Developing contacts in customer supply chains will give you a competitive advantage with retailers

Logistics offers opportunities: developing contacts in customer supply chains will give you a competitive advantage with retailers

Tom Andel

Dermot Smurfit, president of the European Federation of Corrugated Board Manufacturers (FEFCO), captured the collective wisdom of his organization’s 13th Technical seminar in his opening remarks. The event took place April 20-22 in Nice, France.

“There’s a serious disconnect between specifiers of corrugated packaging, and the users, which include the major supermarket groups,” he says. “Sixty percent of corrugated goes through their system. Still, it’s been estimated that in Germany alone, product lost through incorrectly specified or designed packaging results in a loss of between 300 million and 1.5 billion euros. This has to be a significant concern to all of us in the box business. Our Spanish colleagues have estimated that over the past 50 years or so plastics have removed some five million tons of corrugated from the European system. Returnable plastic crates are seen as our greatest threat, having already removed over 1 million tons from the system in just a few short years.”

This represents corrugated’s greatest threat, but also the industry’s greatest opportunity. The supply chain through which corrugated packaging travels can yield information that will make corrugated converters more competitive. To access that information, converters need to cultivate a new point of contact: the logistics manager at the retail level.

Sell Your Innovation

Professor Bernard Hallier, managing director of the European Trade Institute (EHI) and president of EuroShop, the worldwide exhibition for retail investment goods, says there’s an oversupply of products and packaging in the supply chain and limited shelf space. Retailers are being forced to be innovative.

“People making decisions in marketing don’t know much about packaging,” he told his audience of corrugated industry specialists. “A new cycle has started.”

He was referring to the information cycle in the supply chain. If converters want to stay in business, Hallier warned, they must realize that retailers are pushing for their supply chain partners to have the necessary packaging know-how to help make them successful.

The problem is, too many corrugated suppliers are afraid of creative people, says Erik Dyhr Thomsen, development manager for Kappa Dansk Kraftemballage, based in Denmark. The industry needs to be as creative as Apple was when it took the portable music market away from the Sony Walkman. The problem is that converters are still faced with the customer mantra “price, price, price.”

Finding New Markets

“You need to talk to customers about the future of packaging and what it can do,” he says. “What will your packaging do for their product? To answer that you need to find out what the customer is doing in his marketplace.”

Thomsen cites the example of a pipe tobacco client that was losing revenue because of an aging and shrinking customer base. The solution would be found in creating a new form of packaging. Thomsen convinced the tobacco company to switch from a plastic pouch to one made from corrugated paperboard. This gave the product a bold new look that was attractive to younger consumers. The result for this tobacco company: a 25 percent growth in market share.

Consumers want top quality and design at discount prices. That’s why retail suppliers of paint, textiles, shoes and leather goods are losing ground to Wal-Mart. Corrugated converters can look to furniture makers and fashion shops as the newest growth opportunities outside the big box retailers.

“They’re the ones you’ll have to impress with your products,” Thomsen advises. “Creativity will be your most important raw material.”

Know Logistics Pros

The person you need to impress most with that raw material is the logistics manager.

“They’re the new decision makers in retail,” says Alfred Hofman, who used to be responsible for maintaining fresh produce for EDEKA, Germany’s largest food retailer. He’s now president of his own consulting and investment company, Intrepid Fresh, based in Holland. He adds that these decision makers want packages that will lower handling costs and be easy on the environment. That should make it easy for converters to make the case for corrugated.

Hofman offers examples from his time working for EDEKA.

“When EDEKA went back to cartons [from plastic] in 2000, they had quality problems like poor cooling and seepage,” he explains. “We needed coatings for the wet products and controlled atmosphere packaging for individual units.”

Hofman worked with his corrugated supplier on a solution involving the addition of a layer of film to the tops of containers of strawberries and cherries. This was a simple but effective means of providing an “individual controlled atmosphere.”

The greatest pending opportunity for corrugators will be next year, and it involves bananas. Today, the prescribed industry standard corrugated packaging for bananas in the EU, the U.S and Japan is telescopic and weighs 20 kilos loaded. Because that packaging is too big and heavy for many retailers and consumers, the size restriction will be lifted. Packaging vendors will be able to sell this market on an open-top box that’s more retailer and consumer friendly. Hofman noted that this new market opportunity represents 650 million packaging units a year.

