Nov/ Dec 2016 AICC Boxscore by AICC, The Independent Packaging Association

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A PUBLICATION OF AICC, THE INDEPENDENT PACKAGING ASSOCIATION

November/December 2016 Volume 20, No. 6

WELCOME NEW CHAIRMAN

TONY SCHLEICH! A strong proponent for principled leadership and putting people first

ALSO INSIDE Better Business Through Best Practices Succession Planning AICCâ&#x20AC;&#x2122;s 2016 Annual Report

TABLE OF CONTENTS November/December 2016 • Volume 20, Issue 6

COLUMNS

ON THE COVER AICC President Steve Young with new AICC Chairman Tony Schleich at Tony's plant in Hutchinson, Kan.

FEATURES

WELCOME, NEW CHAIRMAN TONY SCHLEICH! A strong proponent for principled leadership and putting people first

BETTER BUSINESS THROUGH BEST PRACTICES Sometimes the best course of action to ensure progress means getting back to basics

SUCCESSION PLANNING The future is just around the corner— are you prepared?

OUT WITH THE OLD? NOT SO FAST 5 reasons why a corrugated machine rebuild saves you money and time BY THE NUMBERS AICC’s 2016 Annual Report

BoxScore is published bimonthly by AICC, The Independent Packaging Association, PO Box 25708, Alexandria, VA 22313, USA. Rates for reprints and permissions of articles printed are available upon request. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of AICC. The publisher reserves the right to accept or reject any editorial or advertising matter at its discretion. The publisher is not responsible for claims made by advertisers. POSTMASTER: Send change of address to BoxScore, AICC, PO Box 25708, Alexandria, VA 22313, USA. ©2016 AICC. All rights reserved.

CHAIRMAN’S MESSAGE

SCORING BOXES

LEGISLATIVE REPORT

MEMBERS MEETING

ASK RALPH

TACKLING TECH

LEAN LEARNINGS

LEADERSHIP

SUSTAINABILITY

THE ASSOCIATE ADVANTAGE

FINANCIAL CORNER

THE FINAL SCORE

DEPARTMENTS

WELCOME NEW MEMBERS

GOOD FOR BUSINESS

POINT OF VIEW

MEMBER PROFILE

ICPF UPDATE

Visit www.aiccboxscore.org for Member News and even more great columns. Scan the QR code to check them out!

BOXSCORE www.aiccbox.org

OFFICERS Chairman: Tony Schleich, American Packaging Corp. Vice Chairman: Al Hoodwin, Michigan City Paper Box Vice Chairman: Joe Palmeri, Jamestown Container Companies Vice Chairman: Jay Carman, StandFast Packaging Vice Chairman: John Forrey, Specialty Industries/Krafcor/ NuPack Printing DIRECTORS-AT-LARGE Jim Akers, Akers Packaging Kevin Ausburn, SMC Packaging Group Matt Davis, Packaging Express Marco Ferrara, Cartones Sultana Jana Harris, Harris Packaging Corp. Nelva Walz, Elegant Packaging REGIONAL DIRECTORS Region 1: Doug Rawson, Superior Lithographics Region 2: David DeLine, Deline Box Company Region 3: Justin Mathes, Vanguard Companies Region 4: Eric Elgin, Oklahoma Interpak Region 5: Gary Brewer, Package Crafters Inc. Region 6: Guy Ockerland, OxBox Region 7: Finn MacDonald, Independent II Region 8: Joe Hodges, Mid-Atlantic Packaging Region 9: Larry Grossbard, President Container Group Region 10: Peter Hamilton, Rand-Whitney Corporation Region 11–12: John Franciosa, McLeish Corr-A-Box Coyle Packaging Group Region 14: Yair Caballero, Corruempaques Overseas: Kim Nelson, Royal Containers Ltd. President: A. Steven Young, AICC Headquarters

Immediate Past Chairman: Mark Williams, Richmond Corrugated, Inc. Chairman, Past Chairmen’s Council: Greg Tucker, Bay Cities Container Corp. Secretary/General Counsel: David P. Goch, Webster, Chamberlain, and Bean Counsel Emeritus: Paul H. Vishny, Esq. ASSOCIATE MEMBER DIRECTORS Chairman: Jeff Pallini, Fosber America Vice Chairman: Ed Gargiulo, Equipment Finance Corp Secretary: David Burgess, JB Machinery Director: Pat Szany, American Corrugated Machine Corp. Immediate Past Chairman: Keith Umlauf, Haire Group ADVISERS TO THE CHAIRMAN Gene Marino, Rusken Packaging Jeff Pallini, Fosber America Tom Shallow, Fitzpatrick Containers PUBLICATION STAFF Publisher: A. Steven Young, syoung@aiccbox.org Editor: Virginia Humphrey, vhumphrey@aiccbox.org EDITORIAL/DESIGN SERVICES The YGS Group • www.theYGSgroup.com Editorial Director: Annette Gray Managing Editor: Ashley Reid Copy Editor: Steve Kennedy Associate Editor: Drew Bankert VP, Marketing Services: Jack Davidson Creative Director: Serena Spiezio Art Director: Jason Deller Account Manager: Brian Hershey

SUBMIT EDITORIAL IDEAS, NEWS & LETTERS TO: BoxScore@theYGSgroup.com CONTRIBUTORS Mike D'Angelo, Vice President Maria Frustaci, Director of Administration and Director for Latin America Cindy Huber, Director of Meetings and Conventions Chelsea May, Member Services Coordinator Laura Mihalick, Senior Meetings Manager Taryn Pyle, Director of Training, Education and Professional Development Richard M. Flaherty, President, ICPF ADVERTISING Information: Virginia Humphrey, vhumphrey@aiccbox.org Opportunities: Howard Neft, InTheKnow Inc. 847-899-7104 • thneft@aol.com Folding Carton and Rigid Box Advertising: Taryn Pyle 703-535-1391 • tpyle@aiccbox.org AICC PO Box 25708 Alexandria, VA 22313 Phone 703-836-2422 Toll-free 877-836-2422 Fax 703-836-2795 www.aiccbox.org

ABOUT AICC AICC, The Independent Packaging Association, is uniting and celebrating the success of inspired, independent packaging companies. We are a growing membership association which has served independents since 1974. AICC SERVES: Passionate professionals; The independent and united; The responsive and agile. AICC WILL: Connect and cultivate; Deliver success.

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Intelligent Productivity

Chairman’s Message

MY NAME IS TONY SCHLEICH, AND I APPROVE THIS MESSAGE

s anyone else as happy as I am that the 2016 election cycle is finally behind us? I believe we can all agree we are suffering from election fatigue. In the end, everyone wants to have an effective leader for our country. However, it is apparent that good leadership is harder to find than ever before. This is the reason that our past chairmen chose to focus on leadership themes. I would like to continue this discussion by shifting our focus to principled leadership. Success typically comes from making good decisions. We only come to make good decisions by making bad decisions—and Lord knows I have had my share! The effectiveness of the leadership we provide is a function of the quality of the decisions we make. And the more those decisions are anchored with a clear set of appropriate principles, the more likely they are to be good decisions. We at the American Packaging Division of the Lawrence Paper Company believe there are five core values of principled leadership: Integrity, Balance, Creativity, Agility, and Excellence. I would like to briefly focus on one pillar, integrity, and look forward to sharing more with you as my term continues. We have simply defined integrity as, “Always doing what is right over settling for convenience.” Being a leader of integrity means a person who is consistent, honest, and has a clear moral compass. For me, the learning started when I was growing up in Owatonna, Minn. Regardless of what my brother and I had going on, my mom and dad always made it a priority to sit down and have a family meal. Looking back, I now see that my parents—whether they knew it or not—set the example of principled leadership. My father-in-law and mentor, Dave Claxton, has probably taught me more than any master’s degree could ever teach, and for that I am forever grateful. At the core of principled leadership is the ability to lead by example. Whether it was as small as picking up a piece of scrap from the plant floor or as big as caring enough to understand our employees’ hardships, he earned the trust of everyone who worked for us. I can only aspire to carry on his leadership legacy. As I begin my year as AICC chairman, I will leave you with a quote from Dr. Brené Brown: “Integrity is choosing courage over comfort; choosing what is right over what is fun, fast, or easy; and choosing to practice values rather than simply professing them.” Thank you, and I look forward to meeting with you and carrying on the conversation of principled leadership!

Tony Schleich President, American Packaging Corp. Chairman, AICC

BOXSCORE www.aiccbox.org

Scoring Boxes

UNDERSTANDING CORRUGATED INDUSTRY STATISTICS BY DICK STORAT

round the middle of each month, the American Forest & Paper Association (AF&PA) and the Fibre Box Association (FBA) release containerboard production, corrugated shipment, corrugator consumption of containerboard, and containerboard inventory statistics for the previous month. Monthly reports containing this data are available to the public by subscription. In addition, AICC members receive Scoring Boxes, a monthly analysis of containerboard and corrugated market conditions published by Richard Storat and Associates, which provides analysis of this data. The topmost chart on this page combines this data and provides a visual road map of containerboard flows between the mills that produce the containerboard and the corrugated converting plants that manufacture corrugated products. At the left of the chart, mill data is shown. Total U.S. containerboard capacities are taken from the AF&PA’s annual survey of all containerboard mills and include allowances for scheduled maintenance. The unmade containerboard is the difference between containerboard production and capacity and represents the mills’ reserve capacity that could have been produced in the given month. This difference includes all reasons for not producing the mills’ full capacity, including unscheduled maintence and lack of orders. The operating rate—the national production divided by national capacity—is a useful guide to market conditions. Operating rates of 95 percent or more accompanied by normal

BOXSCORE November/December 2016

Containerboard Flows – July 2016 (000 Tons)

July Box Plant & Mill Containerboard Inventory Changes 000 Tons

200 161

150 109

100

50 26

Source: AF&PA, FBA

or low inventory levels are indicative of healthy demand. The brown center of the flow chart identifies the various uses of containerboard and the sources of containerboard besides that from U.S. mills. Some containerboard production may go

5 yr avg

10 yr avg

into an increase of inventory at mills or mill warehouses. A substantial fraction of production is made for export markets. The July data shown above indicate that 14 percent of containerboard production was made for export markets, a typical share.

Scoring Boxes

BOXSCORE November/December 2016

Unidentified Uses of Containerboard 500 400 300 (000 Tons)

Unbleached kraft linerboard accounts for some 90 percent of this amount. In addition to U.S. mill production, corrugated converters use some imported containerboard, usually 4 percent or less of corrugator consumption. The lion’s share of this amount comes from Canada. Corrugators can also draw from their inventories of containerboard for feedstock. In July, that amounted to an unusually small 9,000 tons. Combined mill and box plant inventories are affected by seasonal demand, so it is useful to compare a given month’s inventory change to prior changes in the same month. For example, July’s inventory rise of 50,000 tons was lower than any of the prior six-year July changes, and fell well below the five- and 10-year averages for July. That suggests that mills provided supply that matched well the demand for corrugated that month. Theoretically, if corrugators were the only users of containerboard, then mill containerboard production adjusted for inventory changes and international trade flows would equal the amount of containerboard converted by corrugators in a given month. Because containerboard is used to make other products not requiring use of a corrugator and for other reasons, Other Uses is the imputed amount of containerboard left over after corrugator consumption is satisfied. Last year, it amounted to 5 percent of all containerboard produced in the United States, or just under 150,000 tons per month, on average. Actual uses, such as the manufacture of slip sheets used to separate tiers of goods on pallets and other packaging supplies, account for most of that amount. However, the volatility of this number from month to month also suggests that other factors are influential. In addition to possible reporting inconsistencies, two other factors can cause monthly variances. Containerboard that has left the mill or mill warehouse but has not yet been recorded as received by box plants is called “in-transit” inventory. It is not

200 100 0 2014

-100

JAN

FEB

MAR

APR

MAY

2015

JUN

2016

JUL

AUG

SEP

OCT

NOV

DEC

Source: AF&PA, FBA

reported as inventory by either the mills or box plants. The volatility arises when there is an increase or decrease in the amount of containerboard in transit. Another factor is that all containerboard made by the mills for export may not be exported in the same reporting period or may, in fact, be diverted in the marketplace from its original overseas destination to domestic use. That situation would also show up as a surge or depletion in Other Uses. Some industry observers believe that when the level of Other Uses is unusually high, it probably means that there is additional containerboard somewhere in the pipeline, which will show up as additional stocks at box plants in a future month. The chart above shows monthly levels of Unidentified Uses for the past three years. The month-to-month variability is clearly depicted. For instance, this July’s amount was noticeably higher than the norm, exceeding the average level of the past four Julys by 46 percent. Corrugator consumption is one measure of demand for corrugated products, but since corrugated products are usually sold by area, not weight, the corrugated industry reports shipments in units of square feet. For example, in July, the corrugator consumption of 2.466 million

short tons was reported as 29.829 billion square feet by FBA. One important operating difference between corrugator plants and containerboard mills is in how continuously they run. Mills run around the clock seven days per week, except for scheduled outages or infrequent breakdowns. Box plants, on the other hand, typically do not operate on weekends or holidays, unless demand is unusually strong. Box plants, thus, usually have between 19 and 23 shipping days per month. On the basis of shipping days alone, an additional shipping day could account for some 5 percent of monthly output. To address that potential problem, box shipments are also reported at an average weekly shipment rate, which provides a consistent basis for comparing output with previous periods, even if the earlier month had a different number of shipping days. This guide to understanding the statistics of the containerboard and corrugated industry should help orient those new to the industry and also serve as a refresher for industry veterans. Dick Storat is president of Richard Storat & Associates. He can be reached at 610-282-6033 or storatre@aol.com.

