Mar/ April 2016 AICC BoxScore

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A PUBLICATION OF AICC—THE INDEPENDENT PACKAGING ASSOCIATION

March/April 2016 Volume 20, No. 2

INVESTING IN

NEW TECH

PRICE, INTERNAL AND EXTERNAL CONSIDERATIONS ARE PIVOTAL TO DECISION-MAKING

ALSO INSIDE Is Your Company Truly Winning?

ESOP in Practice Solving the Accounting Mystery

“Quality is our goal and we work hard to deliver it.”

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Manufacturing Department

®

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TABLE OF CONTENTS COLUMNS

March/April 2016 • Volume 20, Issue 2

3

CHAIRMAN’S MESSAGE

4

SCORING BOXES

8

LEGISLATIVE REPORT

13

ASK RALPH

14

THE HIDDEN FACTORY

16

SELLING TODAY

18

TACKLING TECH

20

VIEW FROM THE FLOOR

22

LEAN LEARNINGS

24

LEADERSHIP

28

MEMBERS MEETING

FEATURES

62

THE ASSOCIATE ADVANTAGE

42

64

FINANCIAL CORNER

68

THE FINAL SCORE

42

48

INVESTING IN NEW TECH Price, internal and external considerations are pivotal to decision-making IS YOUR COMPANY TRULY WINNING? ‘Ready, Aim... Win!’ offers AICC members a transformative approach to doing business

52

ESOP IN PRACTICE How does it really work?

56

GUEST COLUMN Solving the Accounting Mystery

48 52

BoxScore is published bimonthly by AICC—The Independent Packaging Association, PO Box 25708, Alexandria, VA 22313, USA. Rates for reprints and permissions of articles printed are available upon request. AICC is an international trade association representing a majority of independent North American manufacturers of packaging products and the suppliers to the industry. AICC members are represented by 538 boxmaking locations and 482 supplier locations, both segments of which are offered a full array of membership services, programs, and benefits. The statements and opinions expressed herein are those of the individual authors and do not necessarily represent the views of AICC. The publisher reserves the right to accept or reject any editorial or advertising matter at its discretion. The publisher is not responsible for claims made by advertisers. POSTMASTER: Send change of address to BoxScore, AICC, PO Box 25708, Alexandria, VA 22313, USA. ©2016 AICC. All rights reserved.

DEPARTMENTS

10

WELCOME NEW MEMBERS

31

GOOD FOR BUSINESS

40

POINT OF VIEW

66

ICPF UPDATE

Visit www.aiccboxscore.org for Member News and even more great columns. Scan the QR code to check them out!

BOXSCORE www.aiccbox.org

1

OFFICERS Chairman: Mark Williams, Richmond Corrugated Inc. Vice Chairman: Tony Schleich, American Packaging Corp.

Vice Chairman: Al Hoodwin, Michigan City Paper Box Vice Chairman: Joe Palmeri, Jamestown Container Companies Vice Chairman: Jay Carman, Stand Fast Packaging DIRECTORS-AT-LARGE Jim Akers, Akers Packaging Brad Albright, Touchpoint Packaging Matt Davis, Packaging Express Marco Ferrara, Cajas de Cartón Sultana John Forrey, Specialty Industries Inc. Jana Harris, Harris Packaging Corp./American Carton REGIONAL DIRECTORS Region 1: Don Simmons, Empire Container & Display Region 2: David Deline, Deline Box Company Region 3: Kevin Ausburn, SMC Packaging Group Region 4: Eric Elgin, Oklahoma Interpak Region 5: Gary Brewer, Package Crafters Inc. Region 6: Clay Shaw, Batavia Container Inc. Region 7: Finn MacDonald, Independent II Region 8: Joe Hodges, Mid-Atlantic Packaging Region 9: Larry Grossbard, President Container Group Region 10: Peter Hamilton, Rand-Whitney Corporation Region 11–12: John Franciosa, Coyle Packaging Group Region 14: Yair Caballero, CorrEmpaques Overseas: Kim Nelson, Royal Containers Ltd. President: A. Steven Young, AICC Headquarters Immediate Past Chairman: Greg Tucker, Bay Cities Container Corp.

Chairman, Past Chairmen’s Council: Mark Mathes, Vanguard Companies Secretary/General Counsel: David P. Goch, Webster, Chamberlain, and Bean Counsel Emeritus: Paul H. Vishny, Esq. ASSOCIATE MEMBER DIRECTORS Chairman: Keith Umlauf, Haire Group Vice Chairman: Jeff Pallini, Fosber America Secretary: Ed Gargiulo, Equipment Finance Corp Director: David Burgess, JB Machinery Immediate Past Chairman: Brian Kentopp, Bobst ADVISERS TO THE CHAIRMAN Tom Skinner, Phoenix Packaging Inc. Craig Hoyt, Buckeye Boxes PUBLICATION STAFF Publisher: A. Steven Young, syoung@aiccbox.org Editor: Taryn Pyle, tpyle@aiccbox.org EDITORIAL/DESIGN SERVICES The YGS Group • www.theYGSgroup.com Editorial Director: Annette Gray Managing Editor: Ashley Reid Copy Editor: Steve Kennedy Editorial Coordinator: Jordan Kell VP, Marketing Services: Jack Davidson Creative Director: Serena L. Spiezio Art Director: Jason Deller Account Manager: Brian Hershey

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SUBMIT EDITORIAL IDEAS, NEWS, AND LETTERS TO: BoxScore@theYGSgroup.com CONTRIBUTORS Director, Meetings: Cindy Guarino, cguarino@aiccbox.org Manager, Meetings: Laura Mihalick, lmihilaick@aiccbox.org Director, Latin America: Maria Frustaci, mfrustaci@aiccbox.org Director, Membership: Virginia Humphrey, vhumphrey@aiccbox.org Project Coordinator/Meeting Planner: Carolyn Patterson, cpatterson@aiccbox.org Administrative Assistant: Chelsea May, cmay@aiccbox.org President, ICPF: Richard M. Flaherty, rflaherty@icpfbox.org ADVERTISING Information: Taryn Pyle, tpyle@aiccbox.org Opportunities: Howard Neft, InTheKnow Inc. 847-899-7104 • thneft@aol.com Folding Carton and Rigid Box Advertising: Taryn Pyle 703-535-1391 • tpyle@aiccbox.org AICC PO Box 25708 • Alexandria, VA 22313 Phone 703-836-2422 • Toll-free 877-836-2422 • Fax 703-836-2795 www.aiccbox.or

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Chairman’s Message

WHAT’S YOUR ‘FOXHOLE FACTOR’?

A

person with a high “foxhole factor” is someone you want on your team.

No one knows this better than the men and women who serve in our armed forces. As the saying goes, “When the going gets tough, the tough get going.”

But how does this apply to our independent packaging industry?

As I have mentioned before, legendary basketball coach John Wooden always said he didn’t care if he had the best players. He preferred to have the players who formed the best team. In the box business, as in basketball, there are numerous important roles that need to be filled. Each one offers a leadership opportunity. Organizations with the most leaders usually win. It takes a focused effort to assemble a winning team, and it takes persistence to maintain one.

Last year, our chairman, Greg Tucker, introduced Holly Green from The Human Factor to our association. Holly has helped Greg’s company, Bay Cities, move from a lifestyle company to a professionally run enterprise. As Greg puts it, “She has helped get rid of the sacred cows of the past and truly and insanely set our sights on winning.”

Holly is currently working with 11 AICC member companies, including ours, as well as the association itself. At our AICC Winter Board of Directors Meeting in January, Holly guided your board and AICC staff through three days of intense strategic agility.

We got a lot accomplished, but it just kicked off a planning process that will culminate in a shared vision of the future AICC, along with specific strategies to get there.

An important step in Holly’s program is determining values. If you can get this piece right, then you are off to a good start, because values create the soul of an organization. They define behavior. Organizations that are serious about values will hire and fire based on how well one’s behavior fits within these values. Basically, companies want people with high foxhole factors—people who walk the talk; people whose behavior is in lockstep with team values. When leveraged appropriately, values can play a huge role in transforming a culture. (For more information on Holly’s program, see Page 48.)

At the time of this writing, I am looking forward to a great AICC Spring Meeting in Palm Desert, California, in April. We have a couple of excellent keynote speakers.

One is Doug Box, whom I recommended to the convention content committee.

Doug’s presentation is a case study of his family business that is very compelling.

If you are one who mixes family and business, you will not want to miss this.

Our closing keynote is basketball legend Bill Walton, who played for the wizard of Westwood himself at UCLA. In between there are excellent breakout workshops on both Thursday and Friday, plus our inaugural CEO Summit and Third Annual Independents’ Cup Golf Tournament. If you can come in early, there are two excellent plant tour options on Tuesday: New-Indy Containerboard Mill and Fruit Growers Supply Company—both a short drive away in Ontario, California.

I look forward to seeing you there. Let’s roll!

Mark Williams President and CEO, Richmond Corrugated Inc. Chairman, AICC

BOXSCORE www.aiccbox.org

3

Scoring Boxes

STAY INFORMED ON INFLATION

BY DICK STORAT

2015 Price Change—Regional Industrial Electric Power REGION New England Mid-Atlantic East North Central West North Central South Atlantic East South Central West South Central Mountain Pacific U.S. Average Source: BLS

4

BOXSCORE March/April 2016

2015 PERCENT CHANGE -7.6 23.5 3 6.4 -2.6 3 -8.9 -3.8 0.1 0.4

U.S. Producer Price Index Year-Over-Year Percent Change 10 8 6 4 Federal Reserve Target: 2% 2 S OUR C E : F R B, BL S

A

ny independent boxmaker who keeps even a casual eye on inflation has probably heard of the Producer Price Index (PPI), which is released monthly by the U.S. Bureau of Labor Statistics (BLS). An increase in the index compared to a prior period means that prices have risen and that inflation has occurred. Similarly, a declining index signals deflation over the measurement period. As the chart at right indicates, the PPI has declined relative to the same month of the prior year every month during 2015. This is in contrast to the Federal Reserve Board’s policy target of inflation increasing at a 2 percent annual rate.

The overall PPI for December 2015 was 1.0 percent below prior-year data, meaning the prices received for goods and services sold to ultimate consumers declined by 1 percent last year.

In addition to this top-line number, the BLS releases monthly PPIs for more than

0 -2

11

12

13

10,000 individual products and groups of products based on more than 100,000 price quotations received confidentially from statistically sampled cooperating companies. Mining this data provides insight for independent boxmakers who find it important to know whether their customers’ prices are increasing or decreasing. This article will take a look at some of the products and industries most relevant to independent box converters.

Prices for the same commodity can vary significantly among regions of the country. One important example of this that affects boxmaker competitiveness is the cost of industrial electric power.

The table at left shows how much that inflation component (industrial electricity prices) changed in each major region of the country last year.

Regional prices were affected by a number of factors, including supply availability and additions, input energy costs, and demand patterns influenced

14

15

by regional economic activity, weather, and other factors. Regional price changes varied from a 23.5 percent increase in the Mid-Atlantic States to an 8.9 percent decline in the West South Central region, a swing of more than 32 percentage points, even though the U.S. average price for industrial electricity increased by only 0.4 percent.

A key component of knowing your customer is understanding what conditions are like in their businesses. Price changes for the products they supply to their customers in boxes provided by independent converters is a key component of that conversation. The table on Page 6 lists the 2015 change in average prices for manufacturing industries that consume significant amounts of corrugated and solid fiber packaging.

Compared to overall producer price inflation of –1.0 percent for 2015, the wide range of price changes by industries that consume lots of packaging

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Scoring Boxes

is remarkable. Food manufacturing product prices dropped by 6.5 percent last year—six times as much as overall inflation and significantly more than the 4.3 percent drop in prices of all manufactured goods. The drop in manufactured goods prices was influenced, in part, by declining prices for manufactured goods exports caused by the rapid strengthening of the U.S. dollar against most trading partners’ currencies last year.

The sharply falling prices of farm products and energy costs last year also contributed to the decline in food manufacturing prices.

While the average prices for produce dropped by 22 percent last year, the prices for downstream manufacturers of frozen, canned and dried fruit, and vegetable products held firm.

Within categories, there were also large swings last year. In the dairy category, producer sales prices for packaged fresh skim milk declined by 22.8 percent, while the price for creamery butter rose by 18 percent.

In the beverage category, compared to a solid 2.8 percent overall price gain, carbonated soft drinks advanced by 4.3 percent, while bottled water prices dropped by 3.5 percent.

For independent boxmakers who want to know current pricing conditions in their customers’ businesses, the monthly PPI release makes for interesting reading. This detail can be found by following the links for the Producer Price Index on www.bls.com.

The detailed information in the monthly PPI Report is also useful to evaluate price changes in the corrugated industry and in industries that compete directly with corrugated and solid fiber box packaging. The table below shows the PPI results for major sectors of the corrugated and solid fiber manufacturing businesses.

Again, notice the considerable variance between the overall inflation of -0.5 percent in this sector, which came close to matching the headline PPI inflation decrease of 1.0 percent last year.

Boxes shipped to food and beverage producers held steady, but those shipped to packagers of paper and allied products like office paper and tissue products declined by 1.4 percent. Corrugated sheet sales from corrugator operators to converting box plants declined by 1.2 percent last year, according to the BLS. Lastly, the PPI detailed tables provide insight into how national average corrugated packaging prices changed during 2015 compared to competitive packaging. Plastic packaging prices declined by a much larger 4.5 percent last year, reflecting lower resin prices.

Plastic film prices decreased by an even greater 6.0 percent.

Dick Storat is president of Richard Storat & Associates. He can be reached at 610-282-6033 or storatre@aol.com.

