Volume 10 | Issue 2 | Year 2007

Twenty years ago, the packaging industry was totally relationship driven,” says David Wagner, vice president of sales and marketing for Specialty Industries. “The sales reps did whatever was necessary to make the customer happy in ways that may not always have been directly related to business matters – taking the guy in purchasing out to play golf, for example. But, today, that old boy network is dead and gone. Nobody cares about getting free dinners. It’s price, price, price, price.”

Specialty Industries provides packaging solutions that address customer pricing concerns without, oddly enough, focusing entirely on price. According to Wagner, “What we’ve done here in the last five years in particular is to combine the manufacturing perspective with operations and distribution. So instead of just telling a customer we’ll make these boxes for you at X cents per box to beat our competition, we’ll provide a competitive price, but we’ll do a number of things our competition doesn’t. We’ll also package and ship the product for you, and, we’ll even recycle the packaging after it’s been used. That brings down the price of your entire operations, not just what the boxes cost you. That’s a value-add most other companies don’t offer.”

This is why, he adds, business cards no longer identify employees as “sales representatives,” but rather as “sales consultants.” The company’s approach is aptly summarized by its mission statement, “More than just a box, we provide the entire package.” This means, as Wagner points out, “We’re not order-takers. We help customers define their needs, and then design and implement solutions that meet these needs. That could mean managing their entire distribution chain in which we put their product in our boxes and ship to their customers. Or, it could mean manufacturing packaging that’s sent to customer distribution centers according to the customer’s just-in-time inventory software. The focus is always on what the customer needs us to do for them, and how best to do it. It’s not a about making X amount of product just because we have the manufacturing capacity to do it and then making sure we sell it all.”

It’s a strategy that is achieving impressive results. “Five years ago we had less than a million dollars in annual revenue. Last year we generated about nine million dollars,” Wagner says.

Wagner emphasizes that the customer-orientated solutions approach is underpinned by the entrepreneurial approach of company founder and owner Carl Cheek Sr., who at 69 is still active in running the business in its 39th year.

“He’s got more energy than I do,” Wagner notes. “Just to give you an idea of how Carl does business, you may have heard of this company Harley-Davidson. All their bikes are packaged in corrugated. The company that was providing the Harley-Davidson boxes was making them and shipping them in from out-of-state. But because Harley-Davidson is a community-oriented business, they wanted to use a local supplier. Their manufacturer at the time couldn’t – or wouldn’t – do it, even though you’re talking about 350,000 boxes a year. But setting up something locally just wasn’t part of their orientation. So Carl came in, thought it was a good idea, and got the business. That’s what entrepreneurs do, they step in and take advantage of opportunities established businesses don’t want to see, or can’t see.”

Indeed, this customer focus fuels the company’s growth strategy. “If we need to meet a customer need by acquiring a company that fits into our business model and, obviously, has potential to be profitable, then that’s what we’ll do. For example, about four- and a-half years ago we acquired a folding carton company in Florida that makes not only the boxes for cigars, but the bands that go around the cigar. It was a nice addition to our product mix.”

Different Packaging
Indeed, it has become one of three business units in the company. The New Packs folding cartons division makes rigid set-up boxes and printed wooden boxes used not only for tobacco products, but also for candy, food, hardware and cosmetics.

The Specialty Industries division itself makes corrugated products that are made from both pulpwood and plastic. “There are some situations where you can save money by literally thinking ‘outside-of-the-box.’ One good example is in the appliance industry. Your washer or your dryer used to come in a big corrugated cardboard box. Now, if you’re shipping, say, 400,000 boxes a year and each box costs you $18, that adds up to a lot of money. So, one way to provide the same level of protection at a lower cost is to put the appliance in polyurethane at both ends and then shrink-wrap it from top to bottom with film. Because we’re not just a corrugated cardboard company, we can offer both options; moreover, we can offer the option that is best for the customer.”

