Reviving Residuals

Description

Paleti Bulgaria Ltd. is a start-up company established in March 2019. It is located in Razdelna village, close to city of Varna. The main activity of the company is production, processing, storage and sale of pallets, grills and other transport packages made of wood. Paleti Bulgaria Ltd. has contract with the State Enterprise "Prison Affairs Fund" - Varna, for provision of jobs for the prisoners with a light regime of serving the sentence. Normally, between 8 to 15 people are involved in the production of the pallets.

The current project will allow the company to purchase a technological line for production of compressed (molded) blocks for pallets of sawdust and / or waste wood. Paleti Bulgaria Ltd. envisages to reuse its own residuals as well as residuals from sawmills, the furniture industry, second-hand pallets, and etc.

The investment to be made under the project will enable the company to increase its competitiveness through introduction of a new production process of eco-friendly compressed pallet blocks. It is also expected that current project will contribute to the annual reduction of waste from production and operational processes – with app. 6 tons per year through re-use of the wood waste.

Summary of project results

PALETI BULGARIA Ltd. faces several substantial challenges that complicate its operations as a start-up in the wood-based manufacturing sector. The company specializes in custom-made wooden pallets and transport packaging, but its reliance on raw timber introduces significant obstacles. These challenges include:

1. ​​​​Supply Chain Disruptions

• Unpredictable Access to Raw Timber: PALETI BULGARIA Ltd. has been directly impacted by fluctuating timber supply chains, which are sensitive to global market conditions, trade restrictions, and shifting environmental policies.
• Economic and Trade Uncertainties: Trade restrictions in the international market, especially within Europe, further complicate access to necessary materials. As a start-up, PALETI BULGARIA Ltd. faces difficulties in securing consistent, affordable supplies, making it challenging to keep production stable and costs under control.

2. Timber Scarcity

• Demand Exceeds Supply: There is significant demand for timber across multiple industries in Bulgaria and Europe, causing competition for the limited supply available. Timber shortages directly affect PALETI BULGARIA''s ability to secure enough raw materials to fulfill orders reliably.
• Environmental Constraints on Timber Harvesting: In Bulgaria and Europe, environmental regulations and sustainable forestry policies restrict deforestation and limit timber harvesting to prevent environmental degradation. This shift towards sustainability, while beneficial for the environment, poses a serious challenge for wood-dependent industries like PALETI BULGARIA.

3. Volatile Raw Material Prices

• Escalating Costs Due to Timber Shortages: The scarcity of timber not only impacts availability but also causes prices to fluctuate. For PALETI BULGARIA, the inability to predict raw material costs creates financial instability, challenging their ability to offer consistent pricing to customers.
• Impact on Profit Margins: As a start-up, managing expenses is critical. However, raw material price volatility makes it difficult for the company to forecast costs accurately, which can erode profit margins and reduce the funds available for reinvestment and growth.

The combined effects of supply chain disruptions, timber scarcity, and raw material price volatility present substantial challenges for PALETI BULGARIA Ltd. These issues impact the company''s ability to operate smoothly, maintain competitive pricing, and deliver high-quality products consistently. Addressing these challenges will likely require the company to explore alternative supply sources, potentially diversify materials, or implement strategic cost-management practices.

The project has brought transformative results for PALETI BULGARIA Ltd. by establishing an innovative technological process for manufacturing compressed blocks, or "legs," for pallets from sawdust and waste wood. This technology enables the company to recycle its own by-products and source additional raw material from sawmills, the furniture industry, and other waste wood suppliers, thus integrating sustainability into its production. Here are the key project results and their implications:

Resource Efficiency and Sustainability

• Utilization of Waste Wood: By using sawdust, waste wood, and other industry residues, PALETI BULGARIA Ltd. can significantly reduce its reliance on natural timber. This shift promotes resource efficiency by recycling wood waste that would otherwise be discarded, aligning with circular economy principles and reducing environmental impact.
• Reduction of Fresh Wood Use: The new production line is projected to decrease the company’s reliance on natural, freshly cut wood by one-third. This reduction not only helps conserve natural resources but also stabilizes the company''s material costs by reducing dependency on fluctuating timber supplies.

Introduction of New Manufacturing Technology in Bulgaria

• First-Mover Advantage: While compressed pallet block technology is familiar to some European manufacturers, it had not previously been implemented in Bulgaria. PALETI BULGARIA Ltd. is now one of the pioneering companies in the country to adopt this process, allowing it to offer a unique product in the Bulgarian market.
• Competitive Pricing: The technology enables the production of affordable, high-quality pallets with legs made partially from waste wood. For Bulgarian manufacturers who continue to rely on all-natural wood, using compressed blocks is often cost-prohibitive due to import issues. PALETTI BULGARIA Ltd. circumvents this issue, providing a competitively priced product while reducing environmental impact.

Enhanced Product Quality and Market Appeal

• Improved Durability and Strength: The compressed blocks have properties that surpass natural wood, resulting in a stronger and more resilient end product. This quality enhancement appeals to customers looking for durability in their pallet purchases, particularly in industries that require pallets with greater load-bearing capacity and moisture resistance.
• Sustainability Appeal: As more businesses adopt sustainable procurement practices, PALETI BULGARIA Ltd.’s eco-friendly pallet option, partially made from recycled materials, holds strong market appeal. This differentiation can attract environmentally conscious customers and bolster the company’s reputation as a sustainable manufacturer.

Increased Independence from Volatile Timber Supply Chains

• Supply Chain Stability: By incorporating recycled wood waste into its manufacturing process, the company can maintain production levels more independently of natural timber supply fluctuations. This innovation reduces the impact of timber shortages and price volatility, contributing to cost stability and more predictable operations.
• Reduced Vulnerability to Market Pressures: With decreased reliance on natural wood, the company can mitigate the risks associated with raw material scarcity and environmental regulations limiting deforestation. This supply chain resilience positions PALETI BULGARIA Ltd. to maintain steady production and pricing, even as demand for timber grows in the European market.

In conclusion, the project has enabled PALETI BULGARIA Ltd. to establish an innovative production line that strengthens its competitive edge, increases resource efficiency, and reduces environmental impact. By implementing this technology, the company not only achieves operational sustainability but also enhances product quality and market appeal, securing a favorable position as a forward-thinking player in Bulgaria’s wood pallet industry.

Thanks to the grant from Innovation Norway, we expect to realize additional financial impact for the company. Also to acquire knowledge that will give us a leading position in the Bulgarian market in the production of similar products.

In the spirit of bold dreams, in the long term, we have set ourselves the goal to become the first manufacturer of pressed wooden logs certified under EPAL system and to supply Bulgarian and European pallet manufacturers with a high-quality product of exceptional quality.

With the implementation of the Reviving Residuals project, we will use 30% less raw timber in the production of the product. We are extremely pleased that with the implementation of this new production line, we will continue to enable prisoners to carry out work, acquire knowledge, and in some way contribute to their future integration