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Legislative Report

NEW IRS REGULATIONS UNDERSCORE NEED FOR BUSINESS OWNER INVOLVEMENT BY JOHN FORREY

y the time you read this article, the 2016 elections will be over. Of course, at the time I’m writing it I have no idea about the outcome. However it played out, I’m sure most of us are either totally disgusted or just mildly annoyed. But I digress. In the September 19 issue of Board Converting News, Mitch Klingher of Klingher Nadler LLP wrote a sobering story about new regulations out of the IRS that could imperil the estate plans of many private business owners. In it, Klingher gives a comprehensive overview of the theory of business valuation, explaining that when an interest in a closely held business is transferred, its value can be enhanced or discounted, depending on how much control on the business the particular interest exerts. The value can be “discounted” if it is a minority share, for example, on the theory that a buyer would not want to pay a premium if an element of control in the business were not included. This discount is important in family business situations because the “discounted value” allows a transfer of interest at less than full value, saving taxes and allowing more wealth to be retained in the family. According to Klingher’s article, the IRS is proposing to do away with these valuation discounts in those instances where family members control more than 50 percent—a situation which puts in peril the ability of any family to successfully pass on the business. These rules being proposed by the IRS are a classic example of the kind of

BOXSCORE November/December 2016

Our AICC/FBA Industry Fly-Ins are opportunities for us to come to Washington and meet face to face with our legislators to discuss these kinds of abuses of power. regulatory overreach we have witnessed in the past several years as Congress is deadlocked and nothing gets done. This allows government agencies like the IRS, the Department of Labor, the National Labor Relations Board, and the EPA to, in a sense, run amok and act unilaterally. While they ostensibly are acting under prior legislative authority, in reality they often depart from the original congressional intent of their enabling legislation. Our AICC/FBA Industry Fly-Ins are opportunities for us to come to Washington and meet face to face with our legislators to discuss these kinds of abuses of power. Whatever your political persuasion, we can all agree that our Constitution guarantees a separation of

powers in the branches of government; they are, however, being eroded as the IRS example above shows. Please plan on attending our Washington Fly-In next June to help us protect the interests of independent businesses. We need independent business owners like you to show up, take a stand, and speak out. John Forrey is president of Specialty Industries and NuPak Printing in Red Lion, Pa., and is chairman of AICC’s Government Affairs Committee. He can be reached at 717-2464301 or jforrey@specialtyindustries.com.

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New Members

WELCOME, NEW MEMBERS! COLORHUB TIM HARRIS Partner/ CEO 4064 Rum Run Ave. SE Grand Rapids, MI 49546 Phone: 616-379-9303 Website: www.colorhubprint.com Email: tim@colorhubprint.com

INX INTERNATIONAL INK COMPANY JAMES G. WEGEMER Director, National Accounts 150 N. Martingale Rd., Ste. 700 Schaumburg, IL 60173 Phone: 800-631-7956 Fax: 847-969-9758 Website: www.inxinternational.com Email: jim.wegemer@inxintl.com

SCHRAGE BOX & DESIGN MICHAEL SCHRAGE Vice President 2511 State Rd. Bensalem, PA 19020 Phone: 215-604-0800 Fax: 215-604-0800 Website: www.schragebox.com Email: mike@schragebox.com

J.S. MACHINE MICHAEL CLARY President 350 Clubhouse Rd., Ste. G Hunt Valley, MD 21031 Phone: 410-584-9626 Fax: 410-584-7626 Website: www.ncmpackagingequipment.com Email: michael@ncmpackagingequipment.com

NATIONAL STEEL RULE EDMUND MUCCI General Manager 750 Commerce Rd. Linden, NJ 07036 Phone: 908-862-3366 Fax: 908-862-5339 Website: www.steelrule.com Email: e.mucci@steelrule.com

TUBOS Y EMPAQUES DE PUEBLA SA DE C.V. MARIA ELENA RUGERIO Directora General Río Colorado 6106 72570 Puebla, Pue. Mexico Phone: +52 222 2-86-74-56 Website: www.kjastepsa.com Email: merg@kjastepsa.com

At C&M Conveyor, we’ve enhanced our ability to meet the demands of today’s corrugated marketplace by adding products and manufacturing capability. The benefit to you: maximum throughput with the flexibility to meet your customers’ ever-changing needs. Our project management approach means we’ll identify your requirements, manufacture to your specs and install on time. Contact us today; let us solve your toughest problem. Leading supplier to the corrugated box industry 4598 State Rd. 37 • Mitchell, IN 47446 812-558-7960 • 800-551-3195 www.cmconveyor.com

BOXSCORE November/December 2016

Members Meeting

2016 EMERGING LEADER CHAIRMAN’S FIELD TRIP RECAP BY GREG McGRATH

n June, more than 40 members of the AICC Emerging Leaders community came together for the third annual Chairman’s Field Trip in historic Richmond, Va., where then-AICC Chairman Mark Williams rolled out the red carpet. As a new member of the community, I had been looking forward to this event since the Spring Meeting in Palm Desert. It did not disappoint. During the 2½-day event, we got to know our fellow Emerging Leaders better, discussed leadership and succession planning with a number of industry leaders, and learned from plant tours that included Richmond Corrugated, Altria Group/Philip Morris USA, WestRock’s Richmond manufacturing facility, and their HQ Design Lab. I learn something new every time I go into a manufacturing plant, and the breadth of plant tours we had on this trip was especially valuable, but the highlights of this field trip for me were the leadership discussions and networking within the group. Scott Ellis facilitated the best panel discussion I’ve seen in some time, on the “Unwritten Rules of Leadership,” with Mark Williams, Jana Harris, Andy Pierson, Jerry Frisch, David Callif, and Joe

BOXSCORE November/December 2016

I learn something new every time I go into a manufacturing plant, and the breadth of plant tours we had on this trip was especially valuable, but the highlights of this field trip for me were the leadership discussions and networking within the group. Hodges sharing their personal journeys and offering up advice to their younger selves. The fact that many knew each other previously increased the interaction and took the discussion to a higher, more personal level. Having access to insight and reflection from longtime leaders in the industry was incredibly valuable. One leadership characteristic that came up multiple times throughout the discussion, which everyone could relate to, was persistence. The conversation flowed and could have lasted much longer. It was a busy few days, and while my to-do list grew during the week’s events, I left Richmond feeling refreshed and re- energized. It’s easy for us to get caught up in the hustle of daily life and forget to take

a step back, look at the bigger picture, and make sure we are still developing personally and professionally each and every day. The large turnout for this year’s field trip is a testament to the great value of this community. It is inspiring to have the chance to interact with so many young, talented leaders who are passionate about the corrugated and packaging industry. The relationships made at this and future events extend far beyond business and will carry on for years to come. Greg McGrath is sales and business development leader, UV/IR systems, at Baldwin Technologies. He can be reached at 815-979-0373 or gregory.mcgrath@ baldwintech.com.

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Ask Ralph

RIGHT WEIGHTING (CONTINUED) BY RALPH YOUNG

n the last issue of BoxScore, we shared that a four-man team presented in Mexico about the no-longer-emerging market for properly made corrugated with just the correct amount of fiber balance among the three to five components. In the article before that one, we stated that 13.5 percent of the containerboard produced in the United States was at 32#/MSF and below. Has this been your experience? We realize that there may not be one solid description for “right weight,” so I will offer one up:

Definition: Right weighting is using the right strength selections of linerboards and medium(s) in combination with a choice of single-wall or double-wall options, as many as a dozen different flutes, design, graphics, interior support, and knowledge of the distribution environment, to create the right package with the least amount of fiber and cost. Example: It can be a 72# performance grade of linerboard substituting for a 90# mullen grade all the way to 18# linerboards in a double-wall combination to engineer a 32# ECT or 40# ECT combined board option. The opportunities have never been greater to look to the strength and combining characteristics of containerboard to obtain the right package or carton. The downward shifting of fiber consumption and upward focus on generating the maximum strength per pound of fiber was demonstrated decades ago with the corrugated clamshell, the AC Delco parts carton, and the Nike footwear box.

BASIS WEIGHT CATEGORIES, LINERBOARDS: Heavyweights

52–96#/MSF

Midweights

35–37#

Traditional Lightweights 24–33# Newest Lightweights

18–23#

The contents of the chart above are somewhat arbitrary, but you understand the structure. These are North American grades and are not typical of what Europeans produce and convert. With Smurfit Kappa’s presence here in the United States, one might expect them to seek out the equivalent grades here with options to combine in their own facilities. There are 10 different machines in the United States, three in Canada, and two in Mexico that offer linerboards from the last category in the chart. If you wish to learn more about the range in properties among the mills, contact me directly. History: The “right weighting” began in North America in the late 1970s, when Owens-Illinois’ Forest Products Division (now G-P and PCA) began to substitute stronger, higher-STFI grades of medium and to reduce linerboard weights for combined board and boxes. What they were doing was redistributing the vertical compression load sharing of the components. They were using less expensive medium to replace more expensive linerboard weights and strengths. In 1991, rail and truck shipping regulations allowed for the use of any combination of components, as long as minimum ECT levels were met based on the content weight and dimensions

of the corrugated box. So, over the years we have seen reductions in liner weights by some mills from 42# to 35# to 33# to 31# and a few mills that can achieve a 32# ECT using 29# liners. Then it was called source reduction, then sustainability, reducing over-packaging, and fit for use, and now we are entering the realm of right weight packaging and containerboards focused on smaller package sizes, e-commerce, and shelf-ready, retail-ready, and corrugated substitutional opportunities for solid fiber packaging. It is usually in the arena of small- and microflute packaging and using modern high-strength grades using a range of 18–33# fiber combinations. Combiners and converters who embrace this developing trend will need to digest some new physical property terms to distinguish among the different offerings. If we look to selected European websites, we can observe process controls that no longer use ECT as a predicator of box performance, but rather use the DST instrument, which measures torsional stiffness and the impact of medium degradation at the single and through the converting operation. And in the area of the lightest weight combinations and smallest flute methodologies—such as block compression, corner crush, and Taber—stiffness might offer better analyses. It is not about measurable caliper. Ralph Young is the principal of Alternative Paper Solutions and is AICC’s technical adviser. Contact Ralph directly about technical issues that impact our industry at askralph@aiccbox.org.

BOXSCORE www.aiccbox.org

Tackling Tech

PRACTICE, PRACTICE, AND BEST PRACTICES BY JOHN CLARK

he packaging industry is going through a major transformation as competition heats up and markets remain stagnant. To compete, companies must reduce cost, improve customer service, create innovative designs, and deliver on time. The pressures companies are facing are forcing them to review all workflows to achieve these goals and drive improved performance. These improvements manifest themselves in transformational best practices. Here are a few:

Making It Easier to Do Business with Your Company Packaging manufacturers are providing online quotes and ordering. Enable customer self-service with real-time tracking of production and deliveries. Going Paperless Electronic proof of delivery (tablet or phone) and automated billing delivers invoices immediately for improved cash flow by eliminating transaction turnaround time. Additionally, this reduces the administration effort—likely on the part of the billing person—and could eliminate a position in companies where there are large quantities of orders. By going paperless for specs and scheduling in the plant, companies can electronically collaborate from design to order fulfillment, ensuring customer specs are perfect and orders arrive in time. Tightening Up the Sales Process Companies are implementing sales force automation systems and workflow tools to expedite the sales process from customer

BOXSCORE November/December 2016

inquiry through design, sample making, and quotations. This improved workflow gets the end user a more accurate, timely, and accurate quote while providing the basic information necessary for the plant to initiate approvals and production. Salespeople are also becoming more like account managers. They are assuming a much broader level of responsibility where they need access to continually updated

they present results anywhere, anytime for an actionable response to improve a situation and outcome. Outsourcing Noncore Functions Finally, companies are outsourcing noncore functions such as IT and payroll as plants try to better utilize team members strategically and attempt to get lean by reducing head count. The migration to

By going paperless for specs and scheduling in the plant, companies can electronically collaborate from design to order fulfillment, ensuring customer specs are perfect and orders arrive just in time. customer information such as orders, schedules, shipping, and accounts receivable (AR) to grow an account and be part of the service paradigm. Today’s customer relationship management (CRM) systems have taken over from the good old days of personal touch and telephone calls. Updating Records with Big Data and Analytics Historical information is becoming a thing of the past—pun intended—as companies have access to real-time data and sophisticated algorithms that can predict the future and alert you to trends. In addition to reports and graphs, analytic tools are crunching productivity, sales, logistics, and financial information, and

the cloud is reducing IT spending, capex, and human support needs as companies need access to a team of outsourced experts versus a single expert. Understanding your customers and your internal strengths and weaknesses are the first steps in redefining how you can operate at a higher level. Adopting new, better practices will depend on your commitment, people, and stick-to-it attitude. John Clark is director of analytics at Amtech Software. He can be reached at jclark@ amtechsoftware.com.

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Lean Learnings

BASICS BEFORE INNOVATION BY MIKE NUNN

What’s the next best thing? How do we continue to add value? When can we develop something innovative and groundbreaking?

hese questions apply to more than just lean; they can be asked of the packaging industry or any business. With rapid advancements in technology, the drive to come up with new ideas, products, and solutions seems to be limitless. However, maybe a focus on the foundation and basics needs to be the top priority before trying to innovate. In the lean world, one of the toughest things to do during kaizen is develop a less wasteful process. To literally think outside the box, remove your existing paradigms of why something may or may not work, then partner with the stakeholders to come up with the third alternative (Covey reference) that is waste-free.

Find Your Focus There are many proven lean tools and concepts to draw on—such as single piece flow and kanban—but it’s the focus on basics that is missing in many organizations. It is the complete understanding of the basics that will drive true kaizen, which is also what created those tried and true lean concepts and tools in the first place. In lean, you can’t focus on learning advanced problem-solving tools like kata until you have the basic ability of seeing and measuring waste. However, all too often this is what I see and hear. Lean leaders and professionals are out learning new tools and going to more seminars, while back on the plant floor, only a select few people can identify all the forms of waste

BOXSCORE November/December 2016

and give examples from their work area. Fundamentally, I believe this is wrong. The original (yes, basic) forms of waste are: transportation, excess inventory, wasted motion, waiting, overproduction, overprocessing, and defects. There are people who would argue there are more forms of waste, but they’re just trying to innovate and be new. Basics … we’re talking about basics, man. Basics. In the packaging world, you can’t design and manufacture an innovative new corrugated box without first understanding the basic characteristics

A Shared Vision Beyond lean and packaging, the basics- focused mindset can apply to our businesses, too. Does everyone on your team truly know why you exist as a business, what your purpose is, and what your vision and mission are? Have you asked? In your business, these things should be considered the platform of decision. True north. The ultimate basics. Please don’t take it for granted that your team knows these basics. Are you the best in your market/ industry at your core business, or are you just one of many who is indistinguishable

Lean leaders and professionals are out learning new tools and going to more seminars, while back on the plant floor, only a select few people can identify all the forms of waste and give examples from their work area. Fundamentally, I believe this is wrong. of corrugated board. Moreover, you can’t ignore these basic characteristics either. Corrugated fundamentals need to be taught and retaught within our organizations. How often is your team being trained and retrained on the basics of corrugated? Hopefully, at least when they’re hired.

from your competition? Quality, customer service, speed to market, and people development are the basics you need to be focused on; be great at those things. By the way, you’ll notice price wasn’t on my list. What if our energy were focused on the basics and doing everything with wow? What if we took all our energy and

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Lean Learnings

improved all the systems and processes that make our businesses tick? How good could your quality be? How fast could your lead time be? To what level could your customer service grow? Tried and True As an avid reader, I am always on the hunt for great business, leadership, or personal development books. To the contrary, I was recently listening to a talk by one of my favorite thought leaders on the topic of leadership and personal development, who talked about the desire for many people—like me—to continue reading new books in search of the next great book. However, this search for “new” can prevent you from truly absorbing, applying, and learning the fundamentals. He challenged the listener, instead of

Quality, customer service, speed to market, and people development are the basics you need to be focused on; be great at those things. searching for the latest piece of development literature, to seek out the tried and true classics and read those books, then reread them and master them. I am on a mission right now to follow this advice

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BOXSCORE November/December 2016

by reading, again, the classics in my collection: The 7 Habits of Highly Effective People, How to Win Friends and Influence People, The Art of War, and a few others. Most companies focus on being OK at the basics while pushing to innovate. I challenge you to innovate on the basics, then try to change the world. Mike Nunn is vice president of operations at Ideon Packaging and is Lean Black Belt–certified. He can be reached at 604-524-0524 or miken@ ideonpackaging.com, or followed on Twitter @mikednunn.