Wagner emphasizes that the company’s extensive expertise in packaging alternatives is an additional value-add of its services. For example, he points out, “Different kinds of film have different tensile properties. You want something really strong around that television or washer/dryer. That seems obvious. But people tend to think stronger is always better. The problem is when that stuff sits in the warehouse, its whole purpose is to contract for a tight fit. That’s why it’s called shrink wrap. But you don’t want that wrap squeezing a shipment of egg cartons the way you want it gripping something made out of metal, unless for some reason you’re trying to produce yolk.”

Specialty Industries is as equally concerned with what goes in the box. “You have to evaluate how expensive the item is and the relative value of making sure it arrives intact,” Wagner points out. “Maybe you’ve got a relatively inexpensive electronic component that you can bubble-wrap. You can expect a certain amount of breakage, but it’s not overly expensive to quickly ship a replacement. But with other higher-priced premium parts, those economics don’t work, and you want to invest in more expensive packaging to ensure against breakage that’ll end up costing you more to replace than you’d save with less expensive packing materials.”

The company uses environmentally recyclable products, a good source of which is the company’s third division, Westreet Industries. This division recycles all kinds of plastics, papers, corrugation, metals, pallets and electronic equipment such as computers and transformers. “Besides the general benefits to our environment, removing recyclables from the waste stream reduces a company’s disposal costs,” Wagner explains. “We partner with customers to provide removal and documentation of their recyclables in a smooth, reliable and hassle-free way. Depending on market conditions, Westreet pays for the collected recyclables which we can either resell or use ourselves to reduce the cost of raw materials for our own package materials manufacturing.

We also sell recyclable spiral round tubes in a variety of colors, diameters and lengths through Westreet. These can be used as yarn carriers, carpet cores, mailing tubes, and film cores, among other applications.”

He adds, “It can be the case that customers are dedicated Westreet accounts. We can also offer Westreet recycling services to customers of Specialty Industries as part of an overall packaging solution. Again, its another value add to customers, and its that kind of flexibility to be more than just a box maker that helps us grow our business.”

Materials Management
Key to effectively managing customer packaging materials is managing its raw materials and manufacturing processes. About six years ago, the company, which employs about 300 people, consolidated five separate manufacturing locations under a single roof along with its main office and warehouse at a 280,000-square- foot location in Red Lion, Pa. All corrugated sheet products less than 60 inches tall intended for distribution within a 200-mile radius are manufactured here. Larger corrugated sheets and other products are made by another company-owned operation in Baltimore, Md., called Craft Care.

While the manufacturing process is highly automated and, thus, highly cost-efficient, one area in which Specialty Industries has to be particularly vigilant is projecting raw materials expenses. “It’s not just an issue of cost, it’s sometimes a question of supply. Films are made from resins, which are a petroleum-based product. When the hurricanes hit the Gulf and disrupted the entire petrochemical distribution system, it wasn’t a question of the cost of resins, it was whether we could get them at all. However, because we have a broad range of products, we had the ability to offer substitute packaging during the shortage.”

He adds, “We always try to anticipate what may be happening 18 months ahead. I think last year we had two increases in the price of poly-based products. The pulp market had been pretty stable up until about two years ago. Then China got into corrugation manufacturing in a big way and they just sucked up paper supplies. That, in turn, resulted in less inventory that drove up market value.”

Wagner likens the situation to playing the stock market. “You have to be careful. You don’t want to buy too much of something that ends up sitting in your inventory when prices drop and it’s costing you more to keep it in the warehouse than its actual market value. So, you have to be conservative and you have to be careful in speculating what something is going to be worth over a short term investment.”

This leads to yet another packaging value-added edge for Specialty Industries. “We not only have the expertise to anticipate and manage changing market conditions, but we have alternative supply sources through our own recycling division,” Wagner points out. “By managing our costs effectively, we better manage the costs of the solutions we implement for our customers.”

This very ability to wrap everything up in a functionally attractive package is why Specialty Industries is leader of the pack.

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