2015 Producer Price Inflation— Selected Industries INDUSTRY U.S. Final Demand All Manufacturing Food Manufacturing Dog & Cat Food Manufacturing Cereal Manufacturing Sugar & Confectionery Fruit & Vegetable Preserving Dairy Products Fruits & Vegetables (Produce) Slaughter Livestock Poultry Processing Bakeries Snack Food Manufacturing Beverage Manufacturing Breweries Wineries Tobacco Pharmaceuticals & Drugs Adhesive Manufacturing Soaps & Detergents Computers & Peripherals Major Appliances Small Electrical Appliances Auto & Light Trucks Furniture Source: BLS

2015 Producer Price Inflation—Corrugated and Solid Fiber Box Manufacturing SECTOR All Sectors Food, Beverage & Carryout Paper and Allied Products Metal Machinery, etc.

Corrugated Sheets Other Corrugated Sales Source: BLS

6

BOXSCORE March/April 2016

2015 INFLATION PERCENT CHANGE -1.0 -4.3 -6.5 0.5 0.2 0.6 0.2 -8.8 -21.9 -25.7 -7.2 0.9 -2.6 2.8 1.4 0.5 4.5 7.6 -0.6 0.4 -5.3 -0.3 -17.9 2.9 1.2

2015 INFLATION PERCENT CHANGE -0.5 -0.1 -1.4 -0.1 -1.2 -1.2

2016 Spring Meeting & 3rd Annual Independents’ Cup Charity Golf Tournament April 13-15, 2016 J.W. Marriott Desert Springs Resort & Spa Palm Desert, California

Keynote Speakers Doug Box

Bill Walton

Box Family Business Advisors Thursday, April 14 8:45 am

NBA Legend & Sportscaster Friday, April 15 11:00 am

“Texas Patriarch – The Rise & Fall of a Family Business”

Inaugural AICC CEO Summit

Wednesday, April 13 – 8:00 am - 4:00 pm

■ This new program offers AICC CEO’s, Owners and Senior executives numerous opportunities to meet and learn from industry experts, peers and a great lineup of speakers!

■ AICC CEO Summit Reception will be held the evening of Tuesday, April 12, 6:30 – 7:30 pm

Plant Tours

“Climbing Back to the Top of the Mountain – One More Time”

Dynamic Workshops Tracks

Thursday, April 14 & Friday, April 15 Effective Conflict Management Track

■ Practicing Connection in Business and Life (day 1) ■ Conflict Resolution Applications in Business (day 2)

Communication & Technology Management Track ■ The Distraction-Savvy Professional (day 1) ■ Becoming the Main Distraction (day 2)

Tuesday, April 12 – 12:30 to 6:00 pm

Business Exit Strategy Track

Optional Events

Supplier Innovations Track

■ Fruit Growers Supply, Ontario, CA ■ New Indy Containerboard Mill, Ontario, CA

■ Emerging Leaders Mentor Session – Tuesday, April 12 – 8:00 am – 10:00 pm Training Session – Wednesday, April 13 – 11:00 am – 3:00 pm Networking Session – Thursday, April 14 – 6:30 – 9:00 pm ■ Spouse/Guest El Paseo Walking Tasting Tour & Shopping Wednesday, April 13 – 11:00 - 4:00 pm ■ 3rd Annual AICC Independents’ Cup Charity Golf Tournament Thursday, April 14 – 12:30 - 5:30 pm ■ Aerial Tram Tour & Lunch at Kaiser Grille Thursday, April 14 – 12:00 - 4:00 pm ■ Sunset Hot Air Balloon Ride Friday, April 15 – 4:30 – 7:30 pm

■ Understanding Exit Strategy Options (Non-ESOP) (day 1) ■ Ownership Transition: Is an Employee Stock Ownership Plan (ESOP) the Right Tool for Your Company? (day 2) ■ Supplier Innovations for Corrugated (day 1) ■ Supplier Innovations for Folding Carton & Rigid Box (day 2)

Event Registration Open

For details and registration for the 2016 Spring Meeting, and events visit www.aiccbox.org/meeting.

More Ways to SAVE! ■ ■

Box Plant registration plans available - Send more for less Register on or before Friday, February 20, 2016 to take advantage of the Super Early Registration saving!

AICC | PO BOX 25708, Alexandria, VA 22313 | 1-703-836-2422 | www.aiccbox.org

Legislative Report

UNEMPLOYMENT NUMBERS BETRAY THE UNEASY STATE OF MANUFACTURING

BY JOHN FORREY

F

or the last six years, we have seen the reported unemployment rate decline significantly. The unemployment rate, which peaked in October 2009 at just over 10 percent, was reported to be approximately 5 percent as of October 2015. According to the data released by the government, the U.S. economy is very near “full employment.”

But are we? The unemployment statistics quoted each month are quite misleading because they register only those unemployed who are actively looking for work. Those who are not counted—or not counted accurately—are those who have given up looking, or who have otherwise dropped to the sidelines of the labor force. This number is much larger. Last year, Forbes columnist Dan DiMicco analyzed data from the Bureau of Labor Statistics, concluding that when one takes into account reported unemployed workers, part-time workers who would like to have a full-time job, and those who have stopped looking, the real rate is more like 15.8 percent. This is hardly a sign of a robust economy.

One reason we find ourselves in this precarious position is that our

manufacturing sector—long the source of well-paying jobs for skilled and semiskilled workers—has been systematically hollowed out in the past four decades.

As a result, many workers have simply given up trying to find a job. In our area—South Central Pennsylvania—we have a very hard time filling our entry-level plant positions because, in my view, people have simply “dropped out.” DiMicco, the columnist I referred to earlier, offers a harsher explanation: “[The loss of jobs] is in large part due to the massive demise in manufacturing here since the ’70s; which is, in turn, due mostly to failed trade policies and the movement of our middle-class jobs overseas. [We have] a government that increasingly attacks and burdens our private sector so that we have lost our global competitiveness.”

For the past 12-plus years, AICC has joined with the Fibre Box Association to co-sponsor the Annual Corrugated and Paperboard Industries Washington Fly-In. This event, held in June every year in conjunction with the National Association of Manufacturers’ (NAM) Manufacturing Summit, provides

members with the opportunity to meet with their elected representatives to make the case that a strong manufacturing sector means a strong economy and even stronger employment.

I hope you’ll join us this year, June 6–7, in Washington, D.C. We need business owners to attend, participate, and speak up. Especially in this election year, it’s important that rational, reasoned, and “real” people make their voices heard. The government will report, the media will spin, and the candidates will posture, but business owners who provide the jobs, benefits, and stability to our workforce are the best arbiters of the state of the economy.

Let’s tell ’em like it is! I look forward to seeing you in Washington.

John Forrey is president of Specialty Industries and NuPak Printing in Red Lion, Pennsylvania, and is chairman of AICC’s Government Affairs Committee. He can be reached at 717-246-4301 or jforrey@ specialtyindustries.com.

“The government will report, the media will spin, and the candidates will posture, but business owners who provide the jobs, benefits, and stability to our workforce are the best arbiters of the state of the economy.”

8

BOXSCORE March/April 2016

AICC/FBA

2016 Capitol Hill Industry Fly-In June 6 & 7, 2016 Washington, DC

In great images courtesy Destination-DC

we shall speak with

volumes

Join your peers in the packaging industry as we address our legislators as one industry with one voice. The AICC/FBA 2016 Industry Fly-In will take place June 6 & 7 in Washington, DC. This year we will again partner with the National Association of Manufacturers (NAM) for their 2016 Manufacturing Summit. It is time again to stand united and voice your support for legislation that benefits the domestic manufacturing base, improves the North American competitive climate, puts America back to work and keeps it working!

“

Power always thinks it has a great soul and vast views beyond the comprehension of the weak.

”

- John Adams

One Voice

Preliminary Schedule* at a Glance * Schedule is preliminary events, timing and location subject to change

Monday, June 6, 2016 AICC/FBA Welcome Reception – 6:00 pm – 7:00 pm (Liaison Hotel) AICC/FBA Dinner (optional) – 7:15 pm – 9:30 pm Tuesday, June 7, 2016 AICC/FBA Briefing Breakfast Meeting – 8:00 am – 10:30 am (Liaison Hotel) Congressional Meetings (Capitol Hill) - 11:00 pm – 1:00 pm AICC Keynote Luncheon - 1:00 pm - 2:15 pm (Capitol Visitors Center, Capitol Hill) Congressional Meetings (Capitol Hill) - 2:30 pm – 5:00 pm Optional NAM Congressional Reception & Dinner w/ Keynote Speaker - 5:30 pm - 8:00 pm (Mandarin Hotel) Note: The NAM Manufacturing Summit continues on Wednesday, June 8.

Accommodations: The Liaison Hotel Capitol Hill 415 New Jersey Ave, NW, Washington, DC Hotel Room Rate – $265 (plus tax) Hotel Cut-Off Date – May 16, 2016 Reservations – (866) 233-4642, or reservations@affinia.com (for group rate reference, AICC 2016 Capitol Hill Industry Fly-In)

For more information, contact Laura Mihalick at LMihalick@aiccbox.org AICC – PO BOX 25708 – Alexandria, VA 22313 – 877.836.2422 – aiccbox.org FBA – 25 NW Point Blvd. – Elk Grove Village, IL 60007 – 847.364.9600 – fibrebox.org

New Members

WELCOME AICC’S NEW MEMBERS ADVANTZWARE JAY FARR CEO 301 Oxford Valley Rd. Suite 1713 Yardley, PA 19067 Phone: 215-369-7800 Fax: 267-503-0226 www.advantzware.com jay.farr@advantzware.com CORRUGATED MACHINE WORKS WILDS OGIE President 725 1st Ave. Columbus, GA 31901-2903 Phone: 706-327-5664 www.corrugatedmachineworks.com wildsogie@gmail.com

10

BOXSCORE March/April 2016

DÜCKER-RINGWOOD AUTOMATION LLC RONALD SCHUSZLER Managing Director 7420 S. Meade Ave. Chicago, IL 60638 Phone: 708-577-8092 www.ducker-ringwood.com schuszler@ducker-ringwood.com ESTERLAM INTERNATIONAL LTD. NEIL HAILEY Director Eastway Lee Mill Industrial Estate Ivybridge, Devon PL21 9GE United Kingdom Phone: +44 1752 690691 Fax: +44 1752 690436 www.esterlam.com neil@esterlam.com

LACHENMEIER NEIL WEISENSEL Marketing Manager 3644 W. Lake Ave. Glenview, IL 60026 Phone: 847-657-4823 Fax: 847-657-5232 lachenmeier.us nweisensel@mullerlcs.com MECA & TECHNOLOGY MACHINE INC. KELLY COLES COO 1281 Parkview Rd. Green Bay, WI 54304-5620 Phone: 920-336-7382 www.mecagb.com kellyc@mecagb.com

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CONTAINERBOARD PRICES SHOW EROSION AFTER LONG PERIOD OF STABILITY

BY RALPH YOUNG

I

n the November/December 2011 issue of BoxScore, we introduced you to the following economic factors regarding containerboard pricing: • Yield advantages with emerging ultralightweight containerboards; • Supply-and-demand economics; • Variations in quality within grades in North America, and the European quality grade structure and pricing differences; • Actual versus published prices; and • A typical profit curve for a paper machine based on grades.

Last fall at some regional AICC meetings, we delivered a presentation on the apparent calmness of linerboard and medium prices over the last several years.

With RISI’s reminder in the December 18, 2015, issue of Pulp & Paper Week that in January they would “rationalize” their transaction, list, and open-market pricing, they have announced a formula for publishing prices. This has been three years in transition.

About 10 percent of U.S. containerboard is exported at mill nets significantly below domestic returns, per reports from security analysts. Mill nets are different for Mexico than for northern Europe, which are different than the Mediterranean. This swing tonnage helps to stabilize domestic supply with demand.

Supplier consolidation had a significant impact, as 70 percent of board manufacturing is held within four companies.

This is a major strengthening of the supply side of the equation. Twenty years ago, the top five producers had only about

a 40 percent market share. Recently, more than 2.2 million tons of high-cost capacity has been withdrawn and about 1.5 million tons added in new construction or conversion of existing newsprint and white paper machines to the lighter side of containerboard weights. Lighter containerboard, same boxes, higher yields.

Our economy has not been robust since 2008, so the demand for corrugated has been lackluster. Yet we have seen stable containerboard pricing. While we might think that with a rising population the need for increased packaging would naturally follow, this has not been the case.

Inventory levels in tons and weeks of supply are key to stable pricing and one of the key elements that stimulate the security analysts to speculate on possible price movements. Analysts also look to the movement of the Federal Reserve and the prime rate, which until November 2015 also had not moved since 2008. Economists look to housing starts, The Conference Board’s consumer index, University of Michigan consumer sentiment, the National Association of Manufacturers’ production index, movements in U6 employment, and the Institute for Supply Management’s index.

Mill operating rates are probably the most-watched measure of the supply and demand change month after month. We wait for comments from the financial institutions after the American Forest & Paper Association publishes production statistics and the Fibre Box Association publishes the estimated corrugated

shipments. With operating rates above 95 percent, supply and demand are considered in balance, and when rates fall below this, financial managers see signs of weakness unless temporary mill downtime has been announced.

The price movement of old corrugated containers also has an impact on the stability of board pricing. When China is not buying and ocean freights are fluctuating, the cost of recovered fiber moves, and input costs at the mills change. Since secondary fiber represents more than 46 percent of all containerboard source materials, these irregularities can impact mill costs, selling prices, and profit margins.

Several reports from security analysts say that producers’ earnings have come close to 20 percent, which are historical highs for the paper industry. These earnings have gone into major projects to rebuild energy systems and meet newer emissions regulations, but not to increase capacity so as to drive prices down.

In January, the media started reporting price erosion beyond medium and recycled grades. Security analysts see slower market growth for corrugated and are predicting a continuation of the trend that has started. Stay tuned.

R alph Young is the principal of Alternative Paper Solutions and AICC’s technical adviser.

Contact Ralph directly about technical issues that impact our industry at askralph@aiccbox.org.

