Beyond the box: converters thrive in the marketplace by finding creative and competitive ways to rethink the traditional box

Paperboard Packaging, Jan, 2004 by Peter Fretty

There is little doubt that thinking beyond or outside the box is one of the most overused cliches in the business world. However, it is literally this approach that is keeping most independent box manufacturers in business.

Even as the marketplace starts rebounding, the pressure will still exist for the remaining firms to be increasingly competitive and creative, explains Stuart Sutley, a principal of the planning and development counselors Capstone Partners LLC.

"Every type of manufacturer has pressures from its customers to add more value without increasing the cost. It is how firms respond that will ultimately determine their fate. The firms that will come out on top will be the ones that can handle all of the customer's packaging and shipping requirements," Sutley says. "The sooner that independents realize that the market is not going to come back and that it has truly changed, the better. You cannot sit back and wait. You need to be proactive and make the changes necessary to your operations." Steve Young, president of the Association of Independent Corrugated Converters, agrees. "The way that manufacturing is evolving, there is now too much box capacity in the country, which has definitely driven pricing down," he says. "Being successful really means developing the relationship with the customer base and understanding what areas are problem areas."

This is really a matter of rethinking and using sales intelligence, Young explains. "If something solves the problem for a customer, the independent needs to consider it. You need to look at what you can actually do for the customer and make money at it. Looking at every aspect and being creative will only make businesses better in the long haul."

Forming Partnerships

While the experts suggest that box makers need to be a one-stop shop to survive, this does not mean that every plant needs to have all the capabilities under one roof. Instead, Sutley suggests that proactive independents work diligently to find true partners in their geographic area that can effectively support them.

"If they go to their customer and they say they want their product wrapped in foam, individually packaged and subsequently boxed and placed on a pallet, this should not be scary--independents should view this as an opportunity," Sutley says. "Produce what you are good at and establish partnerships that provide the additional products. The key is making sure that this is all transparent to the final customer since they do not want to have to deal with all the issues."

Of course, having a complete menu of products and services sounds great in theory, but the downside is that there can be a loss of control. The way around this is making sure that there is far more than just a supplier-customer relationship between parties--the relationship needs to be very strategic in nature.

"You need to have a level of understanding and comfort with one another. For instance, you need to know each other's weaknesses and be open with one another," Sutley says. "You do not want to open up more problems than the market is presenting on its own and not meet the commitments you are making to your customer. This way, all the customer needs to know is that you are going to get it done."

According to Young, partnerships of this nature also make companies less susceptible to Internet bidding and commodity pricing because companies realize the additional value is there. "It is much more difficult to replace a supplier that is performing multiple tasks than one that is simply providing a box," Young says. "You need to make yourself indispensable."

Another type of partnership that is rapidly growing includes the trend where groups are buying into a piece of equipment. In these instances, all of the companies own the piece together and get to make use of the new technology, but spread the risk according to actual use. "Independents can say it is theirs, but not have the entire risk," Sutley says. "It is a win-win."

Capitalizing on Intellectual Property

Finding itself in a world where a box is more than just a box, Lake Forest, Ill.-based Colbert Packaging Corp. decided to branch out from being a traditional folding carton manufacturer. The first step was putting the people in place who understood creativity and intellectual property. The main staff members Colbert has added are in the area of research and design, design and engineering, customer service and sales to help get new products developed and out into the market.

Considering the people aspect first was a very smart move, according to Young. "If a business has long focused on a specific product and is deciding to add an unconventional product or service outside their core offering, they need to make sure that they have the people in place with the expertise that can make the venture a success," he says. "Not doing so can actually be detrimental to a packaging producer. The goal needs to be creating a seamless solution."

According to Colbert Executive Vice President Jim Hamilton, after hiring people who understood and thrived upon the intellectual property aspect, the goal was to identify areas where Colbert could provide value-added that would truly benefit the customer and lock in the business. In some cases this involved combining paper and paperboard, paperboard and corrugated or paperboard and plastic. "We just wanted to get outside of the mainstream," Hamilton says.