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Should End Users Buy Their Packaging from a Factory, Converter or Distributor? Part 2
January 30, 2014
4 Min Read
Finding the Right Supplier
The broad selection of available packaging products is extensive and most are taken to market in a variety of different ways. Some manufacturers sell only through converters or distribution and others will only sell to end users. Many sell both ways because they understand that in some scenarios, a converter or distributor can serve the end user customer better and quite frankly, more profitably than they can.
What a Converter Brings to the Packaging Party
A converter sits in a very enviable position of being part distributor and part manufacturer. A corrugated sheet plant for example may not make corrugated sheets but they sure can produce a lot of boxes and other corrugated products.Typically the advantages a converter is able to deliver to the end user include:
Service – In terms of personal and delivery. Your mid to large size business is important to them and their response usually confirms it. They too look for that sweet spot where their equipment matches up to a customer’s requirements and they are usually quicker and more flexible when it comes to a rush order or unusual request.
Pricing – as I stated in part one, when the equipment fits the job, they can be incredibly competitive because even though they may buy their raw substrate or materials from a manufacturer, the large converter buys at a very good price. Corrugated manufacturers appreciate sheet business because it adds up to quick and relatively easy tonnage which quickly fills a truck.
Lower Operational Cost – yet another reason why a converter can regularly offer better pricing than a manufacturer. Converters are typically smaller operations with lower overhead and labor costs.
Resources – many converters have fully staffed design labs and are more than willing to work through the sometimes painful design stage on a project. Here is another key – the resources they have are usually more accessible than at a manufacturer where you may have to stand in line behind a long list of huge CPG customers.
Then What Is the Distributor’s Role?
The simple answer and purpose is distribution. A distributor is typically a master of inventory control and logistics. If they are not good at managing both, they are not likely to be profitable for very long.Buying wisely in large quantities and supplying it to smaller volume customers as needed is primarily what we as distributors do. You recall my mentioning that manufacturers and converters love long runs? It is often times their distributor clients who provide them with those types of orders and the distributor is rewarded with very low pricing in return. They are able to group or combine the usage of multiple low volume customers, turning it into a large order able to take advantage of the manufacturer or converters high speed or large production capabilities.Variety Is the Spice of Life and a Distributor’s Life BloodIn addition, the distributor also provides these services to a relationship:
Multiple product lines – you will rarely see a single product or single product line distributor because providing customers with choices and a variety of product is what we do. A multi product distributor is also able to provide valuable assistance in vendor rationalization and consolidation programs. Recently Kraft announced they were reducing their vendor base by 40%, to help control and reduce costs. That told me that low volume vendors, especially single product, small volume vendors will soon appear on Kraft’s “former vendors” list.
Technical and packaging systems expertise – Sometimes the best solution is not a product but a system. Speaking as someone who has spent his entire adult life as a distributor, selling equipment to end users, packaging materials are not the greatest cost to an operation, labor is. I have seen thousands of times when the material cost was relatively insignificant because the distributor was able to dramatically reduce labor cost.
Equipment Support - distributors tend to be local companies and they are always looking for ways to endear themselves to their customers. Providing them with equipment and post installation service is one of the ways they maintain the relationship. Many vendors are able to supply a customer boxes, bags or pallet stretch film but who supplies them with equipment and service for their carton erectors, tapers, bagging systems and pallet wrappers? Usually it is NOT the manufacturer or the converter.
Cha, cha, cha, Changes
Those are memorable lyrics from one of my favorite David Bowie songs and an accurate description of today’s packaging industry. There are no hard and fast rules and we now see manufacturers developing equipment support programs, and converters creating stock and release programs for favorite customers.At the same time, creative distributors with management closer to street level tend to be first to recognize new markets or trends such as sustainability. Distributors are rarely stuck with age old marketing direction, and are not handcuffed with inflexible corporate policies. They tend to be the chameleons of packaging with an inert ability to flex and adapt, even in a difficult economy, while some single product manufacturers struggle to keep up.What type of vendor should you do business with for your packaging supplies?
The answer is rarely simple and often not what you expect.
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