Emphasis is on new services, not products
Cost pressures force materials' switches and growing focus on most efficient shipping and financing methods.
By William Atkinson -- Purchasing, 7/15/2004 2:00:00 AM
Keep an eye on chemicals' bulk packaging. Changes are coming. In some cases, they are being triggered by economics, especially recent surges in steel prices. In others, they are due to growing efforts to more efficiently (and inexpensively) package chemicals. In a few cases, they are due to new buying methods, particularly electronic.
Most manufacturers of bulk packaging readily admit that the product technology is not moving along at lightning speed. Certainly, most of them continue to offer new products or advancements on existing product lines. However, what a lot of manufacturers are emphasizing these days are value added services. Here's a supplier-by-supplier look:
ABCs of IBCs
Snyder Industries of Lincoln, Neb., designs and manufactures plastic bulk storage, processing and transportation tank systems. Its rotation molded IBCs are UN- and DOT- approved for transportation of bulk liquid materials. "We specialize in long-term returnable IBCs, so our focus is on developing products that maximize the useful life-to-cost ratio," states Michael Spurrier, vice president, sales and marketing. "We have predominantly been a liquid handling container company, but we are now also introducing new products for dry handling."
With the recent increases in steel costs, Snyder is introducing its next generation of all-plastic IBCs as an alternative to steel IBCs. "These have a comparable useful life for an initial investment of one-half to one-third the cost of a stainless steel container," explains Spurrier. Certainly, plastic is not always an appropriate substitute, but it is in certain instances. "Steel is typically used where there are chemical compatability considerations," he notes. "For example, plastic is not often used for solvents and hydrocarbons, because of compatability issues. However, oxidizing chemicals such as acids, bleach, and caustic are good matches for plastic."
Snyder has found that some users of lighter duty, limited use or disposable packages are looking for more durable reusable containers with which they can substantially increase the number of trips made and reduce long-term disposal costs. "Instead of getting ten trips or so, they can get hundreds of trips with our product," continues Spurrier. "As a result, instead of expensing these containers, they are now going with our more robust container design and capitalizing the costs."
Hoover Materials, Alpharetta, Ga., manufactures metal and rotationally molded IBCs for liquid, powder and solid handling. "However, we continue to focus our efforts on handling dry materials," states Douglas Silverman, director of marketing. "We have a low-cost rotationally molded dry flow hopper which is used to transport and store pellets and powders." It is inside a steel frame to provide added stability.
SpaceKraft, a Weyerhaeuser Business based in Salem, Ore., specializes in corrugated IBCs. It manufactures bins for nonhazardous and hazardous liquids and solids, including multi-trip and export bins. "We are always looking for new markets for our products," reports John Falk, general manager. For example, the company is currently targeting the food industry, offering a non-wood container consisting of plastic in a completely enclosed box, so it can be stored outside. "This is a multi-trip bin that eliminates the problems of wood having to be in contact with food processing," he explains. Such problems include splinters and wood-related contamination. The company is also working on a bag for thick, viscous products, such as greases and printing inks, which can be dispensed through a squeeze roller system. "We also help customers in the area of custom design," continues Falk. "For example, we are working with the seafood industry on shipment of various liquid seafood products with specially-designed totes."
Service opportunities
As a way to build and maintain business, Hoover Materials provides an Asset Tracking service and a Fleet Management service. The latter includes JIT delivery to the filling locations, monthly tracking and return rate reports, and scrap reports.
As one of its offerings, Precision IBC of Fairhope, Ala., provides UN/DOT testing, reconditioning and repair services, all at customer sites if requested. The company has IBCs available in stainless steel, poly, limited life, and reconditioned. "We are doing a lot of work in the area of integrated service fleet management," states Scott Williams, vice president of business development. This includes providing logistical support and IBC container tracking. "For example, we have purchased some IBC fleets, installed new containers, and then tracked the containers from the filling locations to the end-user locations, and back to the cleaning or refilling locations," he continues.
The company also provides a leasing service. "Steel container prices are increasing because of the increases in the price of steel," reports Williams. "Prices for natural gas are also increasing costs for chemical producers. As such, everyone has to watch their dollars." This is where he believes leasing becomes a viable option. "Everyone doesn't want to invest all their capital into $1,500 and $2,000 containers. We can manage the containers and provide all the services for a daily rate."
Trends in IBCs?
At least two manufacturers envision a move away from drums. "Customers want to ship and store their liquids at the lowest cost per gallon, so we continue to see customers moving away from 55-gallon drums to IBCs," observes Hoover's Silverman.
SpaceKraft's Falk agrees. "IBCs have become viable containers in a number of industries," he points out. "We haven't seen the total use of this package yet. We will continue to see more industries moving away from smaller packages such as pails and drums into more efficient shipping with totes." The company is currently encouraging different industries to look at the use of IBCs if they haven't done so in the past.
Flexible IBC options
According to Bruce Cutherbertson, executive vice president of the Flexible Intermediate Bulk Container Association in Macon, Ga., more customers are becoming interested in purchasing bulk bags that have better static control. "There are four ratings," he states. "A- and B-rated bags are not required to have static control. C- and D-rated require static dissipation, or they have to be grounded before they are filled."
