Best suppliers step--and think--out of the box
By Albert Genna -- Purchasing, 11/18/1999
The packaging industry certainly has its unique quality, but the same traits that make good suppliers of other materials also make packaging suppliers stand out--quality, reliability, inventiveness, flexibility, and price. But many buyers say that their packaging suppliers are among the best suppliers they work with. So is there anything suppliers of other materials could learn from packaging? Or is it just the nature of the packaging business that makes them more receptive to buyers' needs?Some buyers say that it's easier to build strong long-term relationships with packaging suppliers than with other types of suppliers. By building close relationships, communication is improved, and often both supplier and buyer can gain. "We've partnered pretty closely with our packaging suppliers," says Randy Bartmess, corporate buyer for Princeton, Mo.-based Premium Standard Farms. "We've made agreements and want our suppliers to have a stake in our business."
Bartmess and Premium Standard had to look carefully to find the right suppliers to do business with. "Corrugated is our number-one cost," Bartmess says. Packaging is crucial to this food producer's business. The success the company has enjoyed with their packaging suppliers didn't just happen by accident. "We had to force it more," he says. "We went out and actively looked for a corrugated supplier. We wanted to find a single source we could do business with long term. It was a long process to get it done." A three-year contract was signed in 1995, and Premium Standard has just renewed it in an additional five-year deal.
For the supplier, the gain is clear--a long-term contract with a large-volume user. But, as in any good supplier relationship, the producer goes far beyond simply supplying the product.
"They bring us new ideas; they're very proactive," says Bartmess. "They'll bring any new product in their business to us." When suppliers look for new ways to do things, advantages often benefit both parties. "Any way they can cut costs for us will also cut costs for them," Bartmess says. Premium Standard's corrugated supplier recently began converting all corrugated to a new liner, saving the company $100,000/yr.
Other packaging suppliers who want to get Premium Standard Farms' business know that they must bring forward new ideas. Example: The company currently has two suppliers of polyethylene liners. Premium Standard Farms had previously had leakage problems with 3-mil large liners. One supplier introduced a new liner that reduces the gage, eliminates leakage, and cuts costs by $100,000.
But even buyers who don't single source or enter into long-term deals are saying that packaging suppliers outperform other suppliers. "Right now in central New Jersey there is significant increased competition among packaging suppliers--and this is an enormous advantage for buyers," confirms Joseph Dobrowski, manager of purchasing for Princeton BioMeditech Corp. in Princeton, N.J. This competition has resulted in suppliers offering many advantages to buyers. "Suppliers will often waive costs of the design of new packaging," he says. Princeton BioMeditech recently changed the quantity of its products in a single box, from a one- to two-item box, at no charge from the supplier. Dobrowski also has been able to have the costs of cut and paste work on production film and plates waived.
In such a competitive environment, even without the promise of long-term contracts, suppliers can be expected to volunteer new information and ideas. "They provide more disclosure than other suppliers," says Dobrowski. For example, suppliers freely offer information on the cutting die sizes they have available, so Dobrowski has a wider variety of dies to choose from, rather than just a few standard sizes or the more expensive option of having dies custom-made. "They are willing to let us know what is available, so we can change our packaging requirements." No custom-made dies equals lower costs for the customer.
And packaging quality remains high, according to buyers. "The only problem is that of packaging suppliers not getting their raw materials due to competition," Dobrowski says. "So we have them order board in advance--ensuring that they know they'll have our order." The customer then owns the raw materials on-site at the supplier. "We also offer them forecasts, but don't actually pay for any packaging they make in advance until we actually use it." Even without long-term contracts, open communication and relationships with suppliers can provide cost savings.
For the most part, buyers of packaging usually evaluate their suppliers on the same criteria they'd use on suppliers of other goods--quality, on-time delivery, and customer service. But packaging buyers stress a couple of other factors: quick turnaround and the ability to fill sudden and unexpected needs. The competitive nature of the business makes many packaging suppliers go the extra mile to help customers. And it's this proactive style that makes many packaging producers such good suppliers.
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