Purchasing Pallet Rack as a Commodity—Part 1

In the 1980s and 1990s, many of the pallet rack manufacturers had large engineering departments to provide application engineering and project engineering for large systems they sold. The application engineers worked with the end users to determine which products best suited their needs and provided the pricing for large systems. Project engineers created the manufacturing bills of materials and the drawings needed for construction permits and installation of the equipment.

The manufacturers also had project managers and site managers on staff. The project managers oversaw the schedules, deliveries, and budgets of large projects, and the site managers were responsible for the installation. The cost of these professional services was included in the cost of the product and often was transparent to the end user.

With the business in the rack industry prospering, the existing suppliers began to expand their operations. Additionally, more companies made ventures into the industry, and specialty suppliers began to expand their product lines. Small metal fabrication shops began to purchase used roll-forming equipment, set up a few welding tables and a paint booth, and became suppliers to the rack industry. The strong U.S. dollar during this period even encouraged a few international companies to venture into the U.S. market. The net result was an increased capacity to deliver rack products.

The capacity of the rack industry continued to expand during the 1990s. But with the recession that began in 2000 the demand for their product started to dwindle. The industry began to be faced with a severe overcapacity problem. More and more companies were competing for fewer and fewer projects. Making matters worse, the industry was hit by sudden staggering increases in the cost of steel, the basic raw material of all rack products. Many companies were operating under fixed-cost contracts, and the steel increases further eroded their profits. The excess market capacity and the sudden increases presented cash flow problems to other companies.

Unable to compete, several of the smaller companies were absorbed by larger companies; others succumbed to bankruptcy or simply closed their doors. The surviving manufacturers began to look for ways to reduce costs to remain competitive and profitable. Some companies eliminated underperforming products from their offerings, while other companies opted to reduce the professional services they provided. Several companies downsized their engineering departments by as much as 75% and project management by 85%; most companies eliminated site management departments altogether.

Today fewer application engineers mean fewer site visits to review existing conditions. This leads to potential oversight of obstructions and mismatches with existing equipment. The reduction of staff has extended the time required to quote larger projects, delaying proposals. The decline in the number of project engineers has led to increased errors in drawings and bills of material.

The pressure to produce greater tonnage with fewer personnel has hurt the quality control process in some plants. Reduced maintenance staffs and budgets means that tooling is not always properly maintained, further hurting product quality.

Project managers, handling too many projects, are not properly scheduling deliveries to the jobsites. This results in “nonbuildable” mixes of products arriving at job sites. Multiple truckloads of beams might arrive at a congested warehouse without frames or uprights to install them in. The beams would then be stored somewhere in the already packed facility until the frames arrive, adding to the congestion.

The reduction or elimination of professional services by the rack industry has not eliminated the need for these services. It has simply shifted the responsibility for providing the services to an emerging group of system integrators or to the end users themselves. Often the end users are trying to provide these services with existing personnel not equipped with the engineering or project management skills needed to successfully implement a large storage media installation. Many times the “lucky candidate” has these responsibilities added to his normal daily workload.

To properly select the correct rack system, the Application Engineer must first identify the characteristics of the load or product to be stored. What is the size and weight of the load and pallet? Is the product confined to the pallet or does the load overhang the pallet? If the pallet rack is sized based only on the pallet, a pallet with an overhanging load may not fit in the rack system or in back-to-back rows. Ignoring the overhung load in the design may cause the “Flue” space between rows to be improperly sized. This can lead to a problem where loading a pallet in one row may impact the product on a pallet in the adjoining row causing product to be pushed from that pallet and creating a safety hazard. Is the load stretch wrapped or loosely palletized? Unwrapped loads may require wire decking on the pallet beams to prevent loose product from falling from the pallet and through the beams.

Brent Tymensky is vice president of design engineering for Nashville, TN-based supply chain services provider Fortna

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