BOXSCORE www.aiccbox.org

13

The Hidden Factory

MEETING CUSTOMER DEMANDS WITH DIGITAL

BY LES PICKERING

R

ecently, I was invited to a Corrugated Summit within the United States. Representatives of approximately 25 companies were in attendance, and an interesting point was raised: With customers wanting more and more, how can plants provide a wider spectrum of solutions to the changing demands of the customer?

Short-run and ultrashort-run orders have not been successfully addressed as a norm, despite features supplied by original equipment manufacturers (OEMs) focused on this restriction. For example, quick-change anilox roll systems allow plants to cost-effectively target reduced order length. High board line rotary die cutters and flexographic printers that set up on the run represent another development that allows plants to reduce order length in a cost-effective manner. Systems from Serrapid and Martin designed for rapid change of the rotary cutting tools with their quick-lock systems are widely adopted today to bring about reduction in setup time. These improvements are seen on flatbed as well; we saw similar advantages with rapid locking and position of the tooling on the center line of the machines.

Consistency of color has come a long way, but within corrugated, this will not be accomplished as a norm for most plants anytime soon. Just look how infrequently you see a densitometer at the machine. This is a troubling matter, because if there is one thing a brand manager desires, it’s consistency of color.

If you are printing on corrugated, you need tools to check the color, and training and procedures to correct and improve.

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Tooling vendors will never make and deliver their tooling to the plant fast enough. If the plant is still ordering printing and cutting tools through two or three vendors, you are never going to have the lowest-cost quality tooling, and you are never going to have the shortest response time to the market. Think about the amount of resources and time it takes for all the internal people to manage the information and tooling just to and from the vendor.

More than two decades ago, the automotive industry rationalized that they make vehicles; vendors make products. Taking a similar analogy, how are you going to make a rotary cutting tool faster, better, and cheaper than the vendor that is a market leader? If you harness the power of the vendor and have them manage the whole workflow inside the box house, it frees up resources and speeds your response to the market.

Purchasing tooling from the lowest-cost vendor is the most expensive way to procure tooling.

All of these features allow the manufacturing plant to expand its capability to cost-effectively provide solutions to the customer in their market. However, there is a segment of the market that is not being addressed with conventional solutions.

Speed to market is going to be a key component moving forward, not just for 5,000 boxes, but for 500, 50, or even 10 boxes. The current mainstream OEM, tooling supplier, and box house are not set up to be successful in this area, because in this analog world, you cannot compete with some of the digital solutions.

Digital in this space below 5,000 boxes is going to eat the lunch of the mainstream box house. Today, it’s small runs that can be personalized with every box. Speed will come through software, and the nice thing in the digital space is improvement does not come in 5 to 10 percent increments; it comes in 50 to 100 percent increments.

The mainstream box house thinks and works in days—10-day turnaround for a multicolored item, three days for new print plates and cutting tools. Due to the fact that no tooling is required in digital, that time frame is anywhere from four to 72 hours. This huge compression of time frame will be a challenge for existing box plants and may be a reason that new companies will emerge to manufacture with digital instead of integrating digital into the box plant.

Custom packaging that you can request and design on the Web is three to eight days, due mainly to an optimized workflow. When digital plants have everything under one roof, four to 72 hours will become the norm.

Digital is here today for the pioneers of packaging. For others it will be tomorrow, but it’s certainly here now. Analog prints packaging; digital prints publicity— hopefully, you can quote me on that!

Les Pickering is co-founder of Quadrant 5 Consulting, based in San Francisco. Les can be reached at 415-988-0000 or leslie.pickering@ quadrant5.com. Follow him on Twitter @Q5cLP.

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Selling Today

3 WAYS TO BE RELEVANT

BY KIM BROWN

T

he work of growing new business, stopping attrition, and maintaining margin levels is exhausting and never-ending. It’s hard to capture a buyer’s attention in the hectic pace of business today. We can be so focused on how to capture it that we haven’t figured out a consistent and successful way to keep it. And if we spend our time excelling in these areas, we may find our business slipping out the back door as we bring it in the front.

Buyers are being heavily courted by our competition, pouncing at the first sign of our complacency in a “what have you done for me lately?” loyalty perspective.

The questions most often asked by box plant owners typically fall within one of these three areas: • Strategy • How to approach the market • How to get noticed Position marketing is the single greatest thing you can do to impact these areas.

Reputation. We live in a reputation economy. Most will search Google or Yelp before trying a new restaurant or buying that new widget. The lines between B2C and B2B have been blurred, and there is definite carry-over in this reputation-search behavior.

A recent study by CEB found that 57 percent of a purchase process is complete before the buyer engages with a sales­ person. This statistic makes it imperative we work to position ourselves to be included in their process.

Action: Update your LinkedIn profile.

Most salespeople have designed theirs around their résumé. Alter this to speak to buyers—not potential employers. Work to convey your knowledge, expertise,

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You have to focus on the behavior, not the goal. Results will follow. and relationships. Ask for written recommendations, write articles, and position yourself as the go-to expert in your market.

Don’t get caught up in the myth of revealing too much information. You cannot sell from a position of fear.

Information is easy to access anyway; there’s no reason not to use it to your advantage.

Behavior. The concept of goal setting is well-known and readily accessible in business books, blogs, or self-help sites.

But most leave out a critical piece to be successful.

Goal setting is simply to provide direction. The important part is outlining the behavior required to achieve it. You have to focus on the behavior, not the goal. Results will follow.

I can say my goal is to lose 20 pounds.

If I don’t outline the daily behavior required and hold myself accountable to that behavior, I will be looking to lose those same 20 pounds next year.

Establishing a goal of $750,000 in new business without a daily work plan to achieve it is setting yourself up for failure.

Let me be clear: The daily behavior is no longer about X number of cold calls. This reputation economy, coupled with the need to be relevant in the buyer’s eyes, demands we outline a new set of daily disciplines designed to achieve the goal.

Action 1: Be intentional. It is costprohibitive to conduct random drive-by

cold calling. It is gambling and positions you to be unprepared and unimportant.

Schedule time in your day to research and learn about your prospects. The tired methods of asking questions to discover a problem you can solve no longer work. Either they’ve already solved it, or it isn’t a priority. Work to uncover data about upcoming challenges they’ll face. They haven’t solved these yet, your competition isn’t trying to, and the fact that you took time to learn about it speaks volumes to the buyer.

Action 2: There are two numbers critical to every business: cost and sales. In the B2B brown box world, we tend to focus on reducing packaging cost. Change perspectives to the other number, and help customers grow sales or margin. Reach out to the sales manager in your top accounts. Ask to attend a sales meeting, get feedback, build relationships, work to get face to face with their buyers to learn how to improve the packaging, and help your customer’s customer.

As you improve your skill set, you can take this model to your prospects.

Always work to be sure your value precedes you. This is building a reputation.

This is position marketing.

Kim Brown is the founder of Corrugated Strategies.

She may be reached at 317-506-4465 or kbrown@corrugated strategies.com.

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Tackling Tech

MANAGING THE WHIRLWIND

BY JOHN CLARK

T

hings today move so quickly that your “business reflexes” have to increase exponentially to keep your business on a course for success. Business reflexes refers to three specific skill sets: • Operations — The intelligence to respond to orders with the correct amount of time and effort.

• Finance — Ensuring that your money works as hard as you do.

• Technology — Using your operational and historical data to drive your business forward.

Operations: Better, Faster, Cheaper Like a well-tuned athlete, your plant is a combination of intelligence, strength, and quickness. While you can be successful with two of these three attributes, excellence requires all three.

Intelligence is now imbedded in your software, but do not forget the importance of human knowledge.

Do not allow yourself to pigeonhole staff members based on their position, age, or gender. The best-run companies are a compendium of the entire knowledge base of the staff, not just those who reside at a certain level on the organization chart. Strength is a reflection of your ability to convert accurately. Technology allows you to plan, produce, value, distribute, and analyze each of these steps quickly to increase throughput and decrease costs.

Your enterprise resource planning (ERP) system should not only allow you to process an order from estimate to posting of cash, but should also collect multiple data points that you can use as part of a business intelligence tool to detect trends, anomalies, and opportunities.

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Finance: A Dollar Saved Cash flow is very different from sales, orders, and earned revenue. It can come from many parties—customers, banks, vendors, investors—and can take many forms—debt, equity, etc. Cash in any industry is king. Consider the following: • Use your vendors as a bank by extending payment terms, using credit cards, and tying vendor payments to customer payments upon acceptance.

• Asset-based loans allow companies to leverage all assets (receivables, inventory, intangibles) to squeeze collateral to create credit lines.

• Factoring uses accounts receivable to provide speedy cash flow for growing companies.

• Many executives and entrepreneurs focus too much on the profit and loss and don’t manage the balance sheet.

Find other assets to leverage. Pay attention to ratios such as debt-toequity and current ratio.

• Whispers can create noise in collections. Stay tuned in to customer service and quality issues—they can be cash killers. High finished goods inventory and delayed customer shipments can stretch cash flow. Consider invoicing clients and requiring payments for shipments on hold.

• Create a proactive collections process, paying close attention to the terms and conditions of sales and payments.

Timely collection calls and prompt issue resolution can keep the cash flowing. Invoice customers electronically by leveraging technology to speed up the invoicing process with electronic signature for proof of delivery.

Technology: Investing in Tomorrow A new generation of hardware and software are combining to provide you with an unprecedented understanding of your business. Not only do wireless and cellular technology allow your plant to communicate seamlessly, but now even remote workers, truck drivers, and sales staff have the technology keep your company functioning without regard to geography or time.

Plants from coast to coast are investing in new machinery and new processes.

Most of these new machines are being placed into service to address the industry trend of smaller orders being produced more frequently. The advent of business intelligence solutions and other tools take the mounds of your financial and operational data, and detect the trends and reference points in not only your business, but that of your customers and vendors as well. As your business and business systems grow, you are creating reams of data that will need more sophisticated tools to point out areas of opportunity, as well as predict problems with vendors or receivables before issues become critical.

At the end of the day, your business is moving faster than ever. This time compression presents not only challenges, but also opportunities for those who wisely invest in the tools and technologies to keep the converting loop tight and timely, while creating metrics to find other areas of opportunity.

John Clark is director of analytics for Amtech Software. He can be reached at jclark@ amtechsoftware.com.

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View From the Floor

COOKIES AND CRAM

BY DEAN MITCHELL

F

or the past three months I have been visiting family in Bangkok.

My grandsons attend a prominent academic international school and were telling me about what they call “Cookies and Cram”—an event where senior students mentor freshmen for upcoming exams at booths that feature homemade cookies. It focuses on three ideas: 1) to provide freshman students test tips and tricks; 2) to give students the opportunity to ask questions and receive information in a nonintimidating, stress-free environment without any teachers present; and 3) to establish a tradition where the senior students look forward to sharing what they have learned and have the opportunity to repay the seniors who took the time to mentor them. The concept is such a great one that I wondered if it is applicable to the business world as well.

I began to think about how a box plant could use the same concept with the talent pool within its organization to provide the same kind of tradition. So, the questions are: Why do it? What are the benefits of doing it? How to do it best?

Within each of our box plants are experienced and knowledgeable co-workers who could become mentors for all new and veteran personnel. Sharing their experience would be invaluable. It is an opportunity to expand understanding of all phases of the box business, from design to delivery and invoicing. The benefit to the new employees goes without saying, but the opportunity for the veteran employee to sit with the person who actually performs a job in the plant would also have many benefits.

Think about the production machine crew member doing Cookies and Cram

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“Within each of our box plants are experienced and knowledgeable co-workers who could become mentors for all new and veteran personnel.” with a designer, or a customer service representative doing the same with the six-color machine operator—in an environment that is nonthreatening and casual—receiving information from an expert. The questions from the mentee will likely be challenging and beneficial to the mentor and, of course, make the mentee more knowledgeable about the total box plant and its processes. It is the opportunity to ask all of the questions you always wanted to.

Doing Cookies and Cram with new box plant employees or crews who have changed shifts or machines would work as well. In a nonthreatening environment—as no bosses would be present—they would receive tips and tricks about the personal side of the business. What is important to specific customers? What is important and a priority to a particular supervisor or manager? What are the challenges of working third shift? What are the owner’s or general manager’s priorities?

How would Cookies and Cram be developed for use in the box plant? Once a month or bimonthly or even quarterly, the plant could set up tables in the lunchroom with signs that identify various functions in the box plant, represented by the expert or experts. Of course, each table would have cookies to munch. The

functions would include sales, design, customer service, scheduling, manufacturing (broken down by various machine centers), logistics, IT, accounting, and human resources. You could also consider breaking down some of the functions into more specific topics. Or, provide a suggestion box or survey to identify the areas of interest. I would suggest that one-hour sessions be available for the event. This could be done by shift, and to keep the plant operating while shift one is doing Cookies and Cram, shift two could come in early to maintain production.

I am certain that each of you can come up with a schedule that works best for your plant and accomplishes the goal of having the most knowledgeable and proficient personnel in the box business.

I would venture to say that this concept would appeal to all generations, especially millennials. It would be a great tool for bringing the various generations together.

The other benefits include establishing a creative environment, improving efficiencies, and increasing profitability.

Dean Mitchell is president of The Mitchell Group. He may be reached at tde55@aol.com.

This will be my final contribution to BoxScore. Thank you, AICC, for this opportunity to share some thoughts and ideas to my compatriots in an industry I am proud to have been a part of.

I hope someday you will look back like I have and say, “Wow, that was sure fun!”

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Lean Learnings

HARD VS. SOFT SAVINGS

BY MIKE NUNN

W

hen it comes to savings, there are two types: hard and soft.

Both are important to have on the lean journey, and your current position on that journey will define where your savings focus should be.

Hard savings are bottom-line dollars.

