What do box buyers want? Price is important, but so is quality, reliability and proactive service

Paperboard Packaging, Feb, 2004 by Hallie Forcinio

Box buyers vary as much as the product they purchase but still share many commonalities. If the small number of buyers interviewed for this article is representative, box buyers are more likely to be male than female. Although most are experienced purchasing agents, odds are good that they are relatively new to buying boxes.

Box buying generally is not a full-time job either. Most box buyers also are responsible for other types of purchases. Not surprisingly, many buy other packaging materials. Some also buy ingredients or product components. Even though it might be a relatively small part of what a buyer does all day, box spending generally is quite substantial, with annual expenditures reaching millions of dollars. Orders typically involve a multitude of sizes and constructions dominated by C-flute kraft corrugated.

The biggest changes in the box buyer's life has been the advent of the computer, which has affected all facets of his job including communication, design and printing. There also has been a transition from long runs to shorter runs to accommodate more diverse product lines and rapidly changing promotional campaigns.

Although negotiating the lowest possible cost has always been an important part of the buyer's job, that has taken on new importance in recent years. "There's increasing focus on the purchasing department to ensure competitiveness in the global marketplace," says Doug Baker, senior commodity manager, Ridge Tool Division of Emerson Electric, Elyria, Ohio, who spends about $2 million per year on boxes and point-of-purchase displays. "Year-over-year cost reduction efforts are very important," he adds.

However, cost is not the only determining factor in selecting a box supplier and may not necessarily be the most important criteria. Quality also is extremely important with one buyer listing it as both number one and number two in his list of the three most important characteristics of a box.

"We also consider performance, service and knowledge of our business," says Liliana Rodriguez, snacks and beverages purchasing manager at Procter and Gamble Co. (P&G), Cincinnati, who is phasing into buying materials, packaging and ingredients for the Folgers and Millstone coffee brands after working with the Sunny Delight brand, which is in the process of being sold.

Building Relationships

We may be living in the computer age, but face-to-face encounters remain the buyers' favorite means of communication. Of course, e-mail, phone and fax also are used, particularly for routine contacts, confirmations and follow-ups with e-mail and phone used most frequently.

Although some buying is done on a spot basis, most purchases are made under long-term contracts. Business typically is opened to bid every two or three years. However, suppliers may not actually change vendors that frequently. Incumbents often retain the business because they have earned a reputation as a superior supplier and they offer suitable terms in the form of competitive pricing and/or value-added service to extend the relationship. Incumbents also may retain the business if changing to a new supplier involves replacing plates and dies, which can quickly become prohibitively expensive.

Reverse auctions, which have evolved with the growth of the Internet, are another purchasing tool. Many buyers have bought boxes via reverse auctions. In fact, some long-term agreements have begun with a reverse auction. Interestingly, although most buyers who have participated in a reverse auction are open to the idea of organizing another, few have actually committed to doing so. Of course, box makers, who have seen margins eroded by reverse auctions, would be happy to stick with more traditional negotiation methods.

Although interest in reverse auctions may have waned somewhat they "are a fact of life," Baker says. "They have proven to be a tool that often works for certain commodities," he adds.

Although virtually all buyers have rationalized the number of box suppliers with whom they do business, single sourcing appears to be relatively rare. "Our recommendation is to always have more than one supplier except for very specialized products," Rodriguez says.

Indeed most buyers opt for a primary supplier and a couple of secondary suppliers particularly if multiple plant locations are involved. To minimize freight costs, which can be considerable since corrugated is relatively heavy and bulky, many box buyers try to select suppliers with facilities strategically located in proximity to their own operations. "It doesn't make sense for a customer in Ohio to be buying from out of state because of (extra) freight charges," Baker says.

Even with the substantial consolidation that has taken place among corrugated suppliers, there is no lack of potential vendors in most areas. Suppliers also can be found in all sizes including small local entrepreneurs, mid-size regional players and large national/ multinational organizations.

Proponents of single sourcing claim it fosters a value-generating partner relationship, which allows plant and supplier personnel to work together collaboratively to build a box that runs effectively on the purchaser's packaging line(s). Advocates also believe single sourcing results in the most cost-effective prices. This is especially true if the buyer's business represents a significant percentage of the box maker's sales and profits since a buyer's leverage is directly proportional to the impact the supplier would experience if the business were lost to a competitor. "Suppliers work hard to keep the business of larger buyers," Baker says.