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Leadership

CORPORATE CHARACTER BY SCOTT ELLIS, ED.D.

haracter is the essential component of attracting and retaining both employees and customers. At the core of leadership is the essential ingredient of character. Webster defines it as “the aggregate of features and traits that form the individual nature of some person or thing.” Leaders act in accordance with the promises they have made. Some would say that character includes a high moral standard, but I will argue that doing what you say you are going to do is the essence of character. Even a despot can exhibit character if his word is his bond. When he ceases to keep promises—my wife told me it was safe to use the masculine pronoun when describing a despot—he will find that allies, customers, employees, subjects, and supporters become scarce. Corporate character is the combination of traits that make up the personality of an organization. When both the written and unwritten rules of engagement are congruent, the company will keep its promises to the marketplace (customers) and to itself (employees). Individual character development is difficult, and corporate character development is a constant effort. Failing is as easy as interrupting an improvement project for seasonal business fluctuation and forgetting to follow through when time allows. It is easy to develop a negative reputation with employees when we jump through hoops for customers and are slow to meet the needs of employees—even when doing so would make it easier to meet customer demand. People want to work in a predictable and ever-improving environment. Customers are drawn to structured and adaptive suppliers. So, as we are getting back to basics in this issue, making and keeping promises must be a constant in company culture if we are to thrive.

BOXSCORE November/December 2016

Customer Satisfaction Quality

Value

GO Pillar “Pull” Throughout System

Delivery

Variety

Continuous Improvement

Safety

STOP Pillar Quality at the Source

Tools of Lean

Employee Satisfaction Stability, Reliability, Felxibility Flexibility Culture of Lean

Visual Workplace Standardized Work Team Work

Leading Improvement How can we lead improvement in our corporate character? First, it must be acknowledged that no individual or company is faultless in this effort; we all fall down. As Alfred said to Batman, “Why do we fall? So we can learn to pick ourselves up.” I believe that recovering from a fall, and learning to fall less often, is the developmental process toward corporate character. As an example of this challenging development, we’ll look at the common problem of follow-through. Consistency in the building and maintenance of a visual workplace with use of 5S or 7S is a very common point of frustration. Employees voice this when they call such programs the flavor of the month. Management voices it when the disciplines have broken down and a major effort must be made to prepare for a customer visit. We understand the value added when the work environment is organized for success with nonverbal signals that make it easy to do the right thing in a safe and cooperative effort. However, distraction often leads to

disagreement about responsibilities for cleaning and maintenance of the work center. Even if employees are inclined to do the work, they may not be allotted the time to complete these responsibilities. So, what was intended to positively change the culture instead raises the level of resistance and cynicism. Let’s follow through with this example and discuss how one company recovered and then thrived. Case in Point All of the above was true of our case study company. They had completed three S activities (Sort, Set in Order, and Shine) but had become distracted before gaining the two agreements on how they would Standardize and Sustain their progress. As a consequence, they had improved neither morale (Spirit) nor the company’s Safety record. But, they recovered well by dedicating staff and time for training and implementation. They allowed the people closest to the work in both administrative and manufacturing areas to build agreement on how to organize and maintain order and cleanliness. They

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Leadership

placed materials and tools they used regularly in close proximity. More importantly, they took the time to codify those agreements so that best practices would survive the changes in mood, crew members, or supervision. They built in measurement of productivity, quality, and safety; then they asked management to audit the best practices so the habits would last. They recognized team members for doing all this, and the net effect is depicted in the following occurrence. The company was a 10 percent supplier to one of the largest wineries in the world. One of the wine producer’s owners toured the plant on short notice, but no one panicked because the habits of 7S were well-ingrained, and the plant was tourready at all times. When the salesperson

guiding the tour stopped at a converting machine, the proud machine operator stepped forward and began answering the guest’s questions. He explained how they kept the process under control, and showed the nearby postings of quality, safety, and productivity measurement. The guest was so intrigued that he asked what improvement project the operator was currently working on. The salesperson was alarmed to see the operator and his guest disappear behind the machine to open a cabinet where he had been organizing and labeling cables for ease of cleaning and quick repair should there be a problem. In very short order, the guest told the salesman that he would be moving a significant portion of their high graphics work into the company: “Don’t worry, you’ll get the commission; but that

operator made the sale. I want that guy making my boxes.” Corporate character is all about keeping promises, falling, recovering well, and following through. As with this and many other examples, the benefits are tangible and measureable. This plant still reports that more than 90 percent of those who tour the facility will become customers. A variety of factors may attract a customer or a talented employee, but character is key to making the relationship thrive. Scott Ellis, Ed.D., is a partner in P-Squared (P 2). He can be reached at 425-985-8508 or scottellis@psquaredusa. com.

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Sustainability

CORRUGATED PACKAGING SETS ALL-NEW RECYCLING RECORDS BY DENNIS COLLEY

he Corrugated Packaging Alliance (CPA) shared glad tidings in two packages this past summer. In June, CPA reported that the OCC (old corrugated container) recovery rate hit an all-time high of 93 percent in 2015. Then later, CPA announced a rise to 48 percent in the average recycled content of corrugated boxes. That’s higher than previous estimates, and an important part of corrugated’s sustainability story. With the holidays in full swing and an increase in consumer doorstep deliveries, it’s important to be reminded of these recovery feats. Corrugated’s stellar recovery and reuse rates have long been ahead of other packaging materials, but none of it happened overnight. It took a prolonged and focused industry effort that should be viewed as an example to improve recycling rates for other packaging materials.

Symbolism Way back in 1970, Wisconsin Sen. Gaylord Nelson created Earth Day to build Americans’ awareness and appreciation for the environment. At the same time, a corrugated company called Container Corporation of America (CCA) sponsored a contest to design a symbol promoting their products made from recycled materials. A student from the University of Southern California, Gary Anderson, submitted the winning entry, which CCA modified and introduced to the world. That character is the familiar “chasing arrows” universally recognized as the recycling symbol today. The corrugated industry innovated again in the early 1990s, developing the Corrugated Recycles symbol to help

BOXSCORE November/December 2016

people identify corrugated for recycling. At the time, curbside recycling was new to most communities. Raising awareness of corrugated’s recyclability was an important first step to increase its recovery rate. Later adopted internationally, the Corrugated Recycles symbol is printed on the bottom of a significant number of today’s corrugated boxes as a clear sign that the package can be recycled. It worked. The percentage of corrugated recovered for recycling has been climbing steadily since the symbol’s adoption, and it grew 3.7 percentage points in 2015 over the year before, to the record-high 93 percent. The 2015 increase was driven by a 3.5 percent increase in domestic consumption of recovered fiber and a 10.6 percent jump in OCC exports, as reported in the American Forest & Paper Association (AF&PA) annual report on U.S. paper recovery. More statistics are available at www.paperrecycles.org/statistics. This is just the latest improvement resulting from the corrugated industry’s long-term efforts. Even back in 1993, when recycling first began in earnest, 54 percent of corrugated was being recovered—a significant achievement already, considering less than 15 percent of plastic is recovered today, more than two decades later. Where Does OCC Go? Most recovered OCC is used to make new paper products. More than 51 percent of OCC recovered in 2015 was used to make new containerboard for more corrugated boxes. An additional 11.5 percent was used to make boxboard (for primary packaging such as cereal boxes), and more than 32 percent was exported. Global demand

for OCC generated in the United States has grown steadily as well, helping ensure a viable market for U.S. recovered fiber. Share the News Everyone in the packaging business wants to promote their products as sustainable. None can compete with corrugated on this front. Some even propagate false information about corrugated to make their own products look better in comparison. We can combat their misinformation campaigns by sharing our truth: Corrugated is by far the most recycled packaging material on earth—its recovered fiber is reused in a robust market—and it is, on average, made with 48 percent recycled content. So, when your neighbor’s doorstep is covered in boxes from family, friends, Amazon, UPS, and others this holiday season, please remember, and share: Corrugated Recycles. Dennis Colley is the executive director of the Corrugated Packaging Alliance and president of the Fibre Box Association. He can be reached at 847-364-9600 or dcolley@fibrebox.org.

For more information, visit www.corrugated.org, and download the new infographic: “Corrugated Packaging Recycling Success.” Go to Supermarket News to see the white paper “Corrugated Packaging—A Recycling Success Story.” Follow CPA on Twitter @corrugatedpkg.

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GOOD FOR BUSINESS

AICC TOOLBOX ................................................ 31 CUSTOMER SATISFACTION ................... 32 AICC INNOVATION ........................................ 34

BOXSCORE TIPS, TRICKS, AND SOLUTIONS TO BETTER BUSINESS

AICC TOOLBOX DIRECTORY DIRECTIONS The AICC iDirectory provides a resource where end users, boxmakers, and industry associates can identify and locate independent boxmakers and suppliers who can meet their needs. Make sure your

1. Log in. 2. Click on your name at the top of the page to view your profile. This is your individual profile page. (You can update your own information at any time on this page.) 3. At the bottom there is a “Company Profile” box. Click the name of your company. This will open your company profile page. 4. To change your Products: a. Click any product in the “available” box and click the right arrow to add it to your i Directory listing. b. Click any product in the “selected” box and click the left arrow to remove it from your i Directory listing. c. Click “Save.” 5. To change your Equipment: a. Click the little pencil to edit your equipment listing.

company profile is up-to-date so those searching can see all that you do. To update the iDirectory profile and roster, follow these steps (it seems a bit more complicated than it really is, we promise):

b. Check/uncheck the boxes to add or remove them from your i Directory listing (the box is a bit small). c. Click “Save.” 6. To update the people shown in your i Directory listing: NOTE: You can have an unlimited number of people in your roster and can select up to three people per category (Executive, Sales, Technical, etc.) to show up in the i Directory. Not everyone has to be in a category or shown in the i Directory. a. Click “Edit” next to the name of the person you want to add/remove from the i Directory. b. Check the box for the category you want them to show up in. c. Click “Update” in the left-hand column to save your changes. 7. To remove someone from your roster:

a. Click “Remove” in the left column. Please DO NOT type over their name with someone new. To add a new person, please follow the instructions in number 8. 8. To add a new person to your Company Roster: a. Click “Add Contact” at the bottom of your company roster. b. Fill out their information in the pop-up box. c. Click “Save.” 9. To edit someone’s personal information: a. Click on their name in the roster. You will then be taken to their personal profile page. b. Click the pencil icon in the box you wish to update. c. Update the information. d. Click “Save.”

BOXSCORE www.aiccbox.org

Good for Business

CUSTOMER SATISFACTION THE TRUE VALUE OF SERVICE BY JOSH SOBEL In recent years, an important debate has formed: “What is the true value of service?” In an economy where price has become king, consumers are often asking themselves, “Is a higher price worth the peace of mind that comes with a higher quality of service?” Ultimately, how much is that peace of mind worth? This is often a pivotal decision in our industry. Even though our commodity-driven industry is highly price-competitive, I have found that service and providing peace of mind can still set a company apart and result in long-term, mutually beneficial relationships. Countless times in my career I have been asked, “Your price is competitive, but why should I give you my business?” My response is simple: “If you buy from me, then you get my attention to customer satisfaction along with everything else that my company has to offer.” In my career, I have been fortunate to work for two of the most customer-friendly and service-oriented companies around. With everything else being equal, it is hustle, hard work, and most importantly, service that keep the customer coming back. I was taught early on in my career that if you gain an account strictly on price, then one day you will lose it on price. That resonated with me, and I keep that in mind whenever I receive a customer phone call to say they need boxes or an order modification, regardless of whether it’s a weekday, a weekend, or even a holiday—even when a customer 300 miles away needs a delivery the next morning and I need to be the one who delivers it to meet a deadline. I may someday lose an account on price, but I will never lose an account on service.

BOXSCORE November/December 2016

Defining Quality What constitutes quality service and customer satisfaction? Quality service is about being able to adapt my products and services to a customer’s business model (i.e., their needs and wants). You can’t be everything to everyone, so it’s important to focus on what you do well as a company and service professional and dominate that customer segment. I strive to avoid losing market share by remaining flexible and customizing my products and services to make sure each and every one of my customers is taken care of to the best of my ability. My approach to business is similar to how an athlete approaches a game. When I am between the lines, anything goes, and the success of my team (my customers and the company I work for) is all that matters. When it comes to service and my value to the customer, I leave little doubt in my customer’s mind that I will hustle and work hard to deliver the highest level of service for their business. If a competitor is ever able to undercut my pricing, I want the customer to contemplate whether the money they are saving is worth the risk of a lower quality of service than they are accustomed to. If I have done my job correctly, the answer will always be no. The Cost of Peace of Mind How do you quantify quality service and peace of mind? Is that quality service and peace of mind only a perceived value, or is there a bottom-line impact to the customer? I have heard many stories over the course of my career where a consumer will switch vendors only to realize that they weren’t getting what they thought

they were getting, which in turn slows production and results in a loss in profits. The question then is this: Was the loss in productivity greater than the savings realized for the cheaper product? In other words, was the loss in service worth the money saved? Because it is difficult to quantify that difference, those questions will continually be re-evaluated, and while many buyers have been trained to look at price first, it seems that the more experienced buyers are able to identify the value of service and the importance that it holds within their organization. And, they are able to quantify that quality service and peace of mind that comes with it. When it comes to quality service and its quantifiable value, I often think about the fact that every morning in Africa, a gazelle wakes up. It knows it must run faster than the fastest lion, or it will be killed. In contrast, every morning a lion wakes up. It knows it must outrun the slowest gazelle, or it will starve to death. It doesn’t matter whether you are a lion or a gazelle. ... When the sun comes up, you’d better be running. Josh Sobel is an account manager at Jamestown Container and an AICC Emerging Leader Board Delegate. He can be reached at 216-9520802 or josh.sobel@ jamestowncontainer.com.