These savings are easy to quantify and something your CFO or controller are going to be very focused on. A common statement of a hard savings focus sounds like this: “We just spent thousands of dollars on lean training. What is the ROI on the training investment?” Patience, grasshopper! When someone first learns a new sport, are they a professional right away? Of course not. It takes practice and time, and lean is the same. You won’t get large and quantifiable hard savings right away.

A focus on hard savings alone will not generate the needed support from the team. Why? Most people in your company—depending on the size of the business, of course—have no concept of hard savings or what they are. Moreover, these same people who don’t understand hard savings are the key people in driving and sustaining your lean journey; they are your front-line staff. What they do know is whether they like their job or not. If lean can have any influence on making their day less waste-filled and more enjoyable, then they will be better stakeholders in sustaining lean.

This is where soft savings come in. Soft savings are the feel-good savings of jobs made easier, reduced stress, job satisfaction, clarity of processes, broken-down silos, and all the other “fluffy” savings that will create the culture needed to sustain a lean journey. Soft savings can be challenging to quantify, and I would

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“When someone first learns a new sport, are they a professional right away?

Of course not. It takes practice and time, and lean is the same. You won’t get large and quantifiable hard savings right away.” recommend not spending too much time attempting to quantify them, because this could lead to waste (overprocessing).

Although not hard dollars, soft savings are savings that will make people immediately happy, or happier, once realized.

At different stages of the lean journey, your focus on soft versus hard savings needs to shift over time.

In the beginning of a lean journey, praise and reward the soft savings. People are still trying to understand what this “lean” is that the company is doing, and they’re hoping it’s not the next flavor of the month. With a hard-savings focus in the beginning, I can guarantee lean will turn into the flavor of the month.

At the start of a lean journey, people are wondering, “What does lean mean to me?

Am I going to lose my job? Will my job be changed?” If on top of the uncertainty you throw in a focus on hard savings that people already don’t understand, then they’re going to be turned off quite easily.

Early in the lean journey, a focus on hard savings should be kept to high-level team members or leaders only. Show patience with the learning of the lean skills and methods. Usually, some of the first lean activities will be simple 5S kaizen (improvements), which are not easy to attach a hard savings to, and that’s OK.

As you progress with lean, there should be a gradual shift to a focus on the hard savings. Your lean knowledge is improving, kaizen events are having a larger scope, and calculating hard savings should be getting easier as a result. But again, the focus on hard savings should be kept to the leaders. Moreover, I offer a caution: Do not press hard savings onto front-line staff. Hard savings should always be kept and the manager level or higher. Leaders need to find a way to translate the drive for hard savings into a soft savings message when facilitating kaizen.

Whether hard or soft savings, one of my big recommendations with respect to savings is to track it. As soon as the lean journey is started, you should track how much time, money, space, distance, and all other savings have been achieved. Be lean, generate savings, and increase value to your customers.

Mike Nunn is vice president of operations at Ideon Packaging and is Lean Black Belt–certified.

He can be reached at 604-524-0524, miken@ ideonpackaging.com, or followed on Twitter @mikednunn.

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Leadership

SPENDING YOUR LIFE

BY SCOTT ELLIS, ED.D.

T

ime is the currency of life, and spending it intentionally is an art and a discipline. Most of us would like to spend less time dealing with crises.

There is a constant struggle to balance time spent on responsibilities at work and at home. We find ourselves sitting in meetings and dealing with many communications in which we see no purpose. We may avoid undesirable tasks, such as giving an employee unwanted feedback, by procrastinating. These are all signs that we are on autopilot, acting unintentionally, and letting other people make important choices regarding our schedules. Are other people spending your life?

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I am not suggesting that you stop doing all the unfavorable tasks, such as sacrificing for the good of others.

I am advising that spending more time in planning, prevention, and staying healthy in body, mind, and spirit will help you be more productive for a longer duration.

How do we find more time to do this planning and prevention? We can do so by declaring war on time-wasters. The biggest waste may be the time we spend on its unquestioned uses. We attend or even lead meetings that have outlived their usefulness or could be run by someone else. You will save time by questioning your entire schedule and choosing to be where you create the most

value. How much time do you spend solving proximate problems for employees or customers? The most frustrating of these are the repetitive problems. These crises take precedence over whatever you may have scheduled. So, you may spend time to solve them over and over. In this mode, most neglect to take the time to study those problems and prevent them from returning. My personal goal is to spend at least 20 percent of my time in prevention and intentional work toward creating the desired impact in my work and private life.

One way to become more intentional about time expenditures is to set goals for each important role in life. We must move beyond the roles we have accepted without question. This includes being intentional about the way we lead, because if we are not deliberate, we will lead in someone else’s style. Leading on autopilot is ineffective, because we default to mimicking the behavior of a model manager we have known, or overcorrecting to be different from that model.

Articulating conscious objectives for targeted improvement in a particular role will help you to set goals for behavior that will create the impact you desire. It will also help you to say no to the distractions and time-wasters of procrastination. You won’t settle for good results in areas where you desire to work toward greatness.

To begin, think about the various life roles you play. Certainly your various career responsibilities deserve their own role designation, as do the various other roles (e.g., spouse, parent, sibling, community contributor, etc.). Use one sheet of paper per role to sketch the impact you desire in that role, as well as the goals you

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will need to act on in order to achieve those outcomes. Once you see the many roles you play, you will realize that it is no wonder you have trouble keeping everyone happy, including yourself. At that point you may need to prioritize.

Consider this: If you woke up tomorrow and found that the rest of the world had amnesia regarding your existence, what would you work to reinstate? Would it be work? Which relationships would you invest in if there were no expectations? This thought process may help you to set the priorities according to your values, and may lend insight into where your priorities could shift today. At first, try to keep the list down to six roles, and make sure that one of them involves keeping yourself healthy physically, emotionally,

spiritually, and mentally. That role is essential if you are to be successful over time in any of the others.

That is also the reason there is mention here of life outside of work. The fact is that workaholics burn out and create disruption; the best employee is a balanced employee who is working to be healthy in all aspects of life.

The following is a brief example of how one person responded to the exercise regarding his role as a department leader: Role: Accounting Department Leader Goal (the impact I intend to have on a key customer of this role): I am a leader who gets things done with the team, not just working alone. A leader

who grows the capabilities of the team by delegation, training, and coaching, withholding nothing and trusting that when others can do what I do that I will be ready for the next challenge.

Current State (tell yourself the brutal facts): I don’t communicate well, or in a timely manner, to give myself or those I delegate to a chance to be successful.

This justifies my resistance to letting others do important tasks. It limits them and has likely limited my ability to advance.

Truth Guiding Quote: “Don’t be a bottleneck. If a matter is not a decision for the president or you, delegate it. Force responsibility down and out. Find problem areas, add structure, and delegate.

The pressure is to do the reverse. Resist it.”

— Donald Rumsfeld Immediate Assignment: Ask my direct reports how I can improve in both listening and delivering information.

Just take the feedback without arguing or retaliating for honest opinions.

Once your key roles and goals are defined, you will have created a compass to guide your employees in their accomplishment. Staying on course is much easier when weekly plans are made in terms of activities that will serve your goals. Adding a task list to your calendar will guide your planning. Rather than a to-do list, this is a summary reminder of the promises you have made to yourself. I call these promises “proactive priorities.” The reward will be a life spent in a more balanced, rewarding, and productive way.

Scott Ellis, Ed.D., is a partner in P-Squared (P 2 ).

He can be reached at 425-985-8508 or scottellis@ psquaredusa.com.

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Members Meeting

AICC MÉXICO CELEBRATES 15TH ANNIVERSARY

BY MARIA FRUSTACI

T

he 2016 AICC México Annual Meeting will mark the 15th anniversary of AICC México’s inception. AICC México serves more than 100 independent corrugators and converters throughout Mexico by offering networking and educational opportunities that cover a wide range of topics, from production to leadership and business development.

Cancún, Mexico, will be the site of AICC México’s 15th Annual Meeting and Trade Fair, which will take place June 8–10 at the J.W. Marriott Cancun Resort & Spa. The meeting is scheduled to feature industry and business speakers

who will present the latest in packaging technology and business practices.

The Trade Fair provides an excellent platform for industry suppliers to promote their latest products. For corrugated, folding carton, and rigid boxmakers, the Trade Fair offers an excellent opportunity to get firsthand information and experience the industry’s newest technology and equipment. More than 50 supplier exhibitors will be showcasing the latest in equipment, software, consumable products, services, and more, with a focus on maximizing the productivity, efficiency, quality, safety, and profitability of their box- and carton-making operations.

Decision-makers from more than 100 member companies are expected to visit the Trade Fair.

“Exhibit space is quickly selling,” says Maria Frustaci, director of Latin America, AICC. “This is really an excellent opportunity and efficient way for suppliers to reach the majority of Mexico’s independent boxmaking community. The Trade Fair gives the exhibitors the opportunity to have a majority of independent boxmakers in one place at the same time.”

To reserve exhibit space, contact Maria at 703-836-2422 or mfrustaci@aiccbox.org.

Don’t hesitate—act now, because exhibit space sells out quickly!

VISIT A TROPICAL PARADISE Cancún, Mexico, is a tropical paradise that remains one of the world’s top tourist destinations. Its great weather, exciting nightlife, beautiful white sand beaches, and outdoor activities attract meeting-goers and vacationers from around the world.

There are plenty of attractions to entertain guests while the meeting is in session or for guests and attendees to enjoy after an intense day of knowledge exchange. Home to the world’s second-largest barrier reef, Cancún is an ideal place for scuba diving and snorkeling. Cancún also offers excellent golfing, fishing, and tennis, as well as great shopping, sunbathing, and dining.

Located in the heart of the Hotel Zone, just a short 20-minute ride from the airport, the luxurious J.W. Marriott Cancun Resort & Spa is the host hotel for the 2016 AICC

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México Annual Meeting. Rooms and suites feature private balconies with stunning views of Cancún’s white sand beaches and the turquoise waters of the Caribbean, as well as marble bathrooms, pillow-top mattresses, and 24-hour room service. Other amenities include their top-rated Mayaninspired spa, pristine outdoor pools, and heated indoor spa pool. The resort also offers several fantastic restaurants, serving everything from Italian cuisine to Japanese fare.

Meeting registration is open to members and nonmembers.

Early registration discounts are available for those registering on or before May 10, 2016. Sponsorship opportunities are also available for suppliers who want to maximize their meeting experience and stay top of mind with meeting attendees.

2016 AICC MĂŠxico

Annual Meeting & Trade Show JW Marriott CanCun y CanCun, MexiCo

June 8 -10, 2016

www.aiccbox.org/mexico

JAMESTOWN CONTAINER CORP. JAMESTOWN, NEW YORK announces They have agreed to acquire the assets of

H. P. NEUN CO. INC. LYONS, NEW YORK

The undersigned acted as financial advisor to Jamestown Container

MITCHELL E. KLINGHER

580 Sylvan Ave, Suite M-A Englewood Cliffs, NJ 07632 (201) 731-3025 | Fax (201) 731-3026 info@KlingherNadler.com

GOOD FOR BUSINESS

REFLECTION AND COMMUNICATION......................................... 31 EMERGING LEADER...................................... 32 CONFLICT MANAGEMENT.. ..................... 36 AICC INNOVATION......................................... 38

BOXSCORE TIPS, TRICKS, AND SOLUTIONS TO BETTER BUSINESS

REFLECTION AND COMMUNICATION It’s Not You, It’s Me

BY VIRGINIA HUMPHREY

E

veryone has heard about the breakups—or been a part of one—where someone used the line, “It’s not you, it’s me.” Maybe this time, it is you.

I am not talking about breakups here, but rather why your “great” idea didn’t gain traction or was flatly shot down.

You may think it is because you are a woman or a man, or you are young or old, or because so and so doesn’t like you. Any or all of those things may be true, but before you accept any of those reasons, ask why. Ask the person who said no to tell you about their thought process in reaching that conclusion. Do it in a nonconfrontational way. You want to understand their thinking so you can better understand their needs.

Maybe it isn’t because John doesn’t like you, but rather because he tried a similar idea five years ago. Learning that could open the door to what has changed in five years that may allow the idea to work today.

Maybe it isn’t because you are a certain sex, but rather because you are in production, and your great idea is for the sales department. You think you are being a good team player and helping the company move forward, but the person you are talking to thinks you are overstepping your bounds. Learning this could inform you about how to better bring up the idea in a way that is nonthreatening or within your scope of work.

Maybe it isn’t because you are of a different generation than your boss; maybe it is because you haven’t done enough homework. You have a great idea but don’t have the numbers to back up why it is great. You know it will work, and you know that you can sell this new product or implement this new idea and save money, but if you can’t prove it, it may be a tough pill for the other person to swallow. Hearing this reason tells you to get your supporting documentation together and try again.

Maybe, maybe, maybe. Until you ask, you will never know that real reason why you got rejected. You will not be able to match your communication style to the

situation or get your ideas moved forward until you know the answer. Before you take the easy way out by assuming you know why you received the answer you did, think about the fact that it really might be you, not them.

Virginia Humphrey is director of membership at AICC.

BOXSCORE www.aiccbox.org

31

Good for Business

EMERGING LEADER

Investing in the Future

BY JESSICA NEGUS

I

n 1986, my grandfather and father made a life-changing decision: They risked everything they had to start a business. They had a dream that was fueled by a variety of factors. These factors were based primarily on their experience in the marketplace of selling corrugated paper boxes and an opportunity to obtain used equipment. The dream was just the starting point. They then needed to find capital to fund the dream. When they did seek the capital, they put everything on the line with the hopes that this business would succeed and be able to provide a comfortable life for their families.

They started Wisconsin Packaging Corporation—a corrugated converting

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business—with minimal, used converting equipment and invested conservatively in machinery as they grew in order to accommodate their expanding customer base, which at the time was pre­ dominantly buyers of brown boxes with minimal print. The decision to invest in new equipment was a balancing act of meeting customer needs, staying competitive in the marketplace by doing things better and more efficiently, and staying within budget. This frugal attitude has proven to be successful for us, but today, many other forces are at play.