Attendees of this year’s FEFCO seminars went home with fresh ideas that may help preserve or even grow their market share. Their strategy will exercise not only what they know about the supply chains they serve, but who they know.

RELATED ARTICLE: Securing your survival.

The future of paperboard converters is tied to the attention they pay to their people and practices.

Innovation isn’t always a good thing when it comes to plant safety. In fact it can be downright ugly. Imagine a lift truck lifting another lift truck to reach something unreachable. Klaus Ruger uses that real-life photograph to do the work of a thousand words in discussing the importance of implementing health and safety programs for employees. It made his audience both gasp and chuckle when he showed it at FEFCO’s 13th annual technical seminar in Nice, France. FEFCO, the European Federation of Corrugated Board Manufacturers, devoted its second morning of presentations to plant management.

Ruger, former managing director of Kappa Wellpappe Wiesloch and currently consultant of Kappa Packaging Germany, says safety needs to be a part of every executive’s mindset, not just the workers’.

He followed the lift truck picture with the sad tale of an employee of a large Frankfurt plant who spilled acid all over himself. It was up to the plant’s executive officer to explain how this person was injured. “He was not wearing a safety suit,” the executive weaseled. Wrong answer, says Ruger. The right answer: “I have not looked after my people so that this person would have been wearing a safety suit.”

To get anywhere close to a zero accident record, safety must be cultural in your company. Ruger says that means individual responsibility, self-coaching, and team spirit, where everyone is concerned about everyone else.

Cleanliness Next to Productivity

Florent Teisseire, production manager at Smurfit Socar Ouest, says cleanliness is also part of a plant’s safety culture. It is a certified process in his plant.

“Prior to certification, we cleaned the machines whether we were on one or three shifts,” he says. “With certification, we’ve improved the cleaning process and made better use of manpower. Prior to certification, machine operators didn’t know why they had to wear white coats. With certification they do. It’s not just to clean the machines, but it’s to please the customer as well.”

Employees have a stake in cleanliness and safety. They even offer their own suggestions. Before certification, in 2003, the company’s suggestion box never contained a single card offering advice on better cleaning procedures. In 2004, 40 of the 209 suggestions it held were about cleanliness.

The cost of these cleaning procedures represents one percent of Smurfit Socar’s sales figures, Teisseire explains. When you know these costs, he adds, you can better manage and improve them.

Master The Learning Curve

To make any safety training effective, it can’t be done in one big-ang approach, suggests Des Moore, head of the School of Business and Humanities at the Institute of Technology, Blanchardstown, Ireland. Start by addressing small gaps. Attendance alone at a training event isn’t enough. Skills need to be put into action immediately after the training session, before trainees forget what they learn–and training decay happens within 24 hours.

The long-term effects of training are important as well, suggests Bertrand Gallois, training manager for Martin Corrugated. Evaluate training’s impact three to six months afterwards. “This can be done in-house by the employees themselves,” he suggests. “They’re the ones best placed to assess the impact and effectiveness.

It’s important that management play a preparatory role, however. They need to base the training on a situational analysis. Assess the work environment before training and tell employees on what basis they’re being measured, he suggests. In the long run this will result in less turnover, more flexible employees, better equipment performance and productivity.

Moore adds to Gallois’ advice to management.

“Managers can help by talking to employees and setting objectives matched to the job,” he continues.

Organize work environment teams to help ensure your plant is employing the right quality and quantity of equipment. Gallois says this will build morale, as will ensuring that these teams are mutually accountable. The teams should be no larger than 15 members, otherwise they might split into factions and create a divisive work atmosphere, Gallois says.

Industry Cooperation

Stefano Rossi, development and manufacturing director, containerboard, SCA Packaging, Brussels, concluded this FEFCO session on plant management by explaining how standards development will make everyone involved in paperboard packaging more competitive with providers of other packaging media. He says this will happen thanks to new cooperation between FEFCO, ECO (the European Containerboard Organization) and Groupement Ondule.

This alliance is starting by establishing paper reel moisture content guidelines, but its to-do list also includes a new set of optimal properties for white top liner, a revision of lightweight grade classifications, a list of Europea grades produced and sold by group members and a corrugator optimization checklist.

The alliance will provide an open forum to promote interaction among all elements of the paperboard supply chain, including starch, converting machines, winders, as well as corrugators, Rossi explains. “If we want to win against competitive materials we must improve the performance of our industry. Working together is the way forward.” That summarizes the content of FEFCO’s 13th training seminar as well.

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