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AICC NNOVATION

SUPERCORREXPO® WAS A SUPER EXPERIENCE

ore than 5,000 people attended educational workshops and roamed the exhibit hall in Orlando, Fla., Oct. 17–20. There was 150,000 sq. ft. of booth space filled with 348 exhibitors, whose drayage tonnage was 2 million pounds. After the show, AICC spoke with first-time attendee Tommy Nuce, sales manager, Mount Vernon Packaging, Mount Vernon, Ohio, to learn about his experience at SuperCorrExpo®.

Q. What was your overall experience at SuperCorrExpo®? It was extremely exciting. I wish there was another day. I was very impressed with the amount of information available and the number of machines running. I have never seen anything like it. The networking was second to none. I was able to meet and talk with my counterparts in the industry, and I was impressed with how helpful they were. Everyone was so willing to share business

WHETHER YOU NEED A RIGHTY OR LEFTY TO HIT ONE OUT OF THE PARK FOR YOU . . .

tips and offer friendly hints. I know that with any situation I may face, someone else will have seen the same problem or been through the same situation, and someone in AICC will be willing and able to help me through it. Q. What was it like walking onto the show floor for the first time? My first thought was “Whoa! Where do I start?” Being a part of the AICC Emerging Leader/TAPPI Young Professional event was a huge help. We went on a group tour and visited five or six booths. That helped me get an idea of the layout and how to make the most of my time there. Q. What was the most informative session you attended? The Emerging Leader event, hands down. It was so eye-opening to be able to connect with a group of people at the beginning of their careers—people I could identify with.

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Q. What are your key takeaways from the meeting? How beneficial software can be and how important it is to grow connections and network. There were hundreds of first-timers in Orlando for SuperCorrExpo® 2016, and thousands of SCE veterans. We hope everyone’s experience was as beneficial and positive as Tommy’s.

RALPH HAS A NEW FRIEND Tom Weber has 39 years of paperboard packaging experience. He is recognized by industry peers to be knowledgeable and well informed in all sales, marketing, and production processes, various types of paperboard and plastic converting equipment, and technically proficient in Leadership Training and Six Sigma/LEAN methodologies. He has managed multiple facilities in operations, run a regional business as General Manager, and successfully directed a privately held company as its President. His career includes tenures with Tenneco, Caraustar, North America Packaging Corporation, Core Systems LLC, and CardPak. AICC members now have unlimited access to our new Folding Carton Technical Advisor, Tom Weber, to find the answers to all of their technical questions. Do you have questions? Ask Tom at tweber@aiccbox.org or (440) 221-3103.

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Point of View

What are the hard and fast rules you abide by in running your business?

Our success can be traced back to the three things I abide by in running our business. One is trust. Without hiring people around me that I trust and believe will push the company upward, we would not be in the position we are today. Over the years, there were a few people that fit that role. Today it is my daughter, Tonya. Having experienced, smart, and passionate people around me that I trust running the business has been a must for me over the years. Two is taking risks—not just risks, but calculated risks. In my time as a leader at HP, we have expanded our production facility, invested in new equipment, and created a world-class training facility and client suite on our campus. Those were decisions that were made with analytics, market research, planning, thought, and advisement. It is these calculated risks that have helped make us who we are today. Finally, a passion to succeed is something that I have always run my business with. I spent countless sleepless nights early on in my career making sure we did everything necessary to exceed our clients’ expectations. I did whatever it took to win. It is something that now, as I have slowed down from the day-to-day operations of the company, I see in Tonya; our vice president of sales and marketing, Joe Morelli; our director of finance, Kathy Carter; and our vice president of manufacturing, Don Ellis. Their drive to make Huston Patterson succeed is something I am very proud of. — Thomas W. Kowa, CEO/chairman, Huston Patterson

BOXSCORE November/December 2016

That is the easiest question to answer but oftentimes the hardest to implement—that of finding the very best people that always put the customers first. At Advantzware, we have a singular approach to our business: “Customers First, Customers for Life.” By serving our customers with this approach, we not only become a partner with our customers, but also share in the mutual success of a relationship that is built with passion, commitment, integrity, and trust. Anything short of having their best interests at the forefront of every decision you make can lead to distrust, animosity, or even having the customer find another vendor that will take care of them in the future. Finding the right people to live this approach every day is not only a challenge, but is something that requires constant focus and commitment—to always work with your employees to get better, no matter what. — Jay Farr, CEO and partner, Advantzware

When hiring new employees, I explain two rules/expectations I have: I do not like surprises—bad news does not age well. Secondly, I want everyone to enjoy coming to work. Employees that dread getting up and embracing the challenges of a new day, I will let them know that this is not the job for them. I would also like to add a golden rule: A successful business thrives by taking care of its employees and its customer base. This is one that we all live by. — Chad Tyson, director of Virginia operations, Corrugated Container Corporation

“To work harder than anyone in the industry to make our customer happy.” It’s painted on my wall. — Jeff Pallini, president, Fosber America Inc.

• Provide only products that can have a significant positive impact to our customers, to their production capabilities, and to a safe work environment for their employees. • At every opportunity, to listen to our customers and offer and discuss all possibilities where CST can improve their production processes while cutting their production costs. — Reimund Brettschneider, president and CEO, CST Systems Inc.

Philipp Lithographing Co. has five hard and fast rules for running our business: • Rule #1: Provide print solutions; not just printed sheets. In today’s industry, anyone can print ink on paper. What sets us apart is our collaboration and partnership with our customers. We take pride in the knowledge of our team members, our flexibility to meet customer demands, and our value-added service. • Rule #2: Every customer is the most important customer. No matter what, every customer is and must be treated as the most important customer. • Rule #3: Quality is key, and time is of the essence—always. Quality is always at the forefront of each of our operations. In addition, we understand the quick-turn nature of the print industry, and we continue to find ways to be more efficient in our processes. • Rule #4: Innovate, update, and upgrade. At Philipp, we are committed to keeping our pressroom and prepress departments current through regular maintenance, upgrades, and updates. • Rule #5: Honesty, trust, respect, and integrity. Honesty, trust, respect, and integrity are the four pillars upon which Philipp Litho conducts all operations and transactions, and they are the core values upon which our team develops relationships with customers, co-workers, suppliers, and business partners. — Stacy Buening, executive vice president/general counsel, Philipp Lithographing Co.

Safety, people development, and customers (in that order) are the highest priorities. Without the well-being of our people and the right talent in the organization, we can’t help our customers. From there it comes down to focusing on and executing the activities that make us better. We emphasize to all of our associates that to improve means maximizing time in front of customers or in our plants with our people and suppliers. It’s difficult to add value in your office in front of a computer. — Timothy L. Bergwall, division president, paper packaging and Soterra land management, Greif Inc.

Employee engagement is the most important factor in our business. Our industry is experiencing revolutionary changes with the advent of high-graphics machines and endless digital developments. It is vital that every employee understands the direction we must travel to continue being an industry leader. This includes critical choices regarding capital expenditure, essential suppliers, and quality of materials. In many cases, we advise customers to step beyond their normal operating window in order to compete, and this requires an understanding on the customer’s part that we are achieving or exceeding those same goals internally. — John Burgess, president, flexo division, Pamarco

1. Foundation of respect and integrity. It starts at the top. Our team of ethical, trusted, reliable experts leverages our firm and gives us a competitive advantage. 2. Team interoperability, based on great communications, is paramount. Each of our departments—sales, operations, marketing, and customer support—works seamlessly to provide ongoing service excellence to our clients. 3. Discipline thought, discipline action. Our leadership team collaborates with our sales consultants to establish clear, achievable goals that benefit the entire business. We use technology to set expectations, track activity, and monitor each customer’s customized account. — Walter Moore, president and CEO, APPI Energy

January/February Point of View: How do you leverage technology to grow your business? Please send all responses to BoxScore@theYGSgroup.com.

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Member Profile

BUCKEYE BOXES Photos courtesy of Buckeye Boxes

BY VIRGINIA HUMPHREY

COMPANY: Buckeye Boxes ESTABLISHED: 1966 JOINED AICC: 1999 PHONE: 614-274-8484 WEBSITE: buckeyeboxes.com LOCATION: Columbus, Ohio PRESIDENT: Craig Hoyt

Employees wore special shirts during a Buckey Boxes open house.

knowledge he gained to make Buckeye or 50 years, Buckeye Boxes has been Boxes more effective. Now his nephew finding ways to reduce costs for is in the business, and they are bringing its customers through corrugated him through the succession process so design, a strength that has set them apart the business can move on to the next from their competitors and helped them generation when the time is right. to grow throughout their five decades His years with a major integrated in business. business helped him figure out what Craig R. Hoyt, president and CEO Buckeye Boxes should not be doing, says and son of the original founder, Robert Hoyt, and helped them focus on their B. Hoyt, leads the company and has been core business and the basics that would working for Buckeye Boxes since he was make them successful. in high school. “There is a saying in the corrugated business: You get paper dust in your lungs, Knowing Your Limits “Some of what has kept us alive is recogand you stay there forever,” says Hoyt. nizing the difference—if it is something “That’s kind of what happened.” the majors want, we can’t afford to While he spent a few years in the be doing it. We don’t spin our wheels industry with a major integrated comchasing the $30 billion corrugated market pany learning their so-called tricks of versus the stuff we can do in the local area the trade, he came back to the company of that market. What has separated us is his father had founded, using the

BOXSCORE November/December 2016

staying ahead of what everyone else can do. That doesn’t mean we don’t have to do what everyone else can do—we do—but we get into things that other people either don’t do well or don’t do at all. That’s one of the keys to our longevity.” One example of how they do that comes in the use of their specialty folder-gluer. One of the major integrated businesses in their market has exactly the same machine they have. So they formed a relationship with them so when the integrated’s machine is busy and they get items they are just too busy to do or something they don’t want to do, then they outsource the joining to Buckeye Boxes. Hoyt says they run product on that machine for seven or eight of their competitors. Likewise, with their coater, they run coating not only for themselves and

their customers, but also for their competitors’ customers. Hoyt says there are three basic things that make the industry a lot of fun. “One is that you get to see how everything in the world is made. What doesn’t come in a box? That’s a fun thing. Second is all the people you meet in doing that. That’s fun. The third thing is design.” Design is where Buckeye Boxes really distinguishes itself from its competitors. The company’s salespeople meet with customers and help them identify any problems they have and what kind of solution will get around that problem. Usually, Hoyt says, the solution involves design. “Sometimes it is redesigning their packing area to use a different product, but most of the time it is looking at the container they are talking about or the inner pack and coming up with a way to do something better for their packaging system.” Many of Buckeye's solutions involve addressing the labor their customers use to package their products. “Boxes are very inexpensive. Labor is extremely expensive,” says Hoyt. “So, a lot of our projects involve figuring out ways to reduce somebody’s labor.” He gives the example of a customer who was sold out and back-ordered and couldn’t get enough products out to its customers in time. Buckeye Boxes went in and looked at the box and packing area. They were able to reduce the customer’s packaging area by one person, and get the company totally caught up and working two shifts. It saved their customer money and made them happy. Edging Out Competitors Buckeye Boxes also prides itself on a quick response time—coming up with a design and quotes faster than their competition. This means they rely heavily on their sales staff and being able to meet with customers to give them exactly what

Craig Hoyt (left) with his nephew, Chris M. Pieroni (right), and sister, Sue Anne Pieroni.

they need. They also work at timing their solutions for the customer. “People are very happy with what they’ve got until they realize they can save money or their customer starts putting pressure on them,” Hoyt says. He describes meeting with a customer and telling her that she didn’t need their services right then. He told her, “When your customer comes in and says they need a reduction in price of your product, give me a buzz and we’ll start working. You don’t have any problem right now—the customer isn’t complaining. When they hit you, because every customer will, call me, and we’ll start figuring out how to save you some money on your packaging.” He says they ended up redesigning her packaging three times over the course of the next eight years. He says that’s the kind of thing you can’t do over the internet. You’ve got to meet with customers one-on-one. Buckeye Boxes encourages its salespeople to be in the position of being the second person a customer will call. The first, Hoyt says, will always be the supplier they are currently working with. Buckeye

Boxes wants to be the second person, the one who can provide the solutions that the current supplier cannot. That requires the salesperson, and Buckeye Boxes, to be the experts. “Expertise is what separates us from others,” Hoyt says. “That takes a desire to learn. We’re very much into continuous learning in our organization. We are a founding member of a corrugated advisory group that meets once a year. We visit their facilities, attend expos, are a member of AICC, and all that it brings.” Best Practices Hoyt points out that the cost of expertise is higher than the cost of imitation, which leads him to one of his company’s best practices—pre-commitment. “If we see a situation where we think we can improve someone’s packaging, we get a pre-commitment first,” says Hoyt. “We give a statement that we have an idea— the customer may not want to buy it, and that would be fine, but if it is a good idea and the customer decides they want to do it, it will take some design work and money and investment to come up with a solution. All we want to know is that if

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Member Profile

it works, the customer will buy it from us and not our competition.” Another best practice Buckeye Boxes engages in is holding a preview meeting. They pull in the designer, the sales rep, the production manager, and the customer service person—along with anyone else who has a stake in the issue being discussed. They examine the item together and determine what needs to be done to make it a success. Close to the end of the meeting, Hoyt says, they ask, “How are we going to screw this up?” He responds by saying they have years of experience screwing stuff up, and that’s how you learn. They then come up with the most likely area where problems can arise and communicate to the leadership to watch

for those problems. It helps them head off the issues and make the project a success. Hoyt also attributes Buckeye Boxes’ success to its focus. The company is always focused on what the customer needs, what a box can do for the customer, and why it is important to the customer’s customer. Hoyt says they hold two meetings a day to focus on making sure that what they say they’re going to do is what they end up doing. They make sure they’re going to meet their commitments and communicate with each other what might need to get moved around or done differently. “There is a tendency in our business, because we are so capital-intensive, to fill the machinery,” says Hoyt. “We are more

customer-focused than we are machinefocused. We’ve got to help our customers improve their packing systems. That’s our whole brand; that’s who we are.” Virginia Humphrey is the director of membership and marketing for AICC. She can be reached at 703-535-1383 or vhumphrey@aiccbox.org.

