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Pump Up Your Profitability

By AICC Staff

March 25, 2019

You do not have to purchase multimillion-dollar machinery, move to a larger building, or expand into new products and services to strengthen your bottom line. Even small changes can deliver big results. And small changes are typically easier to implement and often inexpensive (if not free). They won’t be as flashy as a gleaming new machine or expansive facility. But over time, they can significantly improve your overall profitability.

Preventive Health Care

“As everyone knows, the costs for health care are only going to go up,” points out Les Pickering, co-founder of Quadrant5 Consulting. “We need to ask if we can reduce our costs by doing the right things, preventive things, on a day-to-day basis.

“When you think about health and wellness, ask yourself how much you are spending on health care versus how much you’re spending on prevention,” Pickering advises. “Look at that ratio, and then ask, ‘How can I shift some activities and costs toward prevention?’

“Prevention includes everything, even your vending machines.” Look at the selection of items stocked in your vending machines, Pickering suggests, and if it is predominantly junk food, consider supplementing or replacing those items with healthy alternatives.

“But don’t stop there. Promote fresh fruit on Fridays rather than doughnuts,” he adds. “Maybe you could have fruit and yogurt or low-fat cake for birthdays. Encourage vendors who may be bringing in breakfast items or token treats to focus more on grains and fruits. After all, ornate fruit baskets look amazing and taste good. These small changes can lead to big, big improvements in health.”

Workplace Safety

Preventive steps are equally valuable for reducing the number of—and costs associated with—workplace injuries. “Workplace injuries can be very costly to a company and drain profits,” notes Brian Storms, corporate environmental, health, and safety manager and corporate packaging engineer for Jamestown Container Cos. “Depending on the severity of the injuries, annual worker compensation costs can rise to a million dollars or more.”

The biggest culprit? Complacency, which accounts for many common and avoidable workplace injuries. And, unfortunately, the longer you operate without a significant injury, the more complacent workers can become.

“A safety-first culture encourages workers to remain mindful of what they’re doing at all times and to remain vigilant for accidents waiting to happen,” Storms says. Signage, slogans, and regular training and discussion sessions all help. But managers should keep in mind that even a great message, if repeated day-in and day-out without variation, will eventually fade to mere background noise. Changing the message occasionally and altering how it is delivered can help to keep it fresh.

Waste Management

“Waste costs money,” says Nelva Walz, vice president of Michigan City Paper Box Co., a rigid box manufacturer. “But waste also can be a way to make money if managed properly.”

For starters, Walz suggests looking at how waste and overs are currently being managed. “The normal standard is that you allocate about 3 percent for waste for each step in the production process,” she says. “So, if I’m die cutting a board, that’ll have 3 percent waste. If I’m printing paper, I have to add 3 percent more for waste. Add an additional 3 percent for setup and make-ready. By the time the job is done, you can reach about 12 percent waste on paper alone!

“In the long run, it can make a big difference if you are able to make even small changes to reduce waste at every point in this process. If you’re working with an outside vendor, find one whose equipment and setup can do multiple steps at one time. Going from four steps to two, for example, could potentially save 6 percent in waste—and that saves money. Make sure each part of the process is done with the least number of touches.”

Walz notes that it’s also important not to let leftover materials languish in the warehouse. “For large-volume jobs that will be run again, save or keep unused materials for use in future runs. Count the unused materials, then label and store them,” she advises. “You need to identify those leftovers that could be used for the next project, store them properly, and inventory them accurately so you know what materials you have and exactly where they are. Also, you have to communicate to everybody on your team that you have those materials available. They need to know that if they’re running that specific box size again, they should ask the materials handler to locate the leftover materials. Those things add up.”

Similarly, Pickering believes it can help to ask how much money you may be losing due to waste associated with orphan pallets.

“An orphan pallet is the final pallet of every job than runs through conversion and finishing,” he explains. “You have all seen them: the 14-to-20 of the last four-to-six bundles, the overruns. The palletizer does not want them, as they frequently have to be loaded by hand. The racking system does not want them, as they lose precious capacity in the warehouse. The transportation system does not want them because they take up a fraction of the space that the rest of the order does, so it hurts the cubing of the trailer. Finally, the operator of the flexo folder gluer (FFG) does not want them” because they take longer to process. “Add up counting the items, modifying the final load tag, entering into the production to reconcile the order, and then tagging the pallet,” he adds. “All of that is time that the operator isn’t spending on changing the job order on the FFG to the new order. This is why we often need to have an additional person on the FFG. I’d encourage plants to stop processing orphan pallets and start shipping full small pallets. That would save the industry a fortune.”