According to Cuthbertson, most bag manufacturers can also supply squared bags these days, which are far more economical for lightweight products. "They provide a lot more capacity than rounded bags," he notes. "For example, if they're 42 ft. x 42 ft., they can fit two across in a truck and a sea-going container."
When purchasing FIBCs, though, pay particular attention to quality. It can vary significantly from manufacturer to manufacturer, according to Lewis Anderson, a packaging engineer with TEN-E Packaging Services of Newport, Minn. The company performs numerous testing and other services for bulk packaging manufacturers, including UN and DOT certification testing. "In terms of FIBCs, manufacturing was originally performed in the U.S.," he explains. "It then shifted to Mexico and Turkey. It is now taking place primarily in Asia, especially China, India, and Thailand." It has taken time for manufacturers in these countries to ramp up, but it's now to the point where the majority of IBCs are coming from these countries.
"We do a lot of qualification tests on these suppliers to ensure that these low-cost bags are going to withstand the distribution environment," continues Anderson. Overall, he believes that FIBCs are a great bargain when you compare the cost with the quantity of material they can hold and the performance they provide. However, don't go overboard when seeking lowest cost! Make sure to assess fabric weight, construction, and specifications.
Manufacturing processes can be a concern, too. "There have been situations where we tested bags from 20 different manufacturers, all of which were manufactured with the same material and to the same specifications," he recalls. These included topple tests, drop tests, etc. Some of the bags performed perfectly. "Some others failed miserably," he cautions. In sum, look at performance, not just price.
News in drums
Greif, Inc., Delaware, Ohio, operates three business groups: Industrial Packaging and Services; Paper, Packaging and Services; and Timber.
The first group specializes in drums (steel, fiber, and plastic), steel pails, and IBCs. When it comes to drums, each product has its unique benefits, according to Russ Fazio, vice president of sales-east. "Fiber drums are probably the most cost-effective and versatile one-way package," he states. Steel drums are the most rugged and have the widest range of compatibility. "Plastic lends itself to a lot of reuse, because it doesn't dent or rust," he adds. Overall, though, Greif has found that plastic drum popularity is growing faster than steel or fiber drum popularity, which are the older line products.
In terms of new products, Greif is offering some reduced-gauge steel drums in response to requests from some of the large chemical companies that are seeking to down-gauge in order to take advantage of cost savings. "We can also change specs on our fiber drums," adds Fazio. One example is a total plastic locking band that replaces steel bands. This eliminates the corrosion problem, which has been a concern of food and pharmaceutical companies.
Where Greif is really placing its emphasis these days, though, is in value-added services. "With old line products like steel and fiber drums, it is difficult to come up with much in the way of new products," admits Fazio. "However, there is a lot that can be done with offering new services. Our big emphasis these days is on understanding our customer needs better then finding better ways to meet those needs." That is, rather than focusing on products, the company is focusing on what the customer needs, then identifying the products and services that will best meet these needs.
"To accomplish this, we have reorganized," continues Fazio. That is, the Industrial Packaging and Services unit of the company used to be organized along product lines — fiber drums, steel drums, plastic drums, steel pails, and IBCs. Recently, it reorganized on a geographic basis — East, Midwest, and Southwest/West. "This allows us to bring decisionmaking closer to the customer and to understand the regional differences in our market," he explains. "That is, when we were organized by product line, we each tried to sell our individual drums to customers. Now, we are able to focus on what customers actually need, then provide the most appropriate drums for their needs."
In terms of services, the Industrial Packaging and Services unit provides total packaging services, including life cycle management; logistics, warehousing and inventory management; research and development; and engineering and testing services.
Some examples:
"We don't manufacture or sell material handling equipment, but we do offer consultative services," states Fazio. "We can do everything from recommend individual pieces of equipment to designing complete automated systems from the time our drums come off the truck until they leave the customer's plant." A lot of customers have manual systems for filling drums. Greif can recommend ways to automate this process in ways that will save them money. Recently, for example, the company's material handling engineers designed an automated material handling system at the plant of one of its large food accounts. "We also make recommendations on how to brace truckloads and carloads of steel containers, including containers that are going overseas," continues Fazio. "We will also accompany our customers when they visit their customers who have questions about how to handle our drums."
The company is also working with customers to rationalize and consolidate specifications, according to Tony Segarra, vice president of sales-southwest/west. "Some customers, as they have acquired other businesses, have ended up with three to five different specs from us for the same product," he explains. "By working with them, looking at their products, and identifying the specifications we are supplying, we can standardize them on the lowest-cost specification that still meets their need."
The company also provides a "super-clean" drum service. "As the expectations of our customers' customers rise in terms of drum cleanliness, we have worked on a number of projects to achieve these cleanliness levels," notes Segarra. Greif is able to get the drums to a cleanliness standard in its operation that is beyond the traditional standards. It can then ship these products to its customers, who remove them from the additional packaging and fill them directly without having to worry about cleaning the products at their locations.
Finally, Greif has implemented some programs to help customers reduce transaction costs. One is to become involved with Elemica, an e-portal service. "Our plants can accept orders through Elemica, which lowers transaction costs," states Segarra.
"We also now accept credit card payments on invoices," adds Fazio. "It surprised us that large customers would want to do this, but it turns out that it saves them money by reducing their transaction costs."
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