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BOXSCORE November/December 2016

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Welcome, New Chairman Tony Schleich! A strong proponent for principled leadership and putting people first BY GEOFF WILLIAMS

ot everyone would work for their father-in-law, but Tony Schleich knew a good man and a good opportunity when he saw it. It was a “fateful summer day in 2001,” as Schleich describes it, when the then31-year-old insurance underwriter was at a family gathering at Table Rock Lake, a reservoir in southwestern Missouri and northwestern Arkansas. Schleich’s fatherin-law, Dave Claxton, gathered the family around, which included Claxton’s twin daughters, another daughter, and a son. As Schleich recalls it, Claxton, then 55, knew that he should be thinking about the future and said to everyone: “Look, I’ve got to start positioning this company to transition it to someone in

the family who may be interested in someday running it, or I need to eventually sell it or merge.” Claxton had purchased a box company in South Hutchinson, Kan., in 1987 and renamed it the American Packaging Corporation. He had known nothing about the corrugated industry when he bought the box company but wanted to own a business, and ever since, Claxton had done well. But as the 21st century started, Claxton started thinking about the company’s long-term future and how to get it to the 22nd. Schleich liked the idea of being his own boss and of growing a company, and as it turned out, he was the only one in the family who stepped forward.

“They all thought I was crazy,” Schleich says of his wife and his siblings-in-law, “because I didn’t know who I was going to be working with.” But Schleich and his father-in-law got along just fine. In fact, 15 years later, here Schleich is, not only the president of American Packaging Corporation, but also the new chairman of AICC. BoxScore: You have been active with AICC for a while now. You were vice chairman last year, and before that, you were the AICC education chairman. How long have you been active with AICC? Schleich: [Long pause. Laughs.] I don’t know. I don’t remember when I first got involved.

BOXSCORE www.aiccbox.org

Tony Schleich with staff members Pat Whalen and Carolyn Sams.

BoxScore: Well, somewhere after the summer of 2001 and between now ... Schleich: Yes. It’s been a while. I have also been lucky to serve on the Board for quite some time. The thing is, it’s so doggone rewarding to serve with these people. Sure, it takes some time being involved on the board level, but the benefits far outweigh the time we spend. BoxScore: Is that something you hope to see as chairman—more people involved in AICC? Schleich: Oh, sure. For those who aren’t members or are unengaged, you really do have to give it a chance. I’ll speak for myself, of course, but the relationships that I have developed, you can’t put a price tag on that. I know if I have a problem with the business that I don’t have the answer to, I can call no less than 20 people who would be willing to take that phone call and help me find the answer. That’s our challenge—to promote

BOXSCORE November/December 2016

“The thing is, it’s so doggone rewarding to serve with these people. Sure, it takes some time being involved on the board level, but the benefits far outweigh the time we spend.” that relationship-building to members and to get people to be more engaged, but boy, when it works, it works. And associate members are invaluable in this equation as well. You can call an associate member, for crying out loud, and the suppliers will be more than willing to help you out, and I think that’s unique. They’re selling equipment, of course, but they want to see you succeed. And if you succeed, they have a better chance of selling something to you. So I would flat-out encourage anyone who isn’t engaged with AICC to engage themselves more with

those who attend those meetings, whether it’s on the regional or national level. In the years before Schleich became involved with AICC, he was at first simply trying to understand the corrugated industry. A couple of months after the discussion at the lake, Schleich started working for his father-in-law and began learning the ropes—well, more specifically, he began learning about containerboard and fan fold box machines and automated box gluing machines. In fact, Schleich’s first job was on the shop

“My business ain’t about me—it’s about my employees, and when you start to make it about your employees, things become a lot clearer.” floor, catching boxes off of a semi-auto taper and gluer. It was a surreal, even spooky time, Schleich recalls. When he took the job offer and left insurance, his wife, Kim, was pregnant with their second daughter. (The girls are now 14 and 17 respectively. “God help me,” Schleich jokes.) But as summer came to a close, the entire country was shaken to the core—we don’t even need to mention the date or reason why—and a month later, Tony and Kim moved from St. Louis to Hutchinson, Kan., in October 2001. As the years went on, Schleich rose up the ranks at the company. Meanwhile, Claxton began reducing his role at the company and now generally offers up his opinion as a member of the advisory board. In 2012, American Packaging Corporation merged with the Lawrence Paper Company, in Lawrence, Kan., and that, too, was a big deal for the business. Suddenly, there wasn’t only one location for American Packaging Corporation but three, since Lawrence had expanded earlier and bought Jayhawk Boxes, based out of Fremont, Neb. BoxScore: So ... we’ve got to ask. Not just anyone would agree to go into business with their father-in-law. Schleich: I could not have been more blessed to have had that relationship with him. Sure, it wasn’t all rose petals and pink ice cream. We would sometimes go toe-to-toe on some issues as I would try to learn and chart my own way. But

it was very smart of him to handle it the way he did. Let’s face it—this is an aging industry, and not everybody has succession plans. Dave Claxton was smart enough to think about succession early. He also had the fortitude to allow his management team some rope so we could try things on our own, and he would be there if it looked as if we were going to fall off a cliff. But he didn’t micromanage us. He allowed us the freedom to work on the business on our own, and I give Dave 100 percent of the credit for that. He’ll never accept that credit, but I have the advantage when I talk to folks like you or when I’m standing behind a lectern and giving a talk, and I can give him credit. He had this willingness to allow us the freedom to fail—well, to fail forward, how about that? We did some things wrong. I gotta be honest with you that we did do things wrong, but we learned a lot, and when the recession hit, if we hadn’t already been given the freedom to experiment and to fail occasionally before that period, I’m not sure we would have gotten through that. BoxScore: So, the recession is in the rearview mirror, but the economy and business in general can still be rocky for some. What are the pressing issues that you see facing the corrugated industry right now? Schleich: The burning topics that are out there that nobody likes talking about—well, the shrinking industry insofar as the number of players that we

have. There’s a lot of M&A [merger and acquisition] activity. Some are by choice, like mine, and some aren’t. But in how it relates to AICC, we need to remember the “independent” part of our name, and that it isn’t us versus them. It’s how do we continue to play nice in the sandbox? ... And we have other issues, like how we as an industry continue to do what we do to serve those who need us in this great country ... and how do we stay relevant and how do we stay at the forefront in our customers’ eyes and grow our business when there are fewer and fewer of us? BoxScore: That’s a lot on one plate. Is there any particular issue that you think you’ll touch on the most in the next year? Schleich: I am a huge proponent of the concept of principled leadership. It seems elementary, but executing principled leadership can prove to be challenging, especially if you’re just starting to run a business. And it took me a while, but I think I have it figured out now. My business ain’t about me—it’s about my employees, and when you start to make it about your employees, things become a lot clearer. And it starts to give you, during that drive to work and the time you spend in the office, a little more purpose. You become much more motivated when you don’t only look at revenue and profitability. And certainly those two things are of great importance, but if you take care of the people, that stuff will happen. Geoff Williams is a freelance journalist and writer based in Loveland, Ohio.

BOXSCORE www.aiccbox.org

Sometimes the best course of action to ensure progress means getting back to basics

BOXSCORE November/December 2016

Better Business Through

Best Practices BY ROBERT BIT TNER

very trade show, every Drupa fair, maybe even every industry conversation likely highlights the extent to which innovation and forward movement continue to bring change and challenge to every facet of the box industry, from paper plants to corrugated converters, folding carton and rigid box manufacturers to printers large and small. Yet a growing number of box companies have decided that the best way to move forward is to foster a greater appreciation for the basics—those “best practices” that typify successful operations, but which sometimes can be overlooked or sidelined in the course of daily business. “Our industry has become so complicated,” notes Dan Malenke, president of PKGPRO. “Raw materials, design, inks, all the way to dunnage and palletization— they’re all so inseparably related that it’s not enough for packagers to focus on their little piece of the puzzle. If there was ever a time to become more of a generalist in terms of understanding, this would be the time.”

Build a Strong Foundation “Best practices to me means starting with substrates, understanding from a printing standpoint what you’re printing on, how it’s manufactured, what choices you have, and how they behave in different print processes,” says Kern Cox, a former corrugated professional who left to run the printing and converting research center for corrugated at Clemson University. (He is now a full-time lecturer in graphic communications at Clemson and a frequent AICC speaker.) Malenke agrees. “It’s important to understand the appropriate materials available based on end-use requirements. Of course, converters and package designers can just say, ‘We’ll do it this way because we’ve always done it this way.’ But is that the best way? Now there are so many opportunities for material substitutions that could add value to the client’s packaging. If you understand your raw materials, you can put everything in context and advise successfully.”

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“Of course, converters and package designers can just say, ‘We’ll do it this way because we’ve always done it this way.’ But is that the best way?” — Dan Malenke, president, PKGPRO

While that may sound like a given, Malenke has seen plenty of evidence that it does not always happen. “Sometimes people make horrible choices, like putting a hardware product in an SBS carton. Obviously, they were focused on the graphics; they didn’t understand the physical protection necessary for that product. So that package showed up at a store and jumped out visually on the shelf, but physically it wasn’t successful. I’ve seen other cases where a package designed only for physical support falls down in other areas.”

of that happens with folks coming over from offset lithography, which does have creative capabilities, elements you can change or modify easier than on a flexo press. You have to break that mentality if you’re coming from lithography to a flexo press.”

Stay Connected Knowing what sets the standard for current and emerging best practices requires reaching out across the industry. Malenke believes, “You need to be active in trade organizations, in doing your research, in attending the packaging expos and print trade shows.” It’s also important Focus on Fundamentals to be connected with other independents. In addition to the basics of paperboard, “Independents are specially suited to help Cox believes all of the following deserve to be on any list of industry fundamentals. the little guys so they can work together as a team, collaborate, and pool their Inks and ink transfer. “It’s important to resources. In our industry, companies understand the different varieties of inks, why to use one instead of another, and how have relationships with their competitors; they’re usually transparent within their they interact with the substrates, cost and closed group of partner companies. Some quality, and how to monitor that quality even unite as buying consortiums to get over time and make educated decisions competitive pricing from suppliers. We about when to make changes and adjustoutsource to one another.” ments, when to recalibrate your system.” Malenke also believes it’s crucial to be Image carriers/plates. “It’s useful to understand how plates are made and what connected to industry-focused testing facilities. “We’ve got a proliferation of the current plate technologies are. A big import options now in terms of raw need is knowledge about care and mainmaterial, and it’s going to be getting tenance, how plates should be handled, more interesting. We’ve had capacity stored, cleaned. Plates are expensive, but sometimes they get handled very roughly.” expansion in Scandinavia, giving us more lightweight papers. There is growth Presses. “Sometimes people think of presses as a creative tool. But with a flexo in Asian pulp and paper, with excess capacity coming into this country. Those press, there’s only so much you can do. substrates are not traditional for us. If Sometimes you spend too much time there ever was a time to cut through the getting a press to do something unusual when you could have tweaked something snake oil and smoke and mirrors, it’s now! Get access to a test lab. earlier in prepress and saved time. Some

BOXSCORE November/December 2016

“Bring those new opportunities in and run them through legitimate testing to see how they perform. When the cost appears to be very attractive, understand that there’s a learning curve in knowing how you can best use it. It’s going to take some time to get up to speed so they perform for you in terms of quality and productivity, glueability, performance under different temperatures and humidity levels, fatigue, and degradation over time. With testing, you’ll know how all of those factors affect the end performance of that box.” Keep Learning The kind of wide-ranging knowledge of materials and equipment needed to transform “best practices” into actual daily habits comes only with a commitment to ongoing learning and continual training. “Being able to talk about printing, talk about specs, can take years to learn by osmosis,” says R. Andrew Hurley, Ph.D., professor at Clemson University and chief learning officer for The Packaging School, a partner of AICC's Packaging University. “So, onboarding people at the outset sets a strong pattern for future success. That early training often gets overlooked. But if you’re going to continue to be an expert in your products—whether you’re in sales, design, the shop floor—that requires continuous improvement that needs to be part of a daily process.” It does not, however, need to be overly time-consuming. “If you’ve got 15 or 20 minutes, you can go through part of a curriculum, absorb some basic information, and review it,” Cox points out. “Much of the online

Mark your calendars now !

2017 Spring Meeting &

Independents’ Cup Charity Golf Tournament April 26–28, 2017, Hyatt Lost Pines Resort & Spa, Austin, Texas

History & Art

Austin, the Texas Capital and Live Music Capital of the World offers over 250 live music venues to satisfy practically everyone’s ®

musical palette. And if music isn’t your scene, perhaps shopping in Austin’s 2nd Street District or enjoying some of Texas’ most inspiring cuisine at one of Austin’s many top star restaurants will be more to your taste.

Music & Entertainment

The Hyatt Lost Pines Resort and Spa is the host hotel for the

AICC 2017 Spring Meeting. Located on 405 picturesque acres along the Colorado River between Austin and Bastrop, Texas, the Lost Pines offers a family friendly setting with luxurious accommodations and onsite recreation and entertainment to please kids of all ages. In your spare time enjoy the Lost Pines Spa and pool, play golf at the championship-level Wolfdancer Golf Club, or enjoy horseback riding and river kayaking. The young and young at heart will also enjoy the Crooked River Water Park with it’s ﬂowing Crooked River, pools, two-story water slide and much more. Lost Pines is located adjacent to the 1,100 acre McKinney Roughs nature park.

Fine Dining & Shopping

The 4th Annual Independents’ Cup Charity Golf Tournament

to beneﬁt national and local charities takes place Thursday, April 27th at the Wolfdancer Golf Club. Wolfdancer, named in 2015 as one of the “Best Resort Courses” by Golfweek, is an 18-hole, 72-par, 7,025 yard, Arthur Hills & Associates designed course located on the Lost Pines property.

