“It’s the ability to rely on other locations to continue to be responsible and meet customer demand versus the singlesite facility that, let’s say, had a COVID outbreak that took half the shift down.” —Gene Marino, AICC chairman and executive vice president, Akers Packaging Service Group but at end of the day, you still have the security blanket.” And of course, suppliers will return the favor. If Welch Packaging’s own corrugator goes down, “it’s nice to know that they could ramp their volume up,” Welch says. “They can help us.” Ensuring a return on the investment in corrugating capabilities demands that the machinery be steadily occupied. “The capital to put in a corrugator is very significant, and if you don’t have the volume to operate that corrugator every day, it can be a very expensive,” says Welch. “You can lose money pretty easily if your trim pool is not good, your waste is high,
and you don’t have enough volume to absorb the fi xed costs of the operation.” Marino agrees that strong vendor relationships remain necessary to fill the strategic but inevitable gaps in vertical integration. “There are certain grades we don’t run on our corrugator,” he says. “I still have to make a call to a vendor who will make sheets for me because I choose not to carry different grades or different varieties of paperboard.” While vertical integration offers multiple advantages, including independence from suppliers, it also runs complexities upstream or downstream, adds Marino. A box plant that invests in making its own sheets now has responsibilities for buying and storing containerboard and maintaining expensive equipment. A mill, once acquired, demands a constant supply of personnel and feedstock that keep it running almost 24/7, plus strategically planned preventive maintenance breaks in order to reap returns on the costly investment. That’s why it’s important to remember, when contemplating any sort of integration, that “there are some very efficient and very well-run suppliers out there,” Marino says. “It’s really like anything else. What will be the return on the investment in capital in order to make that move?”
Pandemic Agility Even as the global economy experienced upheaval from the COVID-19 pandemic, Welch says that the acquisition that led
56
BOXSCORE March/April 2022
to creation of Green Meadows Paper Co. “could not have come at a better time.” “All suppliers have struggled the past year,” he says. “Integrating and having more control of our supply was a distinct benefit for Welch. We have certainly benefited from having input or control rather than being at the mercy of the free market.” But as Marino notes, an economic crisis can exacerbate the existing challenges of integration, depending on the business model. Some in the industry run their own truck fleets, while others choose to outsource transportation. Even before the pandemic, the driver shortage—worsening now as the last of the baby boomers age into retirement— created roadblocks for both. It’s a dilemma that Welch and his team manage every day, but one that extensive integration makes manageable. “Having the ability to build redundancy plans and alternative options, that’s where having control is an advantage,” he says. “I’d rather fail myself than get mad at somebody else for holding me up.” Few companies have been immune to the supply chain and personnel challenges of the current economic climate, Marino says. “We’ve just had to be a little more proactive in how we maintain and turn over inventory stock and work with our suppliers to make sure we’ve got the least amount of interruptions possible,” he says. In its 50 years, Akers Packaging Service Group has acquired or started 13 paper and packaging businesses—13 sites in six states. The size that comes with those acquisitions and that integration has allowed Marino’s Akers Packaging “more responsiveness and more flexibility because we could rely on other plants for spikes in business,” he says. “It’s the ability to rely on other locations to continue to be responsible and meet customer demand versus the single-site facility that, let’s say, had a COVID outbreak that took half the shift down. The size speaks to
