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Should End Users Buy Their Packaging from a Factory, Converter or Distributor? Part 1
January 30, 2014
5 Min Read
First, allow me to say I am not particularly fond of multi-part blog posts because quite frankly, my attention span is simply not that long. The appeal of writing a blog like this is being able to jump from topic to topic and have virtually no limitations or restrictions. However in this case, I was certain I could not do an adequate job on this topic in one post, unless it was much too long for anyone to be willing to read. I hope you will bear with me, trust you will find it worth your time, and come back for Part 2.
Some who know me as a lifelong distributor of packaging products may say I cannot possible write on this topic and be impartial. To the contrary, as a distributor with a firm grip on reality and the obvious, I think I have learned and accepted over time, where a distributor like us belongs as well as where we don’t. I can tell you that on many occasions, I have suggested to an end-user customer or prospect that their interest may be better served dealing directly with a factory or a converter.
The Who’s Who and What’s What in Packaging
I know some of my converter friends will disagree but in my opinion, unless you create a product from beginning to end, you are not a true manufacturer. In the packaging industry, a manufacturer is typically able to take a raw material, for example plastic resin, extrude it into a film and put it up on rolls ready for shrink wrapping, over wrapping, stretch wrapping for whatever the film product and packaging application requires. They may also be making rolls of film to be sent to a converter/printer, for example, to be converted into printed, plastic bags.
A similar example in the corrugated industry is an integrated plant able to create corrugated sheets from pulp and form them into boxes, trays, pads, etc. They may also be creating sheets of corrugated board to be converted into finished products at what the industry refers to as a sheet plant. Typically, a converter/sheet plant makes boxes or other finished product but they do not make corrugated board.
When Is Working Directly With a Manufacturer the Best Option?
The answer is a little more complicated than this, but for me the short and final answer is as follows: When the end user customer knows what they need, how to buy it, the volume is substantial and it is shipping to one or just a few locations.
In most cases manufacturers do indeed offer the best prices but not always. End user customers are sometimes surprised at how price competitive converters or even distributors can be, in some specific situations and on certain products.
Material cost is typically less than half of the price of any packaging product, and the balance is usually shipping costs and labor. A converter with the right equipment may be more efficient than a large manufacturer on a short run so their overall production cost is lower and they can give a customer (or distributor) a better price. Remember, any producer’s ability to be price competitive depends almost entirely on the capabilities and efficiencies of the equipment they have available to run the job.
A distributor may be price competitive with a manufacturer in situations where the customer’s service requirements make logistics and shipping costs a greater percentage of the overall cost. For example, an end user customer may use a million pounds of polyethylene film per year but if it has to be delivered in small quantities on a next day basis from time of release, to twenty different plants scattered around the country, there are few manufacturers willing or able to efficiently handle that business. Buying in large quantities and selling/delivering it in smaller quantities is what distributors do.
“Blow and Go”
When I first heard this term from a corrugated mill representative, I assumed it was an industry obscenity. I soon found out that it referred to the way a corrugated manufacturing plant processes paper and corrugated board. Even the way a plant is typically laid out proves it is designed to have pulp come in one door on one end of the plant and leave the opposite end as finished boxes, sheets, etc., sometimes within a matter of hours. A good, productive plant does not count boxes or bundles but its’ productivity is measured in tons or truckloads. It has to maximize its efficiencies which means understanding which types of jobs fly through the system and which create bottle necks or jam ups. There is no time, and in most cases no room, for delay, complications, hand work or make and hold programs.
If an order is in a plant’s “sweet spot” it can be amazingly efficient and the price usually reflects that. If it does not fit into that sweet spot, it is usually farmed out to a smaller company owned plant or maybe even a friendly converter/sheet plant.
Some of My Best Friends Are Manufacturers
Manufacturers have tremendous resources, talented and knowledgeable people and industry insight that is simply not available to us with broader based interests.
For a distributor like our company, manufacturers are suppliers as well as competitors though by agreement the overlap is minimal and rare. We agreed to not sell Kraft, P&G and the other major CPG companies and they agree to not go after our box customers who operate their businesses out of their homes. I’m not sure it was a fair agreement but it seems to be working, so far.
Come back next week to read where packaging product converters and distributors can present the best value.
Photo by: thegirlsmoma
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