Meeting and golf registration will open in Fall 2016.

Hyatt Lost Pines Resort

It’s All Happenin’ in

Independents’ Cup Charity Golf

AICC Serves:

Passionate professionals; The independent and united; The responsive and agile.

AICC Will:

Connect and cultivate; Deliver success.

learning available now is designed for consuming in bite-size chunks, understanding that people are busy.” Unlike high school or college courses, the learning happening in these moments can be put to practical use the minute the team gets back to work. “Because adult learners know what they’re up against, the ‘aha!’ lightbulb moments come up quicker as they’re going through this training,” Cox says. “They’ll immediately see what’s going to be of value to them. In an academic environment, students don’t have the realworld knowledge to know what they’ll most benefit from. “People do like to educate themselves and are accepting of the need to learn more. If you have a company where some people are going into training sessions and others aren’t, these people come back to their positions with more knowledge. That can bring other people on board with learning. Everybody’s going to feed off of each other in that situation.” Today, there are numerous options for tailoring the training your team needs

are shared. When it comes to training support, I look to the associations first.” It is also important not to overlook offerings from traditional schools. Hurley, Malenke, and Cox have all been involved in seminars and courses offered to industry professionals by Clemson University. “Folks can come in for a two-day crash course where they get to sit down as cross-collaborative teams and evaluate packaging,” says Malenke. “Those courses have been fabulous. We’ve had close to 85 companies come to the Clemson seminar; about 500 people have attended.” In fact, some of the curriculum originally developed for the Clemson seminars is now being offered online through AICC’s Packaging University. Of course, sometimes moving forward means experiencing missteps and confronting hurdles. Cox notes that “there will be setbacks along the way. The challenges will depend on where you’re coming from. There may be time robbers, so you can’t focus how you need to. We may run into market pressure: for example, ‘greener’ packaging that forces

“I think AICC has done a phenomenal job with education and training options for people. … When it comes to training support, I look to the associations first.” — Kern Cox, lecturer, graphic communications

around time and budget constraints. “I think AICC has done a phenomenal job with education and training options for people,” says Cox. “We live in a digital age, so it makes sense that there’s lots of online content and curricula that people can go through. There are other organizations, too, that have meetings and forums where education and knowledge

BOXSCORE November/December 2016

us to do more with less material or with unfamiliar material. Suddenly, what we knew flies out the window, and we have to recalibrate to work with lighter materials or, say, more recycled content that may not absorb ink very well.” In the end, such thoughtful troubleshooting becomes a training opportunity in itself.

Embrace a Systems Approach At the heart of this renewed focus on best practices is a belief in the benefit of broad industry expertise over a more insular approach. It emphasizes teamwork, cooperation, and open innovation that extend not only throughout a company but down the entire line from client to printer, packager, and shipper. As a result, corrugated converters and folding carton/ rigid box manufacturers are not simply boxmakers; they are consultants involved at multiple steps in the life of a product. “The systems approach to package design and production planning is big for me these days—where all contributing elements, even the product itself, work together for good,” says Malenke. “Primary, secondary, and tertiary packaging are teammates. Paper machines, functional coatings, sheeters, presses, die cutters, gluers, and filling lines are all touch points [that] contribute to the end result. “We all have to work as a team to better understand how we can arrive at collaborative conclusions,” he adds. “Unfortunately, we still have a lot of ‘siloed’ companies who essentially just do what they do. And I get that. When times get tough, most companies don’t think they can afford to do this kind of cross-functional planning. So they’re tempted to lean on their supplier and do what’s been done in the past, over and over again. They’ll rely on their supplier for education about changes and opportunities. But the more sophisticated brand owners are successful because they understand the entire industry. They readily communicate with raw material suppliers and all the way down the chain.” A systems approach weighs the contribution of every link in the chain, assessing how well it integrates and whether it can be improved. “People who are not out there always pushing, always trying to continuously improve, are going to disappear,” warns Hurley. “Look at Nokia.

“People who are not out there always pushing, always trying to continuously improve, are going to disappear.” — Andrew Hurley, Ph.D., assistant professor, Clemson University

Years ago, they were the No. 1 mobile phone company in the world. But they stopped pushing the envelope because they had everything. Now? Nobody has a Nokia phone. Never forget that this is very much a commoditized industry. And next year, the innovations of last year will just be part of the commoditized structure.” In a commoditized industry, where most if not all companies can provide essentially the exact same end product,

it is attention to detail that sets the leaders apart. “The decision-makers in the organization need to ask themselves, ‘Am I aware of the trends and changes in best practices in the industry? Am I still working with the same set of tools I had 10 years ago, or am I engaged in continuous improvement?’ ” Malenke says. “The key decision-makers are the ones who drive that down into the entire organization.”

“You have to be willing to shake up the box a bit when it comes to what you can provide,” Hurley adds. “Constantly look at ways to improve things. It is unbelievable how much low-hanging fruit—how much opportunity—is available at most companies.” Robert Bittner is a Michigan-based freelance writer and a frequent BoxScore contributor.

Know-how makes your business, our business. Providing equipment financing to the corrugated industry for over 15 years. At People’s Capital and Leasing Corp., we offer: • Capital access for new/used equipment • Corrugated industry expertise • Comprehensive financial resources Our industry knowledge and understanding of your business can give you an edge in the marketplace.

ContaCt me today. Kevin Hartney

203-591-2703 • Kevin.Hartney@peoples.com

BOXSCORE www.aiccbox.org

Succession

Planning

BOXSCORE November/December 2016

The future is just around the cornerâ&#x20AC;&#x201D;are you prepared? BY SAM DAVIS

BOXSCORE www.aiccbox.org

It is the failure to plan for retirement and a transition to the next generation of owners that is the primary reason for the failure of familyowned businesses to continue successfully into multiple generations.

ddie Schwartz, the second-generation owner of an automotive recycling business, decided that 45 years was enough. He was ready to retire and turn the business over to his son, Larry, 35, and daughter, Sara, 32, both of whom had entered the business immediately after graduating from college. Eddie had never funded a retirement plan and assumed that he would sell the business to his children as a means of funding his retirement. However, as soon as Eddie began exploring the steps he needed to take in order to retire, he was confronted with a number of challenging questions for which he had no answers, including: • Can the business remain competitive, or should he and his children consider a sale?

BOXSCORE November/December 2016

• Do his children want to own and manage the business? If they want to own and operate the business, can they work together collegially? Are there other senior managers his children may need to retain or recruit in order to successfully manage the business? • What is the market value of the business? What is the price his children could afford to pay for his shares without placing an undue financial burden on the business? • What annual income will be required in order to maintain his current standard of living? In addition to the possible sale of his shares, what other sources of income are available to him? • Will he lose any insurance coverage if he sells the business? What other

insurance coverage might he need that he did not contemplate earlier in life? • To what advisers can he turn to guide him as he contemplates these questions? Who can advise his children through the transition and after he leaves the business? With the packaging business going through a period of rapid consolidation, the competitive environment is becoming ever more intense. Decisions about whether to keep or sell the business are at the forefront. Some family-owned businesses like Eddie’s may have opportunities to sell at a premium, or they may find themselves with a competitive niche that allows them to remain independent and continue to thrive. But most find themselves confronting less-than-favorable options.

Historically, only 32 percent of family- owned businesses continue successfully in the second generation, and only 12 percent are able to sustain success into the third generation. Industry consolidation is one factor contributing to this trend. However, it is the failure to plan for retirement and a transition to the next generation of owners that is the primary reason for the failure of family-owned businesses to continue successfully into multiple generations. Laying the Groundwork Situations like Eddie’s are all too common. Most business owners in their early 50s have little time to plan for business succession and retirement. But that is exactly what is needed. As a consultant to family enterprises, I can attest to the benefits of planning for ownership and leadership transitions well before health or market conditions prompt unplanned changes. Indeed, succession planning can be liberating for those who are retiring, and empowering for those who are assuming responsibility for the future success of the company. The most successful ownership and leadership transitions entail more than the transfer of assets and authority. They involve family members and their advisers working together across generations to ensure the continuation of a proud family legacy. To be certain, succession planning must address questions that can be difficult to answer, such as: • Should the business continue operating under family ownership or be sold to others? Are qualified next-generation members interested in leading the company? • What changes will be needed to sustain the family enterprise? Is the family enterprise sufficiently diversified to meet changes in market conditions? • Which next-generation family members are the most qualified to lead

the business forward, and how will they work with other family members and key nonfamily executives to ensure success? • Have retiring leaders undertaken the necessary financial and estate planning to ensure their retirement and family needs can be met while leaving the next generation of leaders with sufficient assets to compete successfully? • What professional advisers will be needed to execute the desired ownership transfer? Are next-generation family members acquainted with these advisers? • What governance structures might the next generation of owners consider for making decisions and communicating with the family?

succession planning. The most critical step in the process will feature the engagement of next-generation members in detailing plans for assuming ownership and operating leadership responsibilities. In developing plans to present to their parents or other retiring family members, these leaders can demonstrate their maturity and business acumen, while allowing the current owners to provide helpful feedback and to make final decisions. Once both generations of family leaders agree on a plan, they can engage their legal and tax advisers in finalizing details before sharing their intentions with the entire family and initiating changes. Each family faces different challenges, but a sound succession planning process can permit all business-owning families to prepare for ownership and leadership tran-

The most successful ownership and leadership transitions entail more than the transfer of assets and authority. They involve family members and their advisers working together across generations to ensure the continuation of a proud family legacy. • What meaningful endeavors might the retiring generation pursue once they relinquish ownership and/or operating leadership? A Multistep Process These questions and others can be answered through a multistep succession planning process that engages and educates all family members. First, a successful transition process requires the commitment of all family members, particularly the current owners and leaders of the business, to work on

sitions, and ensure that success continues in the next generation. Families will need this if they are to beat the odds and continue ownership in future generations. Sam Davis is principal at The Davis Group. He can be reached at 804-314-1836 or sdavis@sdavisgroup consulting.com.

BOXSCORE www.aiccbox.org

• • • • • •

Robust pricing and costing Renowned scheduling Supreme visibility Material management Strategic reporting Easy to use

kiwiplan.com offices worldwide

Out With the Old? Not So Fast 5 reasons why a corrugated machine rebuild saves you money and time BY MARK PE Y TON

BOXSCORE November/December 2016

n a world where most technology is virtually disposable, it’s natural to think that if a corrugated machine is on the fritz or stops working, your company should simply replace it. Out with the old, in with the new, right? After all, we’ve been trained to think that the shiny new machine will not only look nicer, but also work more efficiently or be more cost-effective in the long run. Certainly in some cases this could be true. Not all pieces of equipment are candidates for rebuilds, with some machines designed as “throwaways” from the beginning. In contrast, some machines prove to be true workhorses. Take a 30-yearold Langston or Ward as an example. Whether the need is a full-scale rebuild on a flexo-folder-gluer or a well-planned plant tuneup on a rotary die-cutter, strategic work on older machines can enable them to compete with the best new machines available. Unfortunately, not all plants know this trick, and some just don’t believe it. Overcome Common Misconceptions Before venturing in one direction or the other, business leaders need to get over the notion that they have to invest big capital into new technology because their machines are “old.” The latest technology can be added to an older machine at a fraction of the cost. In addition, a rebuild can be as involved as replacing every component except the frame and cross ties. That means while the machine may still look old, the fact is, it is often better than new. If you want it to look new, this can be accomplished as well if you choose the right vendor. Many times, though, a complete rebuild is not necessary, and thus the purchase of an entirely new machine would not be frugal or business-savvy in those instances. That’s why it is critical to first understand the current problem and plant needs. Typically, the age and condition of the machine will determine when a

rebuild or new purchase needs to occur. Gears and bearings will start to wear, and speeds will slow down. The fix might even be as simple as replacing a part. If you are not certain about the problem or need, a vendor such as SUN Automation can help you find the right solution and remain unbiased, as they offer both options to rebuild or buy a new machine. In the end, it’s about what you truly need. With that in mind, you’ll need to ask yourself a few questions. What are you currently running, and what registration do you have to hold to meet plant demand? At what speeds can you afford to run? Can a simple retrofit solve the current problem? Questions such as these will help determine how much of a rebuild is necessary. It’s also not necessary

When in doubt, reach out to your vendors and seek guidance. on a rebuild to solve all the problems at once. For instance, if the primary issue is related to machine productivity, then a simple retrofit or upgrade may be all that’s needed. For a fraction of the cost of buying a new machine, all that may be required to boost productivity is to replace an old kicker table with a new feeder. Why Rebuild? As much of the decision is also based on budget, it’s important to understand all the associated costs. There is a reason why many independents opt to rebuild over buying new when needed. The following are five key reasons rebuilds prevail. 1. Shorten the learning curve. Learning curves are shorter on

rebuilds because it’s still the same machine. Maintenance teams are prepared and experienced to handle regular checks and fixes. Also, any new technology upgrades can be quickly learned, as they’re the only part of the machine that might be new. When you have a new machine installed, it will take operators much more time to get up to speed on the protocol and nuances of the new technology. It’s no longer just one new piece, but every gear and function could be different. It also takes extra time for maintenance workers to learn the upkeep processes for new machines. When more training is needed, that translates into more downtime in your operations and more savings lost. You may even have to shut down your converting line to get everyone up to speed. With such a tremendous learning curve, you also run the risk of constantly calling technical support. That adds up, with extra expenses for airfare, hotel stays, and other incidentals that come along with bringing in outside help to get processes flowing again—not to mention further downtime accrued waiting for external support. 2. Decrease costs. Shorter learning curves and greater uptime add quickly to the bottom line, but there are other ways a machine rebuild or retrofit can save you money in the long run. For one, the machine is already an asset and inherently won’t cost as much to rebuild as buying new. Prices can vary from vendor to vendor, and the ultimate savings depend on labor pricing, condition of the machine, or whether the rebuild is intended to exceed original

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equipment manufacturer (OEM) performance levels. That said, on average, SUN customers save about 60 percent over a new machine purchase when a rebuild is performed on-site, and about 40 percent if the rebuild is done at our facility. Regardless of the situation or vendor, a rebuild is still almost always much less expensive than the purchase of a new machine. There are often overlooked costs associated with buying a new machine. For example, the new machine could require new foundation, rigging, and utilities. It’s important to consider all facets of the new machine install. Furthermore, electrical lines and pipes may also need to be relocated to fit the new machine. In some instances, other machines on the plant floor may need to be moved to make room—adding further costs and time. With a rebuild, everything stays as is, since it’s the same machine. New machines are also more expensive simply because all costs are incurred at one time. That includes purchasing new spare parts so maintenance teams can react when needed. With regard to parts, consider also where the machine is built and serviced. A new machine may not need anything straightaway, but all equipment must be serviced and have wear parts replaced with some frequency, so consider the suppliers’ inventory and lead time. With a rebuild, you eliminate many of these challenges and won’t incur any additional costs. In addition, you can pay for only what you need and can take on the rebuild in stages without losing productivity. This fact is critical for budget-sensitive companies.

