To start, we built a frame using 4x4's anchored into the ground at about 3 feet and concrete blocks (to keep the pallets off the ground).
We built only three of the four walls because we were undecided about the type of door and we chose to leave the front open at this point but you get the idea.
We built the roof framework using 2X4's turned on their sides and secured with roofing brackets. And we added a small pallet deck to the outside so Lester could access his door easier and the entry was kept clear of water. On the doorside (which doesn't seem to leak), you can see some sort of concrete substance stuck between the base and the shed wall. Small discrepencies between the shed base and the concrete should have been sealed with silicone initially. However, if the gaps are a little on the large side then a cement fillet is applied, similar to yours on the outside. In your case, the cement fillet should be cut away with a cold chisel, and a new cement fillet applied.
1 side of the shed on the outside will be impossible to reach, so I guess I'll start on the inside and see does that hold? More than likely the cement fillet will break away quite easily, and then once the debris is brushed away its time for renewal.
If you can't get all the way round the shed, do what you can and then finish from the inside. The old one currently sitting in her backyard is over 30 years old and the floors and walls are becoming unstable. Not everyone uses the 4X4 frame, most of the sites I saw just bolted the pallets together but I wanted my building firmly attached to the ground.

We built our walls 10 feet in length but this is determined by the size of pallets you are using. This is a bit harder because the walls are heavy and have to be lifted on top of the first wall. This part kind of sucks because the pallets are hard to drill through and it's hard to work through the slats. This part is optional of course but we wanted a raised floor as we plan to add sub-floor boards and seal in the walls to make our shed weatherproof.
We also cut out a special cat door for Lester as this is going to be his new home once the old shed gets torn down. Even without the sub-floor and linoleum (yes linoleum, recycled from the laundry room) this shed is already warmer and more airtight than the last one. First we sealed the outside gaps using water resistant weather stripping and additional 2X4 pieces. We are hoping to finish the interior walls tomorrow (assuming no rain as rain inhibits the use of the saw) and start adding the floor linoleum. It may not display this or other websites correctly.You should upgrade or use an alternative browser. This requires strong helpers by the way, three of these attached end to end is quite heavy. We used this because we found it for free on Craig's List and it provided abundant natural light without having to cut out a window.
FM wanted the shed to match the house so she went with vinyl siding (the cheapest option) We ended up finding a super deal from a private party via Craig's List so it got even cheaper. I tried everything I could do to find the source of the leak but the roof and walls and seams that I can find are all bone dry, complete with cobwebs and dust.

I don't remember there being any leaks at the time, but we never would have looked either. Problem is the shed is large - about 10 feet by 15 feet with a 12 foot roof - and was very well built with a raised floor, built in shelving and storage rafters. But this required an underlayment of some kind so we used a thin OSB.I would recommend using vapor barrier if you go this route, which we did not as it costs a LOT of money - we chose to seal every nook and cranny and pray instead. My father had a go off it the other day again and went a bit crazy with expanding foam and mastic, which obviously did not solve the problem. To purchase a replacement even close to this one in size and made of wood (not plastic or flimsy metal) would be over $5k and even those aren't permanent structures. They are used to move heavy items from warehouse to shipping trucks and most companies don't re-use them (don't ask me why) so they end up in landfill. In fact, the sources we found for pallets were begging people to take them off their hands. If you need a work bench, storage shelves for your garage, a dog house, a kid's playhouse, a shed, etc. The wood is solid (and free) and it's an awesome way to recycle high quality materials that would otherwise end up as waste.
Oak is expensive and hard to find but oak pallets are tossed like trash everywhere, every single day. For a little sweat equity, this is a great building method and it was an invaluable learning experience.Here's the process we used but keep in mind there are dozens of ways to go about this.

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