STRENGTH IN NUMBERS

JOE MORELLI HUSTON PATTERSON PRINTERS VICE CHAIRMAN JMORELLI@HUSTONPATTERSON.COM

PAT SZANY AMERICAN CORRUGATED MACHINE CORP. CHAIRMAN PSZANY@ACM-CORP.COM

GREG JONES SUN AUTOMATION GROUP SECRETARY GREG.JONES@SUNAUTOMATION.COM

TIM CONNELL A.G. STACKER INC. DIRECTOR TCONNELL@AGSTACKER.COM

DAVE BURGESS JB MACHINERY IMMEDIATE PAST CHAIRMAN DBURGESS@JBMACHINERY.COM

Post-COVID Reflection and Best Practices

BY JOE MORELLI

In April, I had the honor of speaking at the AICC Spring Meeting in Amelia Island, Florida, as a panelist in a Member Town Hall on Top Industry Issues. Considering it was our first in-person event since the COVID-19 pandemic began, the first question brought to the table was particularly relevant for the nearly 200 people in attendance: What procedures were put in place during the pandemic that you believe will become a part of everyday life?

As I begin to travel around the country again and talk to people about how their businesses are changing, three process changes stick out to me as ways we all can take problems from the pandemic and turn them into benefits for our businesses.

The first is supply chain management. Many of us have had supply chain contingencies built into our daily processes for years. If one supplier goes down, we all have backup. What I have found particularly interesting during the pandemic is the attention to detail when discussing emergency supply chain protocols. Companies are diversifying their supplier base and going into great detail with their current suppliers to understand their protocols, whether there are disruptions in their supply chain, and what their reliance is on foreign products. It is something that will without a doubt become a part of their normal supply chain management, creating an all-encompassing protection plan for their businesses.

Perhaps one of the more interesting byproducts of the pandemic was the improvement in efficiency. I’ve heard stories from industry friends, one person said they reorganized a material staging area in their plant in order to reduce human touches on the material itself. The move reduced the number of touches from four people to one person before it went on the machine. Not only did the move end up being safer for the employees in terms of COVID exposure, but in the end, the company realized it was much more efficient.

The third lasting aspect of pandemicaffected business is sales tactics.

In a recent virtual think tank that I hosted, we interviewed sales expert Mark Allen Roberts, who presented several staggering statistics from McKinsey & Co. He reported that 70%–80% of B2B buyers prefer virtual sales, even when COVID restrictions are lifted. Also, 70% of B2B buyers feel comfortable purchasing up to $50,000 virtually, without ever meeting a sales rep, and nearly 30% of those same buyers feel comfortable spending up to $500,000 without in-person contact! These numbers are shocking and a clear indication that a permanent shift in sales tactics is on the horizon.

Being back in person at an AICC event was incredible, and I don’t think there will ever be a time when we replace the in-person dynamic of business, particularly in sales. I believe the pandemic gave us an opportunity to innovate within our businesses and has created opportunities for growth that perhaps we didn’t even know existed.

Joe Morelli is vice president of sales and marketing for Huston Patterson Printers and is vice chairman of AICC’s Associate board.

Managing Success

BY MITCH KLINGHER

For me as a guy who interfaces with many converters on a regular basis and is privy to a lot of financial information, 2020 was probably the most profitable year for converters since I got involved with the industry almost 30 years ago. It certainly didn’t start out that way, and when COVID-19 hit the economy hard in early 2020, many of you experienced some rocky months. But just about everyone obtained PPP loans, which more than covered the down months and the trials and tribulations of running a fairly labor-intensive manufacturing operation during a pandemic. Even without the effect of the forgiven PPP loan on the income statement, many converters were showing profits in the rarified air of 15%-plus on the bottom line, many of you were in the 10% to 15% range, and almost everyone had a good year.

With two price increases already implemented (and a third one looming), it seems that price increases are good for everyone’s bottom line, and my observation from watching the business closely for quite a long time is that converters pick up margin when the price of paper goes up. The economists point to a dramatic increase in nonstore retail sales during the second half of 2020 and cite the government stimulus programs for a big overall uptick in consumer spending. Panic buying during the early stages of the pandemic has also been cited as a factor in all of this, but the bottom line is that everyone is busy—so much so that paper supply has become tight, lead times for orders have lengthened dramatically, and everyone is working hard to take care of their good customers. The price for packaging has all of a sudden become less of an issue with the customers than the availability. Integrated companies are sending more and more orders to independent companies, and large independent companies are sending more and more orders to smaller independent companies.

The last half of 2020 and the first four months of 2021 have been a veritable panacea for both integrated and independent companies. So the question that needs to be asked is, “What should you be doing with this success?” In the last edition of BoxScore, I argued for using it to invest in your business to help ensure its long-term future. High-speed converting, with its increased output relative to plant employee head counts and more consistent and precise boxes with better print and a lower average cost per unit, will certainly help you be more competitive. I still believe that this is the right course of action for most of you, but let’s look beyond this and talk about the market and other external forces that need to be considered to help you come up with a more comprehensive plan. • With the integrated-based companies so busy, they are exporting much less paper. • Pricing for paper in almost all of the export markets has improved dramatically, so many of these contracts that used to generate little or no profit are not nearly as bad now. • Because of this, it is unlikely that the prices that they are willing to pay for