BOXSCORE November/December 2016

Before venturing in one direction or the other, business leaders need to get over the notion that they have to invest big capital into new technology because their machines are “old.” The latest technology can be added to an older machine at a fraction of the cost. 3. Rebuild on your terms. By not needing to incur all the costs at once, companies can extend their budget and the life of their machine. It may be more cost-effective and provide greater flexibility having the rebuild done on-site. Depending on the age and condition of the existing machine, as well as what specific parts need to be replaced, the process can be controlled quite nicely. For example, a four-color machine rebuild can be scheduled quarterly. The work can be done in stages so as to not interrupt productivity too much and be completed by the end of the year. In contrast, simple upgrades and retrofits can be accomplished even faster. In a few business days, a new vacuum transfer or digital register can make all the difference. 4. Reap the same benefits. Again, you can add just about any new technology to existing machines. And Ward machines can also be brought back to OEM specifications. So, before you throw out your existing machine, make sure its replacement isn’t just dressed up to look enhanced. While it may look better on the surface, that doesn’t necessarily mean it is. However, if looks don’t matter to you, then the warranty surely will. Having the safeguards of a warranty is

invaluable throughout the life cycle of a converting machine. Another common misconception is that rebuilds and new machines differ in their warranty offers. The fact is, the warranty you get on a new machine isn’t always worth the extra dollars spent. For example, with SUN you get the same one-year warranty on each part replaced; it’s no different from buying new, except for the expenditure. But even then, the next misconception is that older machines will need to be replaced sooner than just buying new anyway. This, too, is not the case. On average, older machines prove to last 25–30 years from initial purchase; some last even longer. A rebuild on those machines keeps them operational an additional 15–20 years. The same cannot be said for newer machines, as their longevity is unproven. 5. Get operations up and running more quickly. If rebuilds cost less, provide greater flexibility, and generally run the same as a new machine, then it must simply take longer to achieve all these benefits. We’ve already established that a complete rebuild is often easier and faster than a new installation. It also makes future maintenance much easier overall.

However, you may say that new equipment can be installed and implemented within seven days, whereas a complete rebuild can take up to two weeks. That statement is true, but you have to consider it can take up to six months for a new machine to be delivered. This time is often overlooked when comparing lead times. Upon receipt of an order for an onsite rebuild, replacement parts can be delivered within two to three months—half the time it takes for a new install. Where you buy your equipment can also put a dent in your timeline. Having domestic service and support can greatly improve any foreign

delays. As mentioned earlier, whether new or rebuilt, all machines need to be maintained, and parts that wear out need to be replaced. When purchasing overseas, you often have at least a one-day delay trying to get hold of someone to help. Don’t Judge a Book by Its Cover In the end, there are many common misconceptions about rebuilds. One big challenge is getting over the misconception that it will still look old and therefore perform the same as before. Once you are able to look at both options equally, it’s easier to see advantages of a rebuild. In either situation, though, defining the problem and determining the budget and timeline will further help uncover the right solution.

When in doubt, reach out to your vendors and seek guidance. A reputable vendor should be able to offer the right solution and direct you to which option is best for your operations. If your vendor does not provide rebuilds as an option, seek out additional support before making a decision. In the end, you may be better off optimizing what you already own. Mark Peyton is capital projects manager at SUN Automation Group. He can be reached at mark.peyton@ sunautomation.com.

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Annual Report for 2016

New destinations and new goals drive AICC’s performance and service

ICC’s 2016 fiscal year ended on June 30, and in the year preceding, your Association embarked on a years-long “strategic agility” program called “destination modeling.” Destination modeling is a strategic management tool by which monetary and performance targets, as well as member satisfaction goals, are identified, measured, and tracked with a desired outcome, or “destination,” at a given date in the future—in AICC’s case, 2019. This program is being conducted under the guidance of Holly Green, CEO of The Human Factor, a Denver-based human resources, consulting, and strategic planning firm. While the initial destination goals defined by the model are not scheduled until 2017,

BOXSCORE November/December 2016

the preparation and planning have had a measurable impact on AICC’s performance in the fiscal year ending June 30, 2016, as the following report states. Membership AICC membership numbers continued to grow in the past year, despite a growing trend of consolidation in the industry. Dues revenues reached a record $1,144,791 in FY 2016, up from $1,134,744 in FY 2015. AICC welcomed 45 new members in the fiscal year, and enjoyed a general member retention rate of 94 percent. Total number of corporate member entities worldwide was 476, down from the previous year’s high of 505.

Education and Training AICC’s industry-specific education and training programs reached almost 2,000 employees in the industry and brought in $330,000 in revenue in FY 2016. This was up from $303,000 in FY 2015, or an increase of 9 percent. The increases were fueled in large part by the introduction of new on-site courses in maintenance and e-learning courses in leadership, communications, and fundamentals of financial management. AICC’s webinars continue to reach a larger number of member company employees due to their relevant subject matter and relatively low expense and time commitment. AICC continues to add new e-learning courses

Associate Members: 199

Corrugator Plants: 54 Canada: 24

Mexico: 17

Other International: 5

Sheet Plants: 192

AICC Members by Company Type

AICC Members by Geography

United States: 428

Rigid Box: 5

Folding Carton: 14

Sheet Suppliers: 10

Webinars: 1,448

Seminars & Workshops: 453

Regional Meetings: 668 Fort Worth: 584

National and Regional Meeting Attendance

Number of Employees Trained by CourseType

Online Courses: 33

Washington Fly-In: 48 Palm Desert: 605

and in 2016 educated 1,481 industry professionals online. Of particular note was the introduction of two “fundamentals” seminars in 2016: “Corrugated Fundamentals” and “Folding Carton Fundamentals.” The latter course is a continuation of AICC’s outreach to folding carton and rigid boxmakers, and is spearheaded by Dan Malenke, president of PKGPRO, LLC, a paperboard packaging consulting firm in Wildwood, Fla. National Meetings, Regional and Special Events Attendance at AICC’s national and regional meetings and other events topped 1,900 people in the fiscal year

ending June 30, 2016. The 2015 Annual Meeting, held in Fort Worth, attracted 584 members and guests and included AICC’s 2015 Packaging Design Roundup and Designers’ Forum. AICC’s 2016 Spring Meeting was held in Palm Desert, Calif., and saw an attendance of 605. Income from AICC’s national meetings was $1,392,563, up from $1,235,604 in FY 2015. This increase of 13 percent was due to strong attendance and to increased sponsorship revenue for AICC’s annual Independents’ Cup Charity Golf Tournament. Proceeds of $39,000 were donated to Martha’s Table, Cedar Lake Ministries, and the J. Richard Troll Memorial Scholarship.

AICC’s regions remained active in FY 2016, with 22 events held domestically and internationally. (See sidebar on AICC Canada and AICC Mexico.) The U.S. regional events were attended by more than 668 members and guests. AICC’s annual Washington Fly-In, cosponsored by the Fibre Box Association (FBA) and held in conjunction with the National Association of Manufacturers (NAM) Manufacturing Summit, attracted 48 members from the industry to meet with their legislators to advocate on behalf of economic and social policies beneficial to the manufacturing sector. This past year, members of the Printing Industries of America (PIA) also joined the Washington Fly-In.

BOXSCORE www.aiccbox.org

AICC Canada

AICC Canada, aka Region 11/12, encompasses Ontario, Québec, and the Maritime Provinces and is run by an independent board of directors chaired by President Marco Studer of Independent Corrugator. The region hosts a number of events annually and provides various services to its members locally. In 2016–17, events included two general member meetings, the annual Christmas party with 120 attendees, and the winter Presidents Lunch, where local business leaders are inducted into the AICC Canada Hall of Fame. The last event of the year is a joint golf tournament co-sponsored by CCCA and AICC Canada and expects 165 golfers annually. In 2017 the region will co-host its biennial conference and tabletop fair, Future World, on March 1–2. AICC Canada publishes an annual newsletter for its members, as well as its own membership directory and salary survey. John Franciosa of McLeish Corr-A-Box Packaging and Design serves as Regional Director for Region 11/12 on the AICC Board of Directors. For more information on the activities of AICC Canada, contact Jana Marmei, Administrative Director, at 905-727-9405, or jm@aiccbox.ca.

AICC Mexico

In 2016, AICC Mexico celebrated its 15th anniversary as an AICC region. Founded in 2001, the region has grown to include 17 members.

General Industry: 5%

Publications and Advertising AICC’s publications and advertising contributed positively to AICC’s steady growth in FY 2016, bringing in a combined $334,970, made up of $295,756 in website and print (BoxScore) advertising, and $39,214 in publication sales. More than 325 titles were sold during the course of the fiscal year to 170 companies. The charts below show the quantities by subject area and type in AICC publication and ad sales for the fiscal year. Financial Results AICC’s operations in FY 2016 brought in $3,274,152 in revenues and realized expenses of $3,211,700. This resulted in a net operating income of $62,452. This income, combined with $7,516 in nonoperating income from AICC regional activities, resulted in a total net income of $69,968. AICC members who wish to receive a copy of AICC’s audited financial statement should send a request in writing to Steve Young, President, AICC, PO Box 25708, Alexandria, VA 22313, or email syoung@aiccbox.org.

Design: 7%

Sustainability: 1% HR: 21%

Sales: 51%

Publication Sales Percent Sold by Function Area

IT: 4%

Production: 7% Safety: 4%

BOXSCORE November/December 2016

Directory Logo: 67

BoxScore Ad Pages: 188

Advertising Sold by Type Web Banners: 9

Assets $3,301,955 in FY2016

Current Assets: $2,661,198 Property & Equipment: $587,144 Other Assets: $53,613

BALANCE SHEET

Liabilities $1,033,602 in FY2016

Revenues $3,274,152 in FY2016

Current Liabilities: $979,053 Long-Term Liabilities: $54,549

2016

2015

2,661,198

2,668,103

587,144

568,948

53,613

56,778

3,301,955

3,293,829

979,053

1,037,730

Long-Term Liabilities

54,549

56,714

TOTAL LIABILITIES

1,033,602

1,095,444

Unrestricted Net Assets

2,268,353

2,198,385

TOTAL LIABILITIES & NET ASSETS

3,301,955

3,293,829

2016

2015

TOTAL REVENUE

3,274,152

3,151,450

Operating Expenses – Program

2,745,107

2,610,331

466,593

438,739

3,211,700

3,049,070

62,452

102,380

7,516

33,075

69,968

135,455

Current Assets Property & Equipment Other Assets TOTAL ASSETS Current Liabilities

INCOME STATEMENT

Operating Expenses – Management TOTAL EXPENSE OPERATING INCOME NONOPERATING INCOME TOTAL INCOME

Membership Dues: $1,144,791 Advertising: $295,756 National Meetings: $1,392,563 Education & Training: $330,174 Publication Sales: $39,214 Miscellaneous: $71,654

Expenses $3,211,700 in FY2016

Membership: $362,316 Administrative: $466,593 National Meetings: $1,549,551 Education & Training: $353,967 Publications: $149,900 BoxScore: $273,582 Marketing: $55,791

BOXSCORE www.aiccbox.org

The Associate Advantage

MACHINE FINANCING TIPS ED GARGIULO EQUIPMENT FINANCE CORP. VICE CHAIRMAN EGARGIULO@EFC-FINANCE.COM

JEFF PALLINI FOSBER AMERICA CHAIRMAN PALLINIJ@FOSBER.COM

DAVE BURGESS JB MACHINERY SECRETARY DBURGESS@JBMACHINERY.COM

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

KEITH R. UMLAUF THE HAIRE GROUP IMMEDIATE PAST CHAIRMAN KUMLAUF@HAIREGROUP.COM

BOXSCORE November/December 2016

n my 37 years in the finance industry, my expertise has been in structuring finance programs best suited to each client’s needs. In this article, I will provide helpful information in structuring the most advantageous financing programs for your operations. The evaluation of any new machinery purchase centers on the competitive advantages that may be derived though a more efficient production process. Similarly, an evaluation of your financing alternatives should be based on obtaining similar advantages. Cookie-cutter term loan financing may not offer the flexibility and options to allow your organization to grow and prosper. It seems that the first question asked of any lender is “What is your rate?” Honestly, I have asked the same when obtaining a mortgage or a new car loan, but other factors are just as important. The cost of new machinery continues to rise, and plant/company acquisitions have become a major path to business expansion, making the impact of financing more critical to your tax situation, balance sheet condition, and monthly cash-flow position. Poorly structured financing can limit the ability to expand and grow your company. I always strongly suggest that the corporate accountant be consulted well in advance of any major asset acquisition and financing project. Your accountant can provide valuable feedback as to tax and balance sheet consequences, which can ensure that you request a financing structure best suited to your needs. Your accountant can also provide most of the information that will be requested. Once your accountant has provided feedback and information, it is time to contact potential lenders. Lenders set their terms based on their experience in the

subject industry, knowledge of the assets being financed, and history, if any, with the borrower. Taking extra time to fully investigate the available financing options and terms offered by both your bank and industry-specific lenders can guarantee you obtain the most advantageous lending terms. Significant tax savings may be obtained by choosing a lender who will work with your new machine manufacturer and used machinery dealers to structure the thirdparty sale of existing plant equipment being replaced as a trade-in. This trade-in structure should be addressed and put in place upfront before deposits are paid on the new machinery. Typically, when ordering a new machine, a 30 percent deposit is due with the order—sometimes many, many months prior to delivery. Some institutions provide excellent bridge loan financing for pre-delivery progress payments, while others do not. This is important, since it allows deposits to be paid without tying up your bank line of credit. Your future financial flexibility must also be a major factor when choosing a lender. Does the lender require loan covenants that can restrict the ability to borrow in the future? Does the lender require a blanket lien on your assets and personal guarantees? Does the lender provide both lease and loan options? In closing, it is worthwhile to spend a similar time determining the best machinery financing as you would in choosing the right machine. In this way, you will not only have the most productive and efficient production facility, but the best-scheduled and lowest possible after-tax cost of ownership. This article was written by Ed Gargiulo.