Probably the biggest factor is that integrated mills are growing and realizing there are opportunities for them to compete in the converting side of the paper business. Current estimates have these large integrated paper companies accounting for approximately 60 percent

of the market that was once available primarily to independent corrugated companies. These large integrated paper companies have the advantage of size and resources, so it is becoming more and more difficult to determine where to invest to continue to prosper alongside the integrated behemoths.

Every employee in every company seems to have an opinion on what their company needs to do to be successful.

I myself have a personal wish list of machines and various add-on components for existing machines. This list is fueled primarily by my opinion as a salesperson and what I think would make me better and more competitive in the marketplace. My opinion is just one factor in the successful management of the business. I also have the unusual perspective of growing up in the business

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Good for Business “To throw up our hands and say that we cannot compete in an ever more competitive marketplace and meet the needs of the upcoming generations would be an insult to the success of our company and the founders who risked everything for their dream.” and witnessing firsthand the building of the business. The family values given to my siblings and me were that you do not spend money that you do not have. The same, in a much larger sense, has always been true for the business. Investments have always been carefully reviewed and were executed only when justified.

Attitudes of the past are not the same as those of the present. The millennial generation has been bombarded with a culture of consumerism and instant gratification.

Credit has been easy to get, which has fueled the attitude of “Why wait when

I can have it now?” This is a dangerous position in the business world, especially given the possibility of overspending and overextending company resources with the speed at which technology changes. A brand-new state-of-the-art machine you buy today may be obsolete in two to four years; can that machine pay for itself and earn a profit in that time?

Businesses also need to invest in talented people. Many AICC meetings and articles focus on “filling the bench” with the right people. Our business has always made it a priority to provide fairly

for our employees and has been rewarded with the loyalty of those employees.

Unfortunately, the attitudes of the younger generations have changed.

They profess to want more home life– work balance. While this is a good thing, it sometimes clashes with the perceptions and values of the older generation, who have sacrificed to achieve success. It is becoming necessary for employers to offer additional benefits to new hires—including perks such as flexible hours, more vacation days, and stronger insurance benefits.

Evaluating the return on investment with people is significantly more difficult than it is with equipment. This is particularly true when you consider generational differences.

This family history has been presented to illustrate the challenges that face small independent companies. To throw up our hands and say that we cannot compete in an ever more competitive marketplace and meet the needs of the upcoming generations would be an insult to the success of our company and the founders who risked everything for their dream.

Investments need to be carefully considered from a variety of perspectives.

Communication with all members of the team who have a stake in successful outcomes is the key component in making good decisions. Stay educated with trends and advances in the business. The interesting thing is, this is exactly what my father and grandfather did to be successful. Change is inevitable, and the ability and inclination to adapt is the key to success.

Jessica Negus is an account manager at Wisconsin Packaging Corp. and an AICC emerging leader. She may be reached at 920-563-9363 or jessnegus@wisconsin packaging.com.

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Good for Business

CONFLICT MANAGEMENT

Conflict Management in Business and Life—Why Bother?

BY DANA LESSARD GARNETT

I

s it worth assessing the effect conflict has on our organization, and taking precious time away from our business priorities to address it? Should we be concerned about ensuring our associates possess the skills needed to resolve conflict between themselves and our customers, suppliers, the board, and business owners? Do we care?

If we’re talking finance, we get down to the finite details without batting an eye.

We question, we analyze, and we adapt our approach to improve the bottom line.

However, when we’re talking people, we

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don’t think we need to do this because “we all know what people skills are.” But, drilling down to the finite details of how we operate as people is what’s needed to afford positive and long-lasting change in behavior, which ultimately affects the bottom line.

We’re All Wired the Same With respect to neuroscience, in broad terms, human beings are all wired the same, regardless of personalities and problems we encounter. Events and triggers challenge and hit us the wrong way—wrong, that is, by our judgment. Consequently, our sense of reason is hijacked, and we are on the road to conflict: A problem becomes

a disagreement that turns into a contest, which escalates to a fight—or flight—that reaches intractability with no hope of resolution or turning back. Once you get to “fight or flight,” the situation is usually beyond mediation and requires a judgment, sometimes litigation, to end the conflict. But, here is the rub: This end to the conflict is not conflict resolution.

Wounds from conflict run deep, and we store those memories in our brain. Unless we understand how to anticipate and process conflict, layer upon layer of hurt, resentment, frustration, and anger builds up over time, and we’re in so deep we can’t see it.

Sometimes we feel overwhelmed with the demands on us—sales quotas, price

Good for Business

vs. profits, deadlines, results—and heaped on this are our personal life challenges. Given the stress stemming from these triggers and the heavy drain it has on our energy, creativity, and ability to problem-solve, is putting blinders on and running another analysis of the numbers really going to fix things?

No. Until we acknowledge, address, and process the emotional obstacles and clear the conflict, we are stuck there, and nothing is going to get done effectively.

Recognizing this is a first step to attaining social-emotional intelligence.

Effectively Resolving Conflict So, how can we effectively resolve conflict? When it involves other people, first put yourself in their shoes. This is a form of empathy. Ask them what they are experiencing—what they are feeling, what they need emotionally. Conflict originates from unmet needs. Second, what are your feelings and needs? Share this openly and respectfully. Third, is it possible that your needs and theirs are the same? Is there a way you can resolve how you each perceive the situation? Although you may look at things differently, at the end of the day it is likely you have the same needs and goals—it’s just hard to grasp that when we habitually think our needs are more important than those of others.

As for inner conflict, the same steps follow. Give yourself empathy. Say it out loud—not the things you don’t think you do well, not the things you think you could have done better, but the things you have done well. Say out loud the things you are good at. Our verbal to auditory reasoning track is powerful, and we believe what we hear ourselves say.

“Remember: We are all a work in progress. It’s not about perfection; it’s about learning and the chance for a new start every day.”

What we believe will eventually come true because it’s a self-fulfilling prophecy.

When we hear ourselves speak of others’ shortcomings, we focus only on that without hope of reconciliation. When we self-criticize, list our failures, and don’t believe it’s possible to succeed or find resolution, then that’s the way it will be. Even Shakespeare’s Hamlet was onto this more than four centuries ago: “For there is nothing either good or bad, but thinking makes it so.”

Next, look inwardly and ask yourself: Am I contributing to my inner conflict by replaying it in a damaging cycle?

This ingrains our negative neural pathways and keeps us “stuck” in our “stuff.” In breaking that cycle, we are far less stressed, and it’s easier to let it go. Lastly, when we practice giving ourselves empathy and stop negative spiraling, remember: We all are a work in progress. It’s not about perfection; it’s about learning and the chance for a new start every day.

Why Bother?

So, why bother with addressing conflict and knowing how to manage resolution?

Human beings are linear thinkers. No matter how much we push conflict aside or pretend it doesn’t matter, we cannot move forward effectively as individuals, as a team, as a department, region, division,

or as a company and expect to achieve our goals until we identify, process, and resolve what bothers us. Once that is resolved, our energy and creativity are freed up enormously to collaborate more effectively, hear each other, and work successfully together.

It’s about process—not results. If we focus only on results instead of how we get there, results will elude us. Perhaps we think we get the results we want, but it may be at a greater cost of probable unretractable harm to our working relationships. But if we focus on the process—respecting each other’s differences, extending empathy, sharing our honesty, hearing ourselves saying what is positive and what is possible—the results will follow. They may not be the results we aimed for initially or even expected, but the results that emerge from effective conflict resolution are far more desirable and serve everyone and the bottom line well. ana Lessard Garnett is D a family business adviser for Box Family Advisers LLC. She will be presenting a two-day workshop on conflict management at the 2016 AICC Spring Meeting, April 13–15 in Palm Desert, California.

BOXSCORE www.aiccbox.org

37

Good for Business

AICC NNOVATION Scoring Boxes — A New Benefit for Associate Members ast January, AICC, The Independent Packaging Association, began offering associate members Scoring Boxes, a monthly perspective on conditions in the corrugated and containerboard industry. Written by Dick Storat of Richard Storat & Associates, Scoring Boxes is an additional member benefit in recognition of the value associate members offer to the association through their expertise in the industry and educational content.

L

Have you considered adding roll handling equipment to your operation? C&M Conveyor has extensive experience providing roll handling solutions to the corrugated box, folding carton and printing industries. Our roll conveying systems include fully automatic, semi-automatic, manual push-type, and continuous feed and discharge. Call today to find out the best solution to your roll handling requirements and boost your plant’s productivity.

Leading supplier to the corrugated box industry 4598 State Rd. 37 • Mitchell, IN 47446 812-558-7960 • 800-551-3195 www.cmconveyor.com

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BOXSCORE March/April 2016

“It is AICC’s intent to provide all of our members with the information they need to thrive in an ever-changing marketplace,” says Virginia Humphrey, director of membership. Scoring Boxes was previously available only to general members. It is another tool to help members stay informed.

If you have any questions about the benefits of AICC membership or want to make sure you receive Scoring Boxes in your inbox, please contact Virginia Humphrey at vhumphrey@aiccbox.org or 703-826-2422.

Point of View

Q

Is there ever a time when a company should fire its customer? If so, what parameters should a company use to make that determination?

Our company treasures customers, so I’m hesitant to use the term “fire a customer,” lest I be quoted out of context. Our driving force is serving customers—the word “service” is even in our company name.

We exist for one reason: to serve customers’ needs. Without satisfied customers, there is no reason for our existence.

For us, the customer is king.

We use a strategic filter for identifying prospective customers whose business we solicit. We do this to ensure that we align with customers whose needs best match up with our value proposition and our strategic competitive strengths. This makes for the best long-term fit.

A customer’s profile can change over time. Sometimes this is a result of the customer becoming a credit risk, where we can no longer obtain credit insurance for them and we are unwilling to underwrite the increased exposure. In such instances, we may work out an exit plan rather than supply them at a higher credit limit or extended credit terms.

Sometimes there is a change in the customer’s ownership, which results in changes to the customer’s supply-chain priorities or payment terms that no longer align with the value proposition we bring to the party. In those cases, we may no longer be the best match for our customer’s packaging supply-chain requirements.

In some instances, as with a private equity firm buyout, the new owner wants the same or more costly services at a lower price. They may engage a supply-chain consultant to bid out their packaging or to conduct an Internet auction. Sometimes the specifications given to potential suppliers are incomplete or don’t accurately reflect the unique nuances of services we provide to that customer. In cases where the new owner’s demands can’t be fulfilled with our making an acceptable profit, we may choose not to participate in the auction or not agree to the new demands, resulting in our discontinuation of supplying them.

There are times we later regain that customer’s business once the new, lower-priced supplier fails to meet their needs or discovers that the customer’s requirements are not what were specified in the bid package and cannot be supplied at the price they had bid.

Over my 40-year career in corrugated, we have occasionally experienced a change in customer personnel that made an ongoing relationship difficult to continue. In these rare instances, we encountered a buyer who was unreasonable, difficult if not impossible to please, and who was abusive in his treatment of our customer service people. That is when we may “fire the customer,” telling them that we choose not to deal with someone at that level and hope to “part company as friends.” We try not to burn bridges here, as personnel could change in the future, and we would want to be back as that customer’s best packaging solution provider. — Jim Akers, chairman of the board, Akers Packaging Service Group

May/June Point of View: What measures does your company take to build a close-knit team?

Please send all responses to BoxScore@theYGSgroup.com.

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Not only is there a time, it is frequently not used enough by independents.

We have walked away from our largest account three times over the years and smaller accounts more often than that.

If an account is more difficult to service than it is worth, takes too many credits, is never happy with anything, or is just too cheap to be viable, they are a candidate for termination.

Whatever you think they cost you, it is probably much higher when factoring in the drain these accounts put on all of your resources. If terminating or firing a customer seems harsh, call it what we do: We simply return their volume to the marketplace. — Mark Mathes, CEO, Vanguard Packaging

Without a doubt, to fire customers is a necessity of business. The key is to do it without burning the bridge for the future. Many times, the present generation of a family business is not the right fit. The present policies of a company do not correspond to the ethics of your company. Both of these factors can change to your favor in 10 or 20 years.

The way we fire customers who are problematic is to raise the profit margins with every order until the client says that their company cannot purchase from us because of our selling price. Five, 10, or 15 years in the future, no one knows why they did not purchase from us. Recall that we have an interest in selling when there has been a change in policy or personnel. If they stopped purchasing from us, it was not our fault that the relationship was disrupted. — Jeffrey Hughes, owner, ALHU International, Inc.

BOXSCORE www.aiccbox.org

41

INVESTING IN

NEW TECH Price, internal and external considerations are pivotal to decision-making

BY TOM ANDERSEN

W

hen is the right time to invest in new technology? Although this question may seem simple, there are many factors to be considered. However, it all really boils down to a simple concept: The right time to invest in new technology (NT) is when you and your team have considered all the costs of the technology and have created a predictive model that can be used as the road map forward.

Ancient wisdom asks, “For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?” The costs that require study include previously unknown and assumedly unimportant aspects of the market and its growth. It was previously unknown to you because the NT is just that—new. It was previously unimportant to you because you were not focused on the NT. Now, however, before enthusiasm for shiny new bells and whistles or fear of being left behind by competitors rushes the decision, it is critical for all costs to be known and to understand each cost’s relative importance to the success of the NT project.

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BOXSCORE www.aiccbox.org

43

“Ancient wisdom asks, ‘For which of you, desiring to build a tower, does not first sit down and count the cost, whether he has enough to complete it?’”

Throughout my career I have purchased NT not only for companies in which I held an ownership interest, but also those started as cooperatives (i.e., startups).

