2009-04-23 Materials handling: Rehrig Pacific moves to the back of the dock. And that’s a good thing (by Bob Trebilcock)
“Think Rehrig Pacific and you probably think plastic,” says Bill Mashy, general manager of Rehrig Pacific material handling business group. “But today, we’re also in the wooden pallet business.”
The first part of that quote will come as no surprise to anyone familiar with the plastic container, tote and pallet business. Rehrig Pacific is the leading manufacturer of plastic crates used in the beverage and dairy industries and a leading manufacturer of plastic pallets and dunnage. You can throw in the country’s largest producer of plastic roll out refuse carts (that’s garbage cans on wheels for the uninitiated) for good measure.
But like a lot of businesses these days, that’s a relatively mature market, especially when it comes to the totes, containers, and pallets used in the supply chain. Plastic pallets, for instance, represent less than 8% of the total pallet market, by Mashy’s estimate, still a niche item whose growth is limited by the price of the pallet and closed-loop applications. “Most of the business today is replenishment as opposed to converting customers to plastic from wood pallets or another medium,” says Mashy.
So, also like a lot of businesses these days, Rehrig Pacific is looking for opportunities to offer new products and services to its customers. Enter wood pallets, the second part of the quote.
Now, before you call Mashy to order a truck load of GMA’s, the company isn’t selling wooden pallets. Instead, it has developed Rehrig Penn Logistics, or RPL, a logistics business that manages back of the dock activities for big box retailers (think Wal-Mart) and grocery stores, like recycling their wood pallets and sorting their dunnage. The company has also developed a proprietary tracking software to help its customers better manage their returnable containers and other mobile assets.
Both initiatives are off-shoots of another project that never quite got off the ground, Mashy explains. A few years ago, Rehrig Pacific developed a new system of crates to handle meat products coming to Wal-Mart from suppliers like Cargill. Instead of selling the crates, Rehrig Pacific planned to lease them into the supply chain. As part of the business model, Rehrig Pacific was going be on the back of the dock, where it would have better control over its pool of assets and make sure they got quickly back into service. The more trips, or turns, per crate, the more profitable the pool.
It all looked like a go, with Rehrig Pacific planning on rolling the pool out in the Northeast first. They even bought a logistics company in Pennsylvania that was already providing back of the dock pallet and dunnage recycling services to Wal-Mart. “That’s how we got into the wooden pallet recycling market,” Mashy explains.
In anticipation, the company invested heavily to develop an asset tracking software system that is scaleable and flexible to keep track of the crates.
As sometimes happens, things changed. At the end of the day, the crate business went away. In the meantime, the recycling business kept growing. “In addition to providing a service to Wal-Mart, we developed relationships with other retailers, including a number of grocery retailers,” says Mashy.
What’s more, the company now has a robust software tracking system it can license to companies that want to manage their assets better. “For companies managing their own closed, the fewer high-value assets they lose, the more successful they’re going to be,” says Mashy.
There's no question these are difficult times. But even in difficult times, innovative companies - even those in mature industries - find a way to keep growing their businesses.