and demand for the products has cooled significantly. On top of this, rising labor market pressures and continued high raw material prices have compounded the challenges these companies face today. For every 100 job openings in the economy, there are just 57.5 people actively looking for work, and manufacturers continue citing difficulties in attracting and retaining employees as one of their top challenges.
The high times are over, and now most companies are looking at cost-cutting and reductions in labor. This has also resulted in forcing more companies to look into automation, but smaller companies often lack the capital to implement these technologies. Many of the large and established pallet companies we have talked to have seen this cycle before and know what they need to do to ride it out. The newer ones that were born during the COVID boom days are generally very nervous and unprepared in this environment of uncertainty. As pallet manufacturers and pallet companies are faced with significant challenges, companies will be paying more for landfill and raw material costs and as our pallet customers seek better and smarter ways to recycle pallets they will look to Cresswood as a leader in the pallet recycling shredders industry.
Concerns with Operating Costs, Competition, and Labor Force
There has been a period of M&A unlike any other in recent history in the pallet market. 48forty Solutions is one example. They have absorbed literally dozens of smaller pallet companies and distributors over the past two years under their national umbrella. This allows them to better serve customers in each specific region with rapid deliveries and provide each regional hub with all the capital backing and resources from their corporate office. It is a difficult decision for these small companies to make, to join forces with a large corporate entity, or to continue on your own in an uncertain economy. Overarching all of this is the continued tightening of the labor market and rising labor costs. These pressures make it even harder for the smaller guys to make it through these difficult economic cycles.
Daren Franks and Andrew Harris of Lodge Lumber Company in Houston, TX, were also present at the conference. They are the key supplier of lumber for pallet companies in the US. The big takeaway in speaking to Daren and Andrew is there is a significant correction currently happening in the pallet industry. In a complete reversal from the pandemic period, supplier inventories and core prices are high, and demand is sagging from historic pandemic levels. On top of that, the labor market continues to drive up the cost of operations, and the industry is overall very competitive. Over the last two years, the pallet industry has gone through a period of massive M&A, where large corporate entities are consolidating networks of smaller pallet businesses across large geographical areas. We have also seen many of our current customers go to forms of automation in order to maintain margins and deal with the tight labor market. This can range from simple automation in the form of roller conveyors for moving material, to highly advanced forms of automation like the Pallet Dismantlers and Urban Sawmill from Alliance Automation. It seems this focus on automation will only increase as the demographics in this country shift and fewer and fewer workers are available on the market.
Cresswood is proud to be a member of the National Wooden Pallet & Container Association and to participate in the NWPCA Leadership Conference every year where we can connect with other industry leaders in the global wood packaging industry.