In both cases, the potential costs of nondelivery on promises made an impact on both finance and reputation. These investments have ranged from comparatively low-risk purchases like management software to high-risk buys like the simultaneous installation of several cutting-edge flexographic machines in an operating room environment with

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new software and controls on air, water, and power. Startup operations have extremely high expectations, and leveraged financial strength makes unrealized results unacceptable—and rightly so.

With the importance of these weighty decisions in mind, here are some steps to acquiring NT. Consider the Price First, of course, there are the financial costs, primarily the NT cost in terms of purchase price. This cost has a direct

impact on your balance sheet, P&L, and financial ratios. By the time you arrive at the decision to acquire the NT, you certainly will have considered those implications. Many make the mistake of skipping this first step of pure financial modeling. As the model is being prepared, another aspect of the financial impact needs to be determined.

The second step is to determine when to bring your lender, bank, or other financial institution into the process. Often, bringing them into the process early paves the way to a wrinkle-free, accelerated transaction, because lenders don’t like surprises and they appreciate transparency. While at some point you will seek formal approval from them, this early step is purely informational. I suggest they be brought in early and kept in the loop as milestone decisions are made.

Internal Considerations Third, consider the current state of your operation. The larger the project, the more critical this phase will be, as it is the main factor in your company’s ability to adopt new technology, deploy it, and profit from its advantages. Returning to the tower analogy above, these factors are the foundation on which you build: • What is the current state of technical expertise on the plant floor, in the maintenance department, or in any other applicable area? What additional talent or training will be required?

• What is the company’s cultural condition? Are you and your leadership team willing to exercise the discipline required to achieve all that this NT can deliver?

• Do the people closest to the process who will be most affected see the need for NT? Are they willing to embrace the challenges with the benefits?

• How important is the environment where the new technology will operate? Is there a need to create a cleaner and more organized workspace?

• Are you truly committed to an environment of continual improvement?

• How healthy is the quality process?

Do people throughout the company have communication paths to deal with nonconformances and suggest meaningful improvements?

• Does your company have a significant, formal, and top-down commitment to the training process? NT will demand more from your organization than marginal upgrading of existing technology.

• Will you be willing to include sufficient training in the startup plan to ensure that those working with the NT have non­production time to gain production prowess?

• What new accountability tools will be required to help people comply with the increased complexity and

discipline required for NT? Will SOPs, checklists, audits, or additional safety protocols be needed?

External Considerations The fourth critical determination that needs to be modeled is the target market.

How big is the market you intend to pursue? Is it a mature or emerging market? Certainly when NT is involved, it often means the market is emerging.

Dealing with either a mature or emerging market does not change the consideration of the costs, but if the market is emerging, the costs need to be analyzed through the lens of speed. How long will it take the market to grow to a size that will allow your share to produce the financial results you modeled? As always, the math problem is, How long will the NT take to pay for itself?

Another aspect of the cost regarding the market is the ability of your sales team to sell it. Are they currently equipped to sell into the market with the NT in mind, or will they require training? Will the training be extensive or remedial?

Can they receive the training and not lose focus on the existing sales initiatives?

The right NT supplier will be prepared to partner with you in training on their technology, as well as with any vendors of materials required by the NT. The fifth consideration is the state of the NT. Is it proven technology by having been installed in at least three separate locations and for more than one year?

If you answered no, then you will be an “early adopter,” and you will need to perform significant due diligence in the process. In either case, you need to do some basic inquiry with the vendor of the NT you have chosen. How reputable is the vendor? Is this their first product offering or an updated version of an existing product line? Obviously, there are implications to either situation, but if you are an early adopter and it’s the vendor’s first product offering, you are

in the danger zone. Proceed with caution and deliberation. Your inquiry of the vendor should include their financial condition as well as their corporate culture and history. Do they have the financial strength to deliver the NT and to service and support it going forward? Are they the leader in the field or a lower-price alternative? If possible, visit their manufacturing facility. While visiting, look for signs that can help you determine their commitment to the quality and service you expect. The cleanliness and organization of the vendor’s plant, like yours, is a reflection of the level of commitment to excellence. As you witness the scope and quality of their operation, you can learn an immense amount of information from your time in their facility.

Finally, your negotiation of the purchase agreement must be exacting regarding their performance guarantee.

Include all productivity and quality benchmarks, and be certain that your final payment is subject to all the performance objectives being fully achieved.

The final payment should be of a sufficient size to encourage the vendor to perform the installation and training both in a timely manner and completely.

Ultimately, investing in NT should be well considered by as large a team as possible. This takes discipline and structure, but it is well worth the effort. No one person has a complete perspective, and no one person will be solely responsible for NT’s success. It takes a team to realize all the anticipated benefits from your investment. Operational and cultural assessments can provide a strategic advantage at the commencement of any improvement initiative.

Thomas Andersen is a founding partner of P-Squared (P 2 ).

Contact Tom at tom@psquaredusa.com.

BOXSCORE www.aiccbox.org

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IS YOUR COMPANY

TRULY WINNING?

‘Ready, Aim... Win!’ offers AICC members a transformative approach to doing business

BY ROBERT BITTNER

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F

“

ailure to plan means planning to fail” is a centuries-old business motto.

However, many companies have discovered that a plan, in itself, doesn’t get you very far.

Each year, businesses plan to sell more, earn more, satisfy customers better, and boost employee morale. Yet most plans are little more than hopes based on incremental improvements to past performance, with no specific guidelines in place for reaching them.

Without actionable specifics, it is easy to become sidetracked by the challenges of managing day-to-day business. In the end, long-term goals get set aside, even forgotten. Another year’s plan gathers dust on the shelf.

No business wants to operate like this. No one wants to “plan to fail.” If anything, you want to plan to win.

To do that, businesses not only need specific goals, they need specific steps for achieving those goals, companywide commitment, and accountability.

AICC understands that. That is why the association recently teamed up with consultant and author Holly Green to offer members “Ready, Aim...

Win!”—an intensive, yearlong program that empowers companies to focus on success—winning, to use Green’s term—in today’s fast-moving, highly competitive marketplace.

‘Ready, Aim... Win!’ As CEO and managing director of The Human Factor, Inc., Green has established herself as a leader in helping business leaders and their companies understand what winning looks like and create a quantifiable plan for success.

“I work so much with strategic planning,” Green says, “and I was finding that

the traditional ways just don’t apply in today’s world. People used to plan five, 10 years out. But we can’t begin to imagine what the world will be like in 10 years.

So, I started researching and developing programs that would address the current situation. Because I have a background in neurophysiology, my approach was to ask, ‘How does the brain function in a work environment?’ That got me playing around with new approaches to strategic planning, which I now call strategic

who we are. Ready, Aim... Win! has reignited that. Before, we never had a mission statement on the wall or circulated one.

But now it’s all over the place. It’s in our face. And we’re talking about it.”

For Kim Nelson, president of Royal Containers, complacency was the issue that led her to invest in Ready, Aim... Win! “I heard about it at the AICC spring meeting in 2015,” she recalls. “Holly spoke at a general session meeting,

“The underlying concept of the ‘Ready, Aim... Win!’ process is that success can happen only when every single employee knows the company’s values and goals and is committed to them—and everyone is held accountable.” agility. I’m constantly trying to make sure the things we’re doing to help people be successful actually work in this changing world.” Green began putting these concepts to work for clients six years ago.

Ready, Aim... Win! represents the latest approach, tailored to the unique needs of independents in the packaging industry.

“Five years ago, American Packaging merged with a paper company,” says American Packaging President Tony Schleich. “It’s been a great relationship.

But after going through a merger like that, we lost our way a little bit. That’s not anyone’s fault but mine. I wasn’t constantly reminding employees that we’re still American Packaging; we haven’t changed

then she led a small workshop where she described her program. At the time, it was ‘business as usual’ at Royal Containers. We weren’t looking to make changes. So I didn’t think there was any compelling reason for us to get involved. Our growth was low, but I wasn’t overly concerned because of where the economy and the market were. But as Holly was speaking, it hit me that my complacency was a compelling reason to change. I was too comfortable.”

Greg Tucker, CEO of Bay Cities, has spent the last three years working with Green to develop and implement a customized version of Ready, Aim... Win! He

BOXSCORE www.aiccbox.org

49

believes complacency is the leading threat to independent converters today, who should, by definition, be agile and entrepreneurial in their approach.

“There’s this temptation to sit back and trust, say, that your top five accounts will always be there. But if the top two accounts move to another state, go bankrupt, or get bought, then you’ve got three top accounts. And then you start drowning.”

is held accountable. It requires constant and clear communication, frequent meetings at every staff level, and a serious commitment of time and energy on the part of presidents/CEOs and managers over the course of a year. That time and energy is concentrated on receiving master coaching from Holly Green (and her associates) and putting that coaching into constant, daily practice, for which Green holds leaders accountable.

“Being great is hard work. But most people are already working hard. So why not work hard at being great?”

— Holly Green

Tucker credits Green’s approach for helping him keep Bay Cities’ head above water—and focused on their goals—in 2015, when several major accounts simply vanished. “Our goal was to grow by $12 million last year,” he says. “But then we lost about $12 million in business, including one $3.5 million account. There was nothing we could do about it. Yet, because we were focused on our destination model, we were able to pick up $14 million of business! That enabled us to move the business like a snake. We got set back, but the process we had in place enabled us to adapt to a new environment.”

Culture Shift The underlying concept of the Ready, Aim... Win! process is that success can happen only when every single employee knows the company’s values and goals and is committed to them—and everyone

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BOXSCORE March/April 2016

Specifically, over the course of the year, you will create a destination model for your business and develop specific, measureable steps for getting there. In addition, according to the Ready, Aim...

Win! literature, “You’ll explore how and why you and others think the way they do at work and how you can leverage all the brains in your organization to win. You’ll determine the key areas of focus for your organization and how to keep everyone on track. You will practice giving feedback and enable accountability throughout your organization.”

All of this is done through the guidance of at least six webinars, ongoing conference calls, personal coaching, workbooks, in-person meetings with Green, online surveys, assessments, and email check-ins.

Internally, regular team meetings are required for managers/leaders—which may occur as often as biweekly—as well as regularly scheduled one-on-ones with

every employee. The result is an approach to strategic planning that focuses not on long-range hopes, but on a series of short-term goals that are clearly defined and for which the entire company is held responsible.

“Holly’s approach is to focus on taking little steps,” notes Schleich, “making certain along the way that you know who you are and where you’re going.

We’re constantly checking in to make sure we’re moving toward those goals.” Shortrange goals accompanied by constant assessments mean companies are not locked into a year-old strategy should the marketplace shift. Yet because every goal is based on serving a long-term mission statement as well as enhancing an agreedupon corporate culture, small adjustments can happen quickly without requiring leaders to take their eyes off of the big picture. “It’s a more intensely focused process than anything I’ve ever been involved in,” Schleich says, echoing the sentiments of most participants.

“When it started, the time commitment was maybe more than we had anticipated,” admits Tonya Kowa-Morelli, president of Huston Patterson, a commercial printer. “But we really wanted to reap the benefits, so we took it seriously and put a lot of time into it.”

Depending on the company, the result of the Ready, Aim... Win! process is likely to be a complete corporate culture shift that is both rewarding and challenging.

“Changing people’s mindset has been our biggest challenge,” Kowa-Morelli says. “When you’ve been in business for so long, and so many employees have done the same thing for their entire career, changing the mindset to do something different has probably been our biggest struggle.”

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7

YEARS YOUNG

“We think we’re so open to change, but we really aren’t,” Nelson says. “It’s difficult to change daily routines—how we speak to one another, how we recognize or don’t recognize employees, how we speak on the phone, our body language. It’s way more difficult than any of us realized. We’re practicing it, we’re embracing it, but it’s a challenge against the natural instinct.

“Maybe our biggest challenge, though, is accountability,” she adds.

“When employees are doing even subtle things that go against our values, we have to address them immediately, which is a challenge. A sales rep might come into the office and say openly, ‘These new goals are ridiculous. Why are we doing this?’—undermining what the company’s trying to do. Employees might say, ‘Oh, what are we trying this year?’ You can’t ignore that. Every time we hear things like that, we have to address it.”

Green herself acknowledges that there are going to be frustrations along the way. “Being great is hard work. But most people are already working hard. So why not work hard at being great?”

What Winning Looks Like Part of the hard work that goes into Ready, Aim... Win! involves simply nailing down what “winning” means for a given company.

“People are stunned by how hard it is to get really clear on winning,” Green points out. “Most don’t have a way to specifically define it.”

“Winning sounds easy,” says Nelson, “but figuring it out was actually hard.

We had to take a lot of time writing down our goals and then getting everyone to understand that this is what winning looks like for Royal Containers.”

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At Huston Patterson, Kowa-Morelli says, “Winning is staying ahead of everyone else and being the most sought-after package printer in the United States.”

But it goes further than that. “For us, winning also means we’re really focused on our employees, on creating an environment where people want to come to work every day, and where we’re making our values and expectations known.”

Schleich agrees. “At American Packaging, winning goes beyond just hitting a metric. We’ve learned that it’s also very important that you’re checking into the intangible side: valuing people and managing the work-life balance that we’ve identified as a value here.

Yes, we have a job to do. But if your kid has a ballgame, that’s important, too.

We make sure we’re winning with our employees, too.

“You can see the difference it makes.

When you have happy employees, efficiency improves. If you take care of the people, the numbers start to take care of themselves.”

Of course, it is possible that, despite every effort, a winning-focused company will fall short of expectations at the end of its first year with the program.

“Sometimes we don’t hit all the numbers or achieve all the goals,” Green admits.

“However, focusing on winning likely means you did much better than if you had not had a focused plan to begin with. Even elite athletes and military teams sometimes don’t achieve the complete mission. They regroup, refocus, and go after it again. Winners know that being the best requires constant practice and persistence.”

Tucker goes even further: “I honestly don’t believe you can change your culture in one year. You have to look at it as an ongoing process, not a one-year program.”

