Category Archives: Managing

On Bids

bidEvery so often a bid lands on my desk. It’s either a current customer seeking lower prices or a prospect looking to see if we’ll compete for their business. Whatever the case, it usually means someone asking for bottom dollar, or close. No other qualifications matter. Such exercises drive me nuts.  Any company can find someone desperate or dumb enough to buy business.  Even we’ve been guilty of such stupidity, always discovering it doesn’t pay.  Some customers can’t help themselves.  Supplier madness is just too tempting.

Sometimes we run into a company that takes an entirely different approach. They work to find a way to create a win-win. I know that sounds cliched,  but it does happen. It requires hard work on both sides, a willingness to find creative ways to cut costs or limit price increases.  The process works because it cements partnerships that lead us to bring new ideas to them first and help them through hard times when needed.

Two or three times this year customers took this approach. They stated up front that they value what we bring to them, usually quality and new technology. Another appreciated our willingness to extend terms when they ran into a financial blip. Each wanted to trim cost, but they wanted to understand what we needed as well.  They didn’t want to disrupt a supplier relationship that worked, and valued that over the lowest price.

The approaches varied. One customer sat down with us and reviewed their packaging cost drivers. Plastic resin is one, but they understand we have little control over price movements pounded through by oligopolists like  Dow Chemical and Exxon Mobil.  However, this customer had an obvious way to reduce their prices. They used several different packaging sizes for the same item, an old practice that wasn’t required anymore.  Multiple bags meant we had to run smaller batches, which lead to higher prices. Together we worked to rationalize their bag sizes, taking four down to two, which allowed us to produce larger orders and reduce their prices.

Another customer took an entirely different approach. When they did their biannual bid we sat down and talked over their current prices. We contended they needed to go up, thanks to low prices exacted on prior bids and our need to cover cost increases in other parts of our business, like health care. We’ve done business with this company for many years and they appreciate the new ideas we bring to the table, and the consistency with which we meet their specifications. So they listened. In the end we compromised. We still provided highly competitive pricing, but we got enough bump to help. We kept most of our business.

On the opposite end of the spectrum there’s a company that bids their business every two years. They send a multi-page questionnaire asking about our technical ability, financial stability and willingness to help them develop new products. I spend hours answering the questions believing for some reason that even if we are not the lowest price, our service orientation and our engineering prowess will win the day. It never does.  The buyer awards the business to the lowest price, and my impassioned pitch goes to waste. Someday I won’t accept their invitation to bid.

Our company takes a holistic approach.  We do check resin prices rigorously, but award most of our business to the company that has delivered consistently good product. We work with our ink company to find ways to reduce cost, but we don’t toss them if someone shoots in a lower price trying to buy our business.  That doesn’t mean we never cut lose a supplier. Currently we have one on the way out. They didn’t deliver, rarely reduced cost and never brought new ideas.  So why be loyal?

Bid can cut prices. But they guarantee nothing when it comes to quality or service or willingness to work with a customer to reduce total cost.  Bids won’t reveal if a supplier will work with you when you run into trouble, as most companies do at some point. I know those companies that have gotten us where we are remain the ones which will drive us into the future. We hitch our wagon to them. We appreciate and value and help those customers that do the same.

On Growing a Family Business

wwaHistoryWhen my father started Emerald Packaging in 1963 he did so with three partners.  Over the years he bought them out, until in 1993 we became a family business.  Through the years the second generation slowly jumped on board. My brother came first, about 30 years ago, and took a sales role.  My sister followed and entered customer service.  I arrived almost 18 years ago after a career in journalism helping in operations.  My father ran a tight ship. The business prospered making iceberg lettuce bags back when such things were novelty.  He had a good plant management team, which allowed him to focus on sales, strategy and finance.

Then in the late 1990s he decided to begin handing over the reigns.  By then my brother handled some of our largest accounts and my sister oversaw scheduling, a tough assignment given the ever shifting demands of customers.  The  general management role came to me.  I apprenticed under my father and the plant management, sopping up as much as I could about how to run a company.  Certainly journalism had prepared me little except for providing me a grasp on strategy, the effect of world events on a business, and some understanding of finance.  It provided precious little experience managing people.

In 2002 my father officially retired.  My years as chief executive started.  I wish I could say all went smoothly but it did not.  Within my first month on the job we lost our largest account.  Then a month later our second biggest customer left.  Over $4 million of $18 million in sales disappeared overnight, more or less.  They left for different reasons. The first because of price, the second because they felt we didn’t have the technology they needed.  Almost instantly cash flow disappeared, we posted our first ever loss, and Union Bank froze our line of credit.  The family came together and weathered the storm.  We landed new customers, found a new bank that helped us upgrade our equipment and one of the two recalcitrant’s came back.  But the experience scarred me.  I never wanted to worry about financing or making payroll ever again.

