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Exclusive Census Report 2009: Board Converters Are Worried Sick
May 1, 2009 By: Esther Durkalski Hertzfeld Paperboard PackagingThis year's Exclusive Census Report reveals that (no surprise) the board converting industry is depressed.
This year's Paperboard Packaging Exclusive Census Report offers profound insight into the sad landscape of depression. One converter reports "praying a lot." Another is having "doubts about what tomorrow will be like." Square footage production of board is, on average, 15 percent less than a year ago. There isn't much hope on the horizon either.
 How Corrugated Container Plants Describe Their Industry in 2009 |
The Corrugated Container Industry
Nine of 10 box plants report the corrugated container industry as stagnant or depressed. Plants were asked to explain why they had rated their industry this way and most, 57.1 percent, blamed the economy. "All plants have seen a 50 percent or more drop in business," is the staggering reality that one converter reports.
It was only a year ago that box plants reported zero growth. Now they are reporting negative growth and zero cash. Markets, monies, jobs, and customers have vanished, plants report.
 Why Box Plants Report that the Corrugated Container Industry Is Stagnant or Depressed |
Cost cutting is the most popular strategy to negotiate in the current economy, implemented at 63.3 percent of box plants.
Continued cost cutting, which includes people, in a zero cash business environment leads to the zone between depression and bankruptcy. Surviving converters are now in this zone and some can see a future.
 Strategies that Corrugated Container Plants Have Taken in the 2009 Economy |
The level of concern about energy and raw materials costs among converters has plummeted in the last year. New worries for this year include 51.4 percent of box makers who are very concerned about government regulations, which is 24 points higher than a year ago. Another new worry for 47.6 percent is competition from out-of-area plants, up 12 points. Industry overcapacity has 64 percent of box plants very concerned, and this is also up from last year.
For U.S. plants, one worry remains constant. Seventy percent are very concerned about customers moving their manufacturing operations. But is this a worthy worry? Surely in the zero cash environment with downward price pressures on materials and equipment, and many skilled and capable unemployed, U.S. converters have opportunity to magnetize manufacturing.
 Corrugated Container Plants Equipment Buying 2009 |
The marketing plan for box plants in 2009 is focused on customer service. Boxes will be better designed, have better quality, be delivered faster, be fully supported, and cost less. Next priority on the business plan is innovation. This includes lightweighting, bundled solutions, and new protective packaging items.
The data show smaller corrugated container plants, those with less than $10 million in annual revenue, to be more focused on innovation, custom manufacturing, and short runs. Larger plants, those with annual revenue over $50 million, are four times more likely to be engaged in process improvements such as in-house communications. Digital printing is another innovation that is exclusive to larger plants.
 Corrugated Container Plants: Very concerned 2009 vs. 2008 |
Fulfillment services are very important to 43 percent of plants. Two-thirds of box plants consider vendor-managed inventory (VMI) and warehousing very important services to their customers. Moreover, some plants are now reporting warehousing plus just-in-time deliveries. Others mention "reducing warehousing" in favor of JIT as a way to save their customers' working capital.
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