Ready to Win? Is Ready, Aim... Win! the transformative approach for your company? “We have a core set of questions to help people decide that for themselves,” Green says. “One that I talk a lot about is, ‘Are you performing as an elite team, or are you just playing hard not to lose?’ Because there are significant differences between the two. I also ask, ‘Is everyone in your organization crystal clear on what winning looks like? Does everyone understand your strategic goals?’

“My perfect client is a company and a group of leaders who know they can be even more incredible, but just don’t know how to do it.”

“If you’re at any type of turning point, and you’re willing to put in the time and money to be successful, then I think it’s worth it,” says Kowa-Morelli. Tucker agrees: “I recommend this strongly to anyone and everyone who wants to transform their company.”

“I would absolutely recommend it,” Nelson adds. “I think it’s something that especially works well with an entrepreneurial-spirited company.”

Finally, Schleich suggests, “If you’re wondering whether you should do this, I’d encourage a little introspection to really understand where you’re at, where you want to go, and whether you can give up who you are. If you can check your ego at the door, if you can set that aside for a while and just listen, some pretty remarkable things will happen.”

Robert Bittner is a Michigan-based freelance writer. He is a frequent contributor to BoxScore.

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: E C I T C A R P T I N I P S E ESO K? DO

R W O HO LLY W A E R

BY C H

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BOXSCORE March/April 2016

R A. K

R A ME

R

If you didn’t read my last article, you may want to check the September/ October issue of BoxScore to get the background on the pros and cons of establishing an employee stock ownership plan (ESOP). If you did, you have a good sense for the concepts but are probably a little fuzzy on how it actually works. The goal of this article is to give you a sense of what is involved in actually putting an ESOP into place.

A good way to think about an ESOP is using a red light/green light analogy.

You’ve thought about it, are open to the concept, and now you want to take the next step (the lights are still green).

What should you do next?

The best way to proceed is to engage with a sell-side ESOP adviser. This person will perform what is known as a feasibility analysis, which will take into account valuation, cash flows, debt repayment, compensation levels, and other factors to see if a deal even makes sense. This feasibility analysis will help you as a seller understand what you will get from the sale of your stock, as well as the impact on the company and the employees. Assuming that the lights are still green, this preliminary study will roll into plan design, transaction structure, and implementation.

Plan design will involve your goals and objectives with respect to such things as benefit levels, vesting, eligibility, whether credit for prior service will be given, and other factors. It will also consider other benefit plans that might exist, what will happen to those plans, and whether there are any other administrative or regulatory issues to consider.

While the plan can be amended at a later date, some of the decisions that

are made in the design phase can have a significant impact on the transaction structure, as well as the implications of the post-transaction implementation.

Transaction structure will involve such things as the proposed sale price to the ESOP, the amount of bank financing that will be sought, the terms of any seller financing, and other factors.

This stage also involves modeling of the expected benefit levels of the ESOP based on the contributions to be made post- (and sometimes pre-) transaction.

Your sell-side adviser will generally model all of these factors into a proposed structure, and assuming the overall proposal meets with your approval, you can move to the implementation phase.

Making the Transaction Mechanically, an ESOP transaction is like any other sale transaction, in that there is an offer, an acceptance, a due diligence period, and the execution of transaction documents. These documents often consist of a stock purchase agreement, employment agreements, seller notes, and the like. The primary difference between an ESOP transaction and a non-ESOP

transaction is that an ESOP deal involves the sale of stock to a trust. Therefore, in order to proceed with a sale of stock to an ESOP, a trust must be formed and a trustee appointed. The trustee can be anyone who is independent of the transaction. Most sellers opt to hire a third-party transactional trustee for the sole purpose of representing the interests of the ESOP in the transaction. That trustee will then retain the services of a financial adviser to perform an appraisal of the company and report a range of value to the trustee.

Once the trust is formed and the trustee is retained, an offer to sell the stock is tendered to the trustee. The trustee, in consultation with his financial adviser, will respond to the offer, and a negotiation will occur. When both parties are satisfied with the material terms of the transaction, a letter of intent will be signed, and the transaction will move to the due diligence phase.

Due Diligence During due diligence, the trustee team will request a significant number of corporate documents to facilitate legal, accounting, and operational due

“While the tax benefits to both the sellers and the company can be substantial, what really makes an ESOP work to maximum effect is the enhanced performance that often occurs when the employees have a vested interest in the company’s performance.”

BOXSCORE www.aiccbox.org

55

diligence. While this due diligence will generally be less onerous than it would be with a public company or private equity buyer, response to due diligence requires patience and thought. During this process, transaction documents are drafted, bank financing is coordinated, and final negotiations and transaction structuring occur. At closing, signed documents are exchanged, monies are transferred, and the ESOP officially becomes a shareholder of the company.

Post-closing, the company will make debt service payments to the bank and the selling shareholder. Typically, if there is bank financing involved, the bank will allow for interest-only payments on the seller notes until the term debt to the bank is repaid. Following this repayment, the seller notes can begin to be amortized.

After the seller notes have been repaid, the company will typically cash out any

warrants that have been issued as a yield enhancement to the seller notes.

Time for Growth From the ESOP’s perspective, it will begin to repay its obligations through contributions made by the company.

When this occurs, shares are released to the participants, and their account balances grow. The concept is similar to how equity grows in your home as you make your mortgage payments and a portion is used to repay the principal.

The participants get an allocation based on their W-2 and subject to vesting and eligibility requirements.

For example, a person who makes $100,000 per year receives twice as much of an allocation as a person who earns $50,000. Thus, the participants’ accounts grow in the following two ways: 1) by allocation of shares as the

debt is repaid, and 2) by the increase in the value of the stock. These contributions are tax-deductible to the corporation, and it is through these contributions that the repayment of debt ends up happening on a pretax basis.

The debt to the bank and the shareholders will generally be repaid over the shortest possible period of time without putting an undue burden on the company.

The allocation of shares to the participants, on the other hand, will generally be over a longer period than the repayment of the bank debt or seller note. There are three primary reasons for this: 1) As the ESOP is a retirement plan, the goal is typically to provide a long-term benefit to the employees, not a short-term benefit; 2) the longer allocation period encourages longevity and tenure of the workforce (i.e., they have to be there longer to get more); and 3) a longer allocation

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BOXSCORE March/April 2016

ensures that shares will be available for allocation to new employees in the future.

Furthermore, this enhances the ability to sell the ESOP as an additional employee benefit when recruiting.

Enhanced Performance While the tax benefits to both the sellers and the company can be substantial, what really makes an ESOP work to maximum effect is the enhanced performance that often occurs when the employees have a vested interest in the company’s performance. Numerous studies have confirmed that companies in which ownership is shared with the employees outperform those that do not. Many ESOP companies end up branding themselves as employee-owned, and they effectively communicate the benefits of employee ownership to all of their stakeholders.

This has resulted in numerous examples of companies where performance has improved and the workforce has ended up with a far greater economic benefit than they would have achieved elsewhere.

Other than an ESOP, no transition vehicle or strategy currently available affords the combination of flexibility, tax benefits, employee engagement, and preservation of corporate culture. From the seller’s perspective, the taxes on the sale of stock can be deferred or avoided altogether. In exchange for financing the transaction over time, the seller can receive a substantial rate of return on this financing, often in excess of the expected rate of return were cash proceeds to be invested in a bond or stock portfolio.

From the company’s perspective, the transaction can be paid for with pretax dollars, and if the ESOP ends up owning

100 percent of the stock, the company will never again have to pay corporate tax or make a tax distribution.

From the employee’s perspective, they receive a meaningful financial incentive to help the company grow and prosper in the future, and they get to work for a company whose culture is intact. With more than 7,000 ESOP-owned companies in existence in the United States today, it is a strategy that should be considered by most closely held companies seeking an ownership transition.

Christopher A. Kramer is managing director at Strategic Equity Group.

He may be reached at 714-380-3300 or ckramer@segco.com.

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BOXSCORE www.aiccbox.org

57

SOLVING THE

ACCOUNTING MYSTERY

BY RYAN CHAPPELL

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BOXSCORE March/April 2016

I

t is a few months into the new year of 2016, but it is not too late to make one more resolution—for 2016 to be the year more people in our businesses learn more about that elusive, unknown group called accounting.

To help in this endeavor, there will be several AICC-sponsored education programs in 2016 geared toward taking some of the mystery out of accounting.

Many of these programs are geared to the nonaccountants in your company.

Programs on accounts receivable, income statements, and balance sheets will be available, among other courses still in development.

For many, accounting is a mystery. It’s not a visible entity, like production. You just can’t see it operate like watching a flexo kick out boxes or seeing the feet per minute display on the corrugator. Some years ago, you could hear the adding machines clicking away and the paper tape growing longer with each number entered and struck to paper. Accountants’ desks were covered with 13-column green ledger paper. They would wear out erasers in a week. Paper cuts were an epidemic.

Wite-Out was bought by the gallon.

Now, as machinery has evolved in production, very few old-style adding machines are still used. Now it is all done on the computer, and the only noise you may be able to hear is some light tapping on a keyboard as accountants enter information.

You may ask, “What’s in it for my position to develop a relationship with accounting? I mean, all they are is a bunch of ‘numerical historians.’ They take numbers that happened in the past and put them to paper. My group produces product today for shipment. If I did not produce it, the bean counters would have nothing to do.”

Having survived the four-year hazing of obtaining an accounting degree, let me see if I can speak to some of your

questions. I am very grateful for my accounting background and education, because it has allowed me to better understand the needs of the business.

The answer to the question posed above is very simple: You will profit from a relationship with accounting because they can help you succeed in your position and can be your best friend. And I mean this more than just when it is time to hand out the payroll checks. So let’s all take some time to learn how they can help.

During my career, I have had the opportunity to be in many different roles of the business and learn valuable lessons from each position. A colleague once said to me, “All work is noble.” It was one of those comments you have to think about for a while to get the real meaning. To me, it means whatever role you have in your business, it is important—including the guy who cleans the bathroom. If you don’t think so, just let the bathroom get dirty and see what happens to productivity. It is important for all positions in the business to work together properly and contribute to the good of the business.

So it is with accounting. The accounting group takes information provided by a multitude of people, departments, and outside entities; sifts the information; and generates statements that are consistent from month to month. The business then uses this information to make decisions going forward.

Extrapolating Trends It is true that accountants don’t produce a box or a physical product that is loaded on a truck and shipped out to a customer.

What they do is measure—in terms of dollars—the materials and the time it takes to produce that product and ship it out. They are not on the machine at 2 o’clock in the morning; they may not be in the hottest or coldest part of the plant.

However, their job is also important, as it provides a record of performance for

specific areas of the business, and of the business as a whole. And again, let’s not forget about the payroll checks.

The income statement and balance sheet are perhaps the two better-known documents accountants produce. One thing I remember from my MBA classes is the answer to this question: What is the reason for a business? Seems to be a simple question, and yet there can be many answers. To make a profit, to maximize shareholder value, to generate growth for future value—all of these can be true. But the real reason for a business—and some would say the only reason for a business— is to maximize cash for the owners. The balance sheet will show the cash available.

But the income statement and balance sheet are not the only two statements generated. Plus, everyone in the business does not need to see the actual income statement and balance sheet. In compiling the data to generate the income and balance sheets, a lot of information is available that can be provided in other presentations.

For example, the income statement will show total sales for the period. From that number, one could graph out the sales by week, sales by day, or sales by salesperson. In the expense section of the statement you may see a line item for maintenance repairs. You will see a total dollar amount on the paper. What is behind that number may show a particular piece of equipment has started requiring more repairs than it had in the past. By graphing this out, you can see trends developing.

Develop Your Scorecard Everyone in the business needs access to some form of data/feedback to assess how they are doing relative to their objectives. So, ask yourself this question: Am I getting all the information that is created or generated in my business and distributing it to people who can use it to

BOXSCORE www.aiccbox.org

59

better manage the business? A financial scorecard can provide this type information. This will be part of the educational material available this year.

Most of your supervisors and people running machines get production data.

Within the vast array of data gathered, there will be numbers specific to each department, each group in the business.

This data can help the supervisors better manage their department. They will need access to certain numbers from the accounting group. The ability to interpret those numbers may require some understanding of accounting.

What information is needed? Good question. The answer depends on the position and level of the employee in the company. Let’s pick on the converting

group and the 38-inch flexo Joe manages.

He will want to know number of orders, setups, boxes per hour, MSF per hour, and so on. All this information comes from history. Let’s not forget about looking out into the future. Can we think of some leading indicators for Joe, so we may be able to see trends as they develop, and plan as needed?

Could we look at the ways orders are entered and see any future trends that could affect the 38? Are the runs becoming longer or shorter? Let’s say salesman Bob is 100 percent responsible for the sales on the 38. Is there a relationship between the number of calls Bob makes and the dollar amount of new business Bob brings in? The potential questions are endless.

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BOXSCORE March/April 2016

So, who has access to this data? Your scheduling and production systems will provide a lot of data. Your new best friend, the accounting department, will be able to help. Remember, they can help convert the data into dollars so they can properly be measured and allocated.

Development of a scorecard is one of those processes that will take a little time to develop and evolve. You won’t get it 100 percent right the first time. The important thing is, you will have started, and that will provide you information you need to better manage your section of the business. It will also generate additional questions that will lead you to explore ways to gather data to answer these new questions.

Value in Education Please take some time to look over all the available educational opportunities for your group. You can find this information on the AICC’s website, www.aiccbox.org, under the Packaging University header.

Then set up the training. My bet is, once the nonaccountants have been exposed to some explanations of why accountants do what they do, opportunities for greater communication and working together will occur.

After the training, ask them what the accounting entry will be for the cost of the training, and see what answer you get. The entry will be to debit education/ training expense and to credit cash.

Then look out a month and a year from now, and see if you find a correlation between increasing your educational budget and the resulting increase in productivity and profits.

Ryan Chappell is a business consultant for Business Connections LLC. He may be reached at rchappell@ bayoutigers.com.