AICC’s Got Class

(es)

AICC’s Packaging University continues to expand the largest and most recognized curriculum of industry-specific webinars, forums, workshops and e-learning courses for independents in the Corrugated, Folding Carton and Rigid Box business. From Sales to Maintenance, Production Managers to CEO’s, AICC has comprehensive, targeted, training programs for all levels. Our instructors, both in and outside the paper and packaging industry, are respected and knowledgeable consultants with direct experience in the topic at hand. It’s time to go back to school and get your business to the head of the class at AICC’s Packaging University. Log on to the AICC Packaging University site at AICCbox.org, contact Taryn Pyle at tpyle@aiccbox.org or call 703.535.1391 to receive AICC’s new course catalog.

T HE I NDEPE NDENT P AC KAG ING A S SOCIATION

113 S. West Street • Alexandria, VA 22314 • Phone +1.703.836.2422 • www.aiccbox.org

Financial Corner

THE ANATOMY OF A SALE AND HOW IT IS RECORDED BY MITCH KLINGHER

et’s say you just got an order for 5,000 boxes from customer X through salesperson A. The order calls for a labeled sheet, which must be die-cut and then joined on a specialty folder gluer. It must then be assembled with a standard base and header, packed out with product, and then shipped to four different locations. All of the finished boxes must be on a pallet and covered in shrink-wrap. The customer has asked for one price, which Materials

you quote at $27,500 ($5.50/unit). Your work-up of this price is as follows: At the end of the day, you have a contribution margin ($27,500–$21,588) of $5,912 (21.5 percent) and a return on sale ($27,500–$26,163) of $1,337 (4.9 percent—index 95.1). The books would record a sale and account receivable of $27,500, and the salesperson would be paid a commission (15 percent of contribution) of $887. Is this enough? Are

Sq. Ft.

Total

Sheet cost main

125,000

5,250

$5,250.00

Sheet cost base

35,000

0.5

5,250

$2,625.00

Sheet cost header

35,000

0.35

5,250

$1,837.50

Label - main

0.75

5,250

$3,937.50

Label - header

0.25

5,250

$1,312.50

Plates and dies

$787.50

Ink

$50.00

Glue

$10.00

Pallet

500

$2,000.00 $17,810.00

Labor

S/U hrs.

Run hrs.

Total hrs.

Crew rate

Laminator

0.6

4.60

37.5

$172.50

RDC

0.25

3.25

47.5

$154.38

SFG

0.5

4.50

42.5

$191.25 $280.00

12.35

Total

$518.13

Assembly labor

14.00

Pack-out labor

21.00

$420.00 $1,218.13

Delivery

4 trips

200 miles

$600/trip +$0.20/mile

$2,560.00 Total direct costs Allocated overhead Full cost

BOXSCORE November/December 2016

$21,588.13 $4,575.00 $26,163.13

you able to do any more analytics? Can you derive any profit center information from this posting? I think the answer to the above questions is a resounding no. As a result of this order, you: • Sold manufactured corrugated. • Assembled displays. • Packed out the displays. • Recouped freight costs. • Sold pallets. • Sold tooling. • Tied up three pieces of manufacturing equipment for more than 12 hours. The “big picture” analytics would say that you: • Shipped approximately 125,000 sq. ft. of corrugated at a sales price of $27,500, which equaled almost $145/MSF. • This order generated almost $6,000 of contribution and a contribution percentage of 21.5 percent. • This order was sold at a reasonable profit margin/index (if you believe in such calculations!). However, it doesn’t let us know the answers to the following questions: • How much did we mark up the tooling? • How much of a profit did we get on our temporary labor (assembly and pack-out)? • Are we charging enough (or too much) for delivery? • Did we get paid for the pallets, and did we mark them up? • How much corrugated contribution per machine-hour did this order generate?

In order to get these details, you have to take steps to “unbundle” the sale. Just because the customer wants one price for everything ($5.50/display), doesn’t mean that you have to post your books that way. What if the entry in your books looked like this: Accounts receivable: $27,500 Sales tooling: $1,050 Sales pallets: $2,500 Sales labor: $1,000 Freight charge: $2,560 Sales manufactured corr.: $20,390 (or possibly “Sales manufactured displays” if that is a profit center for you) If you were to post your books this way, you might come to the following conclusions:

• Contribution per profit center was: Tooling: $262.50 – 25 percent Labor-only sales: $300 – 30 percent Pallets: $500 – 20 percent Manufactured corrugated: $5,912 – 32 percent – $595/major machine-hour, and it might let you populate a profit center called “manufactured displays” on the income statement.

about the profitability of your business that you can only dream about currently. While it may be expedient to give a customer one price for a host of bundled products and services, in order to really know what is going on, you need to take steps to “unbundle” the sale and look at each component separately. Mitch Klingher is a partner of Klingher Nadler LLP. He can be reached at 201-731-3025 or mitch@ klinghernadler.com.

If you tracked the freight charge on all of your orders and compared it to your freight cost, you would also get some useful information about the adequacy of the charges. If you posted all of your sales this way, you would be able to develop metrics

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International Corrugated Packaging Foundation I N T E R N AT I O N A L

PACKAGING

CORRUGATED

F O U N D AT I O N

HOW TO INVEST IN ICPF

he International Corrugated Packaging Foundation (ICPF) is a 501(c)(3) tax-exempt, nonprofit educational foundation that is reliant on donations and contributions to conduct its mission of generating a stream of increasingly qualified students to enter the corrugated packaging and display industry. The fourth quarter is a perfect time for individual firms and executives to focus on how to join the many others who make annual contributions to support and maintain ICPF’s many initiatives. Following are the numerous ways you can support our work for the future of the industry. Year-End Tax Planning Benefits This quarter you can make a gift that will assist ICPF in its initiatives and provide you additional tax benefits. Following are several examples of donations to ICPF that, in turn, will help support the future of the industry. Check with your tax adviser for verification on specifics. • Make a gift of appreciated property (including stocks, bonds, mutual funds, art, real estate, collectibles) and get a tax deduction for the current market value of the asset (up to applicable IRS limits). • Participate in ICPF’s annual Holiday Weekend in New York. Half of the registration fee is fully tax-deductible as a donation to ICPF. Additional expenses for the weekend are usually tax-deductible for your company as well. • Set up a Gift Annuity that will give you and your spouse guaranteed income for life, and then give ICPF the appreciated asset. • Create a Unitrust to ensure lifetime income with inflation protection.

BOXSCORE November/December 2016

• Use a Charitable Lead Trust to give ICPF annual income now, and then return the total asset to your children or grandchildren when your estate is settled. • Name ICPF as the beneficiary of your IRA or 401(k) plan. • Transfer ownership of a life insurance policy to ICPF. Name the Foundation as the beneficiary. If the policy is paid in full, you get a proportional deduction. If there is an annual premium to be paid, you make a contribution to ICPF to pay the premium, and you get the annual deduction for the dollar amount of the premium. • Add a codicil to your will to make a specific bequest to ICPF. You can choose a set dollar amount, one specific asset, or a percentage of the total asset. Consider a Contribution of Time or Surplus Equipment There are additional ways to get involved and help support ICPF’s mission and initiatives. You can donate surplus CAD tables or corrugated testing equipment to ICPF for college use; serve as a speaker, adviser, or mentor at one of ICPF’s university partners; participate in an ICPF student dialogue dinner; become a corporate partner; serve as one of the rotating industry speakers at ICPF’s annual Careers in Corrugated Packaging & Display Teleconference; nominate a deserving executive to ICPF’s Circle of Distinguished Leaders; participate or otherwise support ICPF’s annual fundraising event; or directly donate to ICPF. All are tax-deductible. It is through your help that ICPF continues to expand its outreach to educate and influence the career decisions of talented, upcoming

graduates from ICPF’s partner universities and colleges. Become an ICPF Corporate Partner ICPF corporate partners are independent corrugated manufacturers, integrated manufacturers, and suppliers to the industry. ICPF Corporate Partners make predetermined pledges to support ICPF’s mission. Pledge levels to become a partner are based upon size of company, with similarly sized companies requested to make similarly sized pledges. Pledges for a corrugated manufacturer begin at $50,000, and those for supplier companies begin at $100,000. The pledge can be paid over time, ranging from one to 10 years. If you decide to make a pledge this quarter, you can postpone the initial pledge installment to 2017 if preferred. Upon your corporate commitment by letter (please contact ICPF for a sample), ICPF would prepare a release for the trade press announcing your firm as a new ICPF Partner, and the pledge to which you have committed. You additionally have immediate access to ICPF’s career portal and résumé bank for recruiting new and upcoming graduates to your firm.

WHY INVEST IN ICPF? ICPF is committed to working with faculty and expanding its outreach to colleges, universities, high schools, and their talented students in order to educate and encourage them to consider the many careers available in the corrugated packaging and displays industry. ICPF’s work, in large part, is enabled by financial and other support provided by individual companies that will benefit from ICPF’s initiatives. Through industry support,

ICPF has made significant strides. To illustrate a cross section of its initiatives, ICPF has: • Placed more than $11.5 million in corrugated equipment in colleges and universities to educate students in concepts and skills to better prepare them for a career in the industry. • Jump-started, created, or expanded 19 corrugated packaging programs at U.S. colleges and universities in just the past 10 years. • Established formal partnerships with more than 25 colleges and universities across North America. • Conducted annual interactive Careers in Corrugated Packaging & Displays Teleconferences to bring the latest developments in the industry to students and faculty on campuses throughout North America. Through the required preparation, the Teleconference enables ICPF to maintain ongoing contact with faculty across the country and is successful in annually promoting corrugated careers to the more than 400 students from the 15–20 campuses that participate each year. • Created the Careers in Corrugated Packaging & Displays Network that annually has 700–1,100 students and upcoming graduates who have joined specifically to pursue student internships and careers in the corrugated industry. • Developed the Career Portal and Résumé Bank for firms to post entrylevel positions for new graduates and student internships. The portal also allows potential student interns and upcoming graduates to post résumés in its résumé bank that can be searched by corrugated partner

•

companies. More than 90 percent of the openings posted on the portal have been successfully filled utilizing the portal in conjunction with ICPF’s résumé bank and LinkedIn corrugated career network. On average, seven qualified upcoming graduates apply to each entry-level opening posted on ICPF’s career portal. Developed and Placed Corrugated Curricula to support real-world corrugated instruction in colleges and universities. ICPF’s corrugated curricula are accessible to students and faculty directly from ICPF’s website. Conducted Annual Student Corrugated Packaging Design Presentation Competitions that expose students to the corrugated packaging industry. In the annual Best of the Best student runoff competition held during ICPF's annual interactive Teleconference, student winners from the AICC competition are challenged to “show, tell, and sell” their entry to their student peers. Students are awarded cash prizes, and many participating in ICPF’s Best of the Best competition subsequently have been recruited into the corrugated packaging industry. Produced a Powerful Recruiting Tool on DVD that explains the corrugated packaging industry and its careers to students and those outside the industry. Students can access these informational career videos directly from ICPF’s website. Initiated a Pilot Program with SkillsUSA, AICC, and FBA to assist local plants in working with local high schools and vocational colleges to train and recruit millennials for careers on the plant floor.

YOUR SUPPORT: • Helps ICPF maintain its work with colleges, universities, and vocational and high schools in broadening its outreach to students. • Helps ICPF maintain and expand its initiatives, like its annual careers in corrugated interactive teleconferences, student design competitions, student dialogue dinners, career portal, and corrugated career LinkedIn network. • Helps ICPF develop new recruiting products to reach students from multiple educational backgrounds to promote the diverse careers in the corrugated industry. • Helps ICPF maintain its work to match students and upcoming graduates to student internship and full-time openings in the corrugated packaging and displays industry. If you are struggling to find talented people, you have a greater stake in ICPF’s success than you may realize. Your company’s financial support will further enable ICPF’s work to directly assist you in securing student interns and new graduates to meet your immediate needs and for succession planning. We welcome and need your support. For more information, visit ICPF at www.careersincorrugated.org, contact rflaherty@icpfbox.org, or call 703-5498580. Richard Flaherty is president of the International Corrugated Packaging Foundation.

BOXSCORE www.aiccbox.org

The Final Score

FISCAL CLARITY

very year in the November/December issue of this publication, we publish AICC’s annual report. This is the Association’s commitment to you, its members, of transparency in the financial management of your Association. This year’s report begins on Page 62. I believe it is important that members understand that AICC’s governance, meaning its board of directors, takes very seriously its fiduciary responsibility. Our bylaws determine the makeup of our budget committee, chaired in this past year by Tony Schleich, president of American Packaging in Hutchinson, Kan. The budget committee convenes at least quarterly for reports on our financial performance and projections of income and expenses to ensure we are on track in our major revenue areas. In addition to hearing these reports, the committee also determines our investment policies and oversees the investment of our growing reserve fund. In that regard, the committee oversaw a major revision to AICC’s investment policy document in January of this year, and also transitioned management of our reserve funds to The Verity Group of McLean, Va. AICC’s reserve funds are approaching $2.0 million, a figure that represents two-thirds of our annual expense budget of $3 million. By any yardstick, this metric is a healthy one for trade associations such as AICC. What’s more, the investment made by AICC’s leadership 25 years ago in purchasing its headquarters here in Alexandria, Va., has provided a substantial asset on our balance sheet—one whose fair market value is approaching $2.5 million. Why is all this important? If you’re reading this from a member perspective, where your company might have sales approaching $30 million and many millions more in the value of your inventory, building, equipment, vehicles, and land, AICC’s numbers are small potatoes. But they are important to you because they show that your Association is built on a sound financial foundation of diverse revenue streams—dues, convention income, education and training, etc.—and that this allows us to continue to expand our services and offerings to you. Prudent management of these resources means that we can continue to provide the very best in membership services now, and our growing reserves mean we have backup resources should we need to use them. Fortunately, we have not had to tap these funds for purposes of covering everyday expenses. So, as you read this year’s report, I hope you will appreciate that an association on sound financial footing is an association that has its members as its first priority. Thank you for your continued support of AICC.

Steve Young President, AICC

BOXSCORE November/December 2016

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