“When you think about health and wellness, ask yourself how much you are spending on health care versus how much you’re spending on prevention,”

— Les Pickering, co-founder, Quadrant5 Consulting

Rail vs. Road

“Freight is often an afterthought on any job because the customer pays for it,” Walz says. “But think about long-term customer building. With one of our customers, we keep saving money for them because of how we ship, which is why they keep placing orders with us.

“Are you using the most effective way to ship boxes?” she asks. “Let’s say you’re on the East Coast and your customer is on the West Coast, and they want their boxes by the end of the month. If you can get that order done two days earlier, maybe you can offer to ship via rail versus road. Train is almost always 30 to 50 percent lower than on the road, especially if you’re shipping a partial load; less-than-truckload (LTL) shipments are usually very expensive. But on rail, they can combine your shipment with other loads. I know nowadays it sometimes seems like every job is a rush. But if the deadline isn’t critical, you can maximize your profitability when it comes to shipping, in cooperation with the customer.

Walz recalls one very simple change that cut her customers’ shipping costs in half. “We make rigid boxes that a customer down the line will typically put things inside. Because they want to receive open boxes to streamline their fulfillment, often we’re asked to ship covers and bases separately, which of course doubles shipping costs. Instead, offer to ship covers and bases together, but with the cover under the base, leaving the box open when it ships. This is called a reverse-close, and it is a simple change that can save a lot of money.”

Refinements From the Front Line

Small changes can also involve tweaks to processes and procedures that shave off time and eliminate unnecessary steps, improving overall efficiency. A number of such changes were highlighted when Storms solicited profitability tips from the plant managers at Jamestown Container. Their advice included:

  • Stagger lunches and breaks to keep machines running.
  • Take a “pass the baton” approach to shift changes so machines don’t stop if they are in the middle of a production run.
  • Cross-train all operators, which can help to minimize or eliminate drop-off during vacations and sick days.
  • Standardize auto-bottoms so they are all set up the same way at the specialty folder gluers.
  • Continually monitor and maintain aging equipment to minimize obsolescence.
  • Use staff from local sheltered workshops for large hand-labor runs.
  • Pick up sheets and supplies (glue, foam, etc.) on backhauls to minimize incoming freight costs.
  • Reduce the amount of trim on die-cut orders (for example, using ⅜ instead of ½). It may save only pennies per run, but over time, it will increase profitability.

Along similar lines, Pickering adds, “I see operators leaving station all the time, which has an impact on overall efficiency. Often, they leave to go to a central print area. Consider the difference it would make, though, if every machine were able to print its own load tag. It would keep the operator on-station and reduce lost minutes—even lost hours over the course of a year.”

Ask and Analyze

No two converters or industry suppliers are going to be identical in terms of equipment, staff, culture, and customer needs. To find those specific areas in your own operation that could benefit from small changes, consider the value of internal benchmarking.

Berni Hollinger, a consultant with CH Consulting Group, writes, “Internal benchmarking compares the results of one department, team, or individual within an organization to another. It’s determined which practice or procedure produces the best results. Then that practice or procedure is adopted by other departments, teams, or individuals within the organization with a view to improvement throughout.”

For example, she notes that a plant may be satisfied most with how its third-shift production line is running. Maybe that shift has lower waste and demonstrates greater efficiencies. That shift’s performance would then become the benchmark for other shifts.

Management needs to analyze just what, exactly, that third shift is doing that sets it apart. “The analysis could focus on leadership expectations, teamwork, and setup procedures—anything that may help them determine why the third-shift results are more successful than the other shifts’,” Hollinger notes. “The results would then be shared with managers for the first and second shifts, and a course of action would be set to implement improvements.

“[Internal benchmarking] relies on management to review the data and determine what the benchmark is and then to follow through with making the changes necessary to achieve expected results,” she writes. However, “the effectiveness of any benchmarking process depends on following through on the results. … It should be reviewed regularly and used to achieve bottom-line improvements.”

In short, you simply need sufficient information to expose the shortfalls, the curiosity to ask why something is being done a certain way, and the willingness to try a different approach if it might make more sense—saving time, money, and perhaps even frustration along the way.

RobertRobert Bittner is a Michigan-based freelance journalist and a frequent BoxScore contributor.