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A CHECKLIST FOR JUSTIFYING NEW EQUIPMENT JEFF PALLINI FOSBER AMERICA VICE CHAIRMAN PALLINIJ@FOSBER.COM

A

s a supplier of corrugated machinery, our company is often asked to provide assistance on how to justify new equipment. While every project is different and there are many contributing factors, this article is intended to provide you with a basic checklist of things that help justify the investment.

❑ Item 1: Increased Productivity ED GARGIULO EQUIPMENT FINANCE CORP. SECRETARY EGARGIULO@EFC-FINANCE.COM

Faster, more efficient machines with quicker setups result in more productivity.

Most suppliers can provide a spreadsheet that will assist you in calculating the productivity you can expect with the purchase.

❑ Item 2: Improved Quality DAVE BURGESS JB MACHINERY FIRST ALTERNATE DBURGESS@JBMACHINERY.COM

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BOXSCORE March/April 2016

❑ Item 7: Safety

❑ Item 5: Cost of Ownership Older machines typically produce at a higher costs per unit and require more

This article was written by Jeff Pallini.

Newer technology is designed to reduce excess scrap generated from setups, changeovers, splices, etc. These are easy to quantify and will help pay for a new machine.

❑ Item 4: New Products Machinery investments can potentially lead to new products beyond your present capabilities. This may mean entering into new markets or satisfying an existing customer with additional offerings.

KEITH R. UMLAUF THE HAIRE GROUP CHAIRMAN KUMLAUF@HAIREGROUP.COM

❑

Item 6: Obsolescence As discussed in my last BoxScore article, obsolescence is a challenging area. You may find that complete machinery replacement will be advantageous over upgrading obsolete existing machinery.

Generally, new machines are safer. OEMs have done a good job of developing safety features to create a safer machine. Often, these safety features are not retrofittable on existing machinery. Safety is difficult to quantify in ROI. However, it is our legal and moral obligation to be committed to the safest operation for our employees.

The above items are the most common areas utilized to justify new machinery investments. Additional items to consider include increasing the trade-in value of existing machinery, advancing your company image to your customers and employees, exploring tax depreciation opportunities, and growing the value of your company to potential investors.

While every new machinery evaluation is different, there is a correct answer.

By reviewing this checklist and having in-depth discussions with your potential OEM suppliers, you will be able to arrive at the best decision.

New machinery may provide the ability to produce a higher-quality product.

This will allow you to better compete and satisfy customer requirements. It is critical that you request samples of similar products and, if possible, do trials to confirm the improved quality.

❑ Item 3: Scrap Reduction BRIAN KENTOPP BOBST NORTH AMERICA INC. IMMEDIATE PAST CHAIRMAN BRIAN.KENTOPP@BOBST.COM

maintenance, which can also drive up cost. New machines come with warranties that provide performance and cost of ownership guarantees. Most original equipment manufacturers (OEMs) have ROI spreadsheets that compare cost of ownership of new machinery to your existing equipment.

Financial Corner

PROTECTING AMERICA FROM TAX HIKES

BY MITCH KLINGHER

O

n December 18, 2015, Congress passed and the president signed into law the Consolidated Appropriations Act, 2016 (CAA) and the Protecting Americans From Tax Hikes (PATH) Act of 2015, funding the government and providing a number of significant tax changes.

The following is a summary of the key areas of this law—and a few other late 2015 bills, such as the 2015 Bipartisan Budget Act—that will be followed by an analysis of what actions you may wish to take in both the long and short run as a result of this legislation.

Expired Provisions That Were Made Permanent • The deduction for state and local sales tax. This deduction benefits taxpayers in states that impose a sales tax but not an income tax.

• Research credit is retroactively restored and permanently extended.

• Bonus depreciation and alternative minimum tax (AMT) relief are restored (retroactively) and extended to apply to property placed in service before January 1, 2020. ɡɡ Bonus depreciation is phased down after December 31, 2017—40 percent bonus depreciation for property placed in service in calendar year 2018; 30 percent for property placed in service in 2019. ɡɡ The act contains a more favorable phaseout for companies in the fruit and nut business. However, I do not believe that this will apply to many in the converting businesses. ɡɡ Requirements for building improvements qualifying for bonus depreciation (and AMT relief) are

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BOXSCORE March/April 2016

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relaxed. This covers nonstructural, retail, and other leasehold improvements.

Higher limits on Code Sec. 179 expensing are restored and permanently extended.

Shortened S-corp built-in gains holding period permanently extended (five years generally).

Partnership interests created by gift will now be fully recognized by law.

The IRS had been trying to chip away the benefits of capital-intensive family limited partnerships with some creative interpretations of the law.

Congress has now put this doctrine directly into the Internal Revenue Code, so a gift of an interest is treated no differently than a purchase.

A 100 percent gain exclusion for qualified small business stock (QSBS) is retroactively restored and made permanent. If you qualify and can sell stock rather than assets, this is a good break.

Rule allowing tax-free IRA distributions of up to $100,000, if donated to charity, is made permanent.

Partnership and S-corp returns due March 15 and C-corp returns due April 15—reversing the due dates that have existed for more than 30 years.

IRS continues to push for more computer matching (all applicable for next year). ɡɡ Increase in information return penalties. ɡɡ Increase in payee statement penalties. ɡɡ Filing due date is accelerated to January 31 for employee wage information and nonemployee compensation.

• IRS Commissioner must ensure IRS employees are familiar with, and respect, taxpayer rights—a kinder, gentler IRS mandated by Congress!

What Should You Do as a Result of All This?

1 Revisit your fourth quarter estimated tax payments and factor in the potential effect of the Section 179 deduction, the 50 percent bonus depreciation, the research credit, the sales tax deduction, and any of the other provisions that pertain to you.

2 Think about ordering the “big ticket items” on your machinery wish list sooner rather than later, since the 50 percent bonus depreciation starts phasing down for equipment placed in service after December 31, 2017.

3 Continue to have your designers track the time they spend and the materials they use on the design of custom boxes, so you have good backup on which to base your claim for the research credit.

4 Don’t be afraid of making that annual gift of your capital-intensive family partnership.

5 Continue to make charitable gifts from your IRA. 6 Be mindful of increased penalties for information returns. Make sure you get properly filled-out W-4s, I-9s, and W-9s from all employees and other payees.

Mitch Klingher is a partner of Klingher Nadler LLP. He can be reached at 201-731-3025 or mitch@ klinghernadler.com.

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International Corrugated Packaging Foundation I N T E R N AT I O N A L

PACKAGING

CORRUGATED

F O U N D AT I O N

ANNUAL STUDENT DIALOGUE DINNER

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his past February 24, the evening before ICPF’s Career in Corrugated Packaging & Displays Teleconference, 18 select students from Bowling Green State University, Clemson University, Illinois State, Michigan State University, and Millersville University joined teleconference speakers and local industry executives for dinner to learn more about corrugated packaging and display industry careers. The industry speakers for the teleconference as well as half a dozen additional regional executives participated in the student dialogue dinner.

The students from Bowling Green State University, Clemson University, Illinois State, and Millersville University were flown in as ICPF’s special guests.

These students joined the MSU student audience the next day to view ICPF’s Careers in Corrugated Teleconference, gaining a unique perspective by observing their remotely accessed campuses and fellow students’ participation from the PBS broadcast site in Michigan.

For more information on the students and executives who participated, visit www.careersincorrugated.org. The résumés of these students, as well as those of other qualified upcoming graduates, can be accessed by ICPF corporate partners and potential partners that post student internships or full-time, entry-level openings on ICPF’s Career Portal.

9th Annual Holiday Weekend in New York—Sign Up Early and Save!

Registration is now open for ICPF’s Holiday Weekend in New York, scheduled for Friday through Sunday, December 9–11, 2016. ICPF’s New York holiday event this past December was sold out by August. To ensure participation, ICPF recommends registration

by June 30, and save $100 with early

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BOXSCORE March/April 2016

bird registration. Registration forms may be obtained by emailing registration@ icpfbox.org. Bring your spouse or guest for the Friday opening reception at The View, New York’s only revolving lounge with a 360-degree view of the Manhattan skyline. Enjoy the Saturday matinée of one of Broadway’s latest hits and the Saturday night reception and dinner at the renowned 21 Club. There will be free time throughout the weekend for shopping, museums, and touring New York’s holiday season sights—all while supporting ICPF’s educational mission.

Haglund Nomination Fund Launched ICPF has announced it is accepting tax-deductible donations to support the nomination of Jim Haglund (Central Package & Display) into ICPF’s Circle of Distinguished Leaders, which recognizes and honors exceptional individuals and leaders in the industry. Nomination contributions support ICPF’s work to advance corrugated curricula at colleges and universities, and its multiple programs to promote corrugated packaging and displays careers to students.

Haglund has served as a long-term leader for both AICC and ICPF. AICC and ICPF hope the donation goal of $15,000 will be reached by April 30 in order to recognize Jim this year at the AICC and ICPF fall meetings in Orlando. (This award recognition would be a surprise to Haglund and his wife, so please do not mention it to them or to others who are not aware that it would be a surprise.)

We are halfway to the goal and hope you will join in funding this recognition.

Mail your tax-deductible check, made payable to ICPF, to: International Corrugated Packaging Foundation 113 S. West St., 3rd Floor

Alexandria, VA 22314 (Please write “Jim Haglund” in the check’s note margin.)

Those making donations will be recognized during the induction, in a press release, and on ICPF’s website. For more on ICPF’s Circle of Distinguished Leaders, visit www.careersincorrugated.org.

Wasatch Container Pledges $50,000 Wasatch Container became the most recent ICPF corporate partner by pledging $50,000 to support the foundation’s educational mission.

“For a number of years, Wasatch Container has been well aware of ICPF’s successful work in advancing corrugated packaging and displays curricula at colleges and universities across the country. However, I personally learned how effective its resources are in recruiting student interns and new graduates after working with ICPF to recruit a Michigan State packaging student for an internship this past summer,” says Jerry Frisch, Wasatch president and owner. “We look forward to using ICPF’s special resources to assist in our recruitment of packaging engineering, business, and related graduates for our future. Of particular interest to Wasatch Container is ICPF’s ongoing work with university packaging programs in the Midwest and Northwest, like the University of Wisconsin–Stout and Lewis-Clark State College.”

Richard Flaherty is president of the International Corrugated Packaging Foundation.

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The Final Score

MANUFACTURING SCORES A BIG WIN, BUT IT TAKES WORK!

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his is old news by now, but it’s still worth retelling. In the waning days of 2015—on December 18, to be precise—the 114th Congress passed the Protecting Americans From Tax Hikes (PATH) Act, a bill that contained many key tax provisions benefiting manufacturers. Specifically, the bill made permanent several temporary provisions, finally bearing fruit for the number of years the manufacturing community has been advocating for them. Last January, we asked our friend Mitch Klingher, CPA, of Klingher Nadler LLC to report on provisions benefiting the corrugated and paperboard industries. Here are some of the highlights applying to manufacturing and small businesses (see Page 64): • Research and development (R&D) tax credit is retroactively restored and permanently extended.

• Bonus depreciation and AMT relief are restored—retroactively—and extended to apply to property placed in service before Jan. 1, 2020.

• Higher limits on Code Sec. 179 expensing are restored and permanently extended.

• Shortened S Corp built-in gains holding period permanently extended (five years generally).

• 100 percent gain exclusion for qualified small business stock (QSBS) is retroactively restored and made permanent. (If you qualify and can sell stock rather than assets, this is a good break.)

Anyone who has attended the AICC/FBA Washington Fly-In over the past several years will recognize many of these. Why? Because we have consistently advocated for them in each of our congressional visits year after year. Taking a cue from the National Association of Manufacturers (NAM), the corrugated and paperboard industries have urged passage of these provisions to ease the tax burden and instill certainty into the tax code. No business owner can make good business decisions if the tax consequences of those decisions are unknown or may change in the coming year. For this reason, we are happy that congressional leaders have listened to the business community.

“These victories were no accident,” says Jay Timmons, president and CEO of NAM. “This was a phenomenally successful year because manufacturers across the country raised their voices. By bringing people together and telling our stories, we were able to advance our priorities at a time when we faced serious challenges and headwinds.”

This year, AICC and FBA will once again co-sponsor our annual Washington Fly-In, June 6–7 in Washington, D.C. To those of you who have resisted attending the Fly-In, please reconsider. This is an important election year, and each one of us has to get off the fence and stake a claim for the business community. The legislation passed in December was passed because people spoke up. Will you stand up and be counted?

Steve Young President, AICC

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BOXSCORE March/April 2016

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ONE OF THE TOP TEN REASONS TO JOIN AICC

DEVELOPMENT 3. LEARN HOW TO INSPIRE AND MOTIVATE THE NEXT GENERATION OF LEADERS AICC represents a majority of the independent corrugated and paperboard packaging manufacturers and their suppliers. Companies always need innovative ideas and new employees to come into their ranks. Foster your up-and-comers with professional development opportunities, like the Emerging Leaders Group, available through AICC.

5. ING ORK

10.

GROWTH

t with NETW onnec rs to

1.

STRENGTHter

You build a bet box, we’ll help 4. r you build a bette COMMUNIC ATIO company.

Be part of a cultu N that allows you tore ask questions an d share ideas.

2.

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6.

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KNOWLEDGE Stay competitive with industry information and benchmarking surveys.

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Get the eduere and need wh ed it: e when you n iversity, n U g in Packag nd industry seminars, a ngs. meeti

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LEADE .

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C Group EO Advisory to your op maximize excelle erational nc profitab e and ility.

To learn more about AICC or getting the most out of your membership, visit AICCbox.org or contact Virginia Humphrey, Director of Membership at vhumphrey@AICCbox.org or call 703.836.2422.

113 S. West Street • P.O. Box 25798 • Alexandria, VA 22313 • Phone +1.703.836.2422 • www.aiccbox.org

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