Since then I have never had to face such times.  Instead we’ve built a vibrant, diversified company.  My brother developed accounts in Salinas and Bakersfield, my sister became a magician with the schedule, and I found the equipment, money and new markets to keep the business humming.  We bought our father out almost ten years ago.  This fiscal year we clocked in with over $80 million in sales and employed 275 people.  The factory runs around the clock, 7 days a week, 362 days a year.  We have the largest packaging operation on the west coast, making everything from stand-up pouches to complicated structures that preserve shelf-life to basic potato and lettuce bags.

But to get here we faced a different kind of challenge.  We had to hire the right people, give them responsibility and let them do their jobs.  We had to bring in capable middle and upper management and blend them into a family culture that tended to control every aspect of the business and gave trust sparingly.  Not an easy environment.  However over time we loosened enough that we’ve been able to attract several product development and industrial engineers, a strong technical sales manager to whom my brother reports, and a young woman who cracked the family tree and has become the second-in-command, our chief operating officer. Recently, to help us navigate our way to $100 million we signed on an experienced controller charged with financial analysis, replacing our deeply loved bookkeeper who plans on retiring in 2015.

I am not entirely sure how we made the transition from family business to a thriving corporation. Undoubtedly we recognized that to grow we needed help.  Our product development people helped us create new products which we could not have done on our own.  Our COO, who started out as a process control engineer, whipped our factory into shape, introducing quality systems, pushing productivity, and slashing inventory, saving cash.  Our sales manager pushed organic growth. He became the face of the company at many accounts, a first for us.  We also teamed with great outside salespeople, brokers, suppliers and distributors who helped us move into new markets, like fresh-cut fruits and vegetables and pouches for dehydrated potatoes.

Ultimately, I believe my siblings and I came to understand the difference between managing and owning.  Any family business set on survival has to recognize the limits of blood.  I cannot, for instance, develop new products.  We need a polymer scientist to do that.  Our sales team needs someone to oversee a large network of people selling our products and help organize customer service.  My brother did not want to do that.  My sister feels comfortable juggling the schedule but we needed someone to run operations.  If we tried to do all of these tasks we’d either be out of business or a much smaller, less successful company.

Parting with authority has not been easy.  Our COO earned our trust over 8 years.  The sales manager received responsibility only after 3 or 4 years.  But ownership means keeping an eye on the bigger picture, building a company of people whosZAZe skills help drive it into that future.  Ownership as a family company grows does not mean day-to-day responsibility.  Accepting this has allowed our family to look towards the horizon while letting people manage who will make us successful today and in the future.  My siblings and I accept we are stewards, who must protect the company and yet let go of it at the same time.

Emails, Texting and Business

iphone_addiction_798185Recently I banished iPhones and PDA’s from company meetings.  Over time it had become increasingly common to see staff checking their phones while a colleague tried to bring their attention to an issue. Or worse, they’d begin texting.  Not only is such behavior rude, study after study has shown that you cannot divide your attention between your phone and a conversation and do justice to either.  “Not unless you are negotiating Middle East peace,” went the one caveat I offered for getting on the phone during a meeting.  Our confabs aren’t very long, and if someone is expecting a call they can always bow out or reschedule it.

I became alert to the issue when I noticed people glancing at their phones during customer visits. Doing so just communicates exactly what you don’t want in the first place.  If I’m the customer I take away that we aren’t terribly important.  It doesn’t matter if you check by looking down at a phone slightly obscured by a table.  You can’t hide downcast eyes, nor fingers working quickly on a message.  Everyone present knows exactly what’s going on.  More importantly, the customer knows we’re not paying attention.

I don’t think anyone at our company means to be rude.  We’re just part of a culture that has become addicted to our phones.  Surveys show, for instance, that over 50% of Stanford University students believe they’ve developed an iPhone “habit”.  An unbelievable 8% report feeling that their iPad is jealous of their iPhone (these kids are smart?).  Businesspeople obviously aren’t immune.  We’ve become accustomed to putting our phones in our pockets and on our desks or on conference tables just waiting for that tweet, text, email or call to come through that requires  seemingly immediate attention.  Meanwhile those around us suffer from the attention deficit of others.

Worse yet, I think, people generally, especially younger employees, refuse to phone about an issue.  Instead they’d rather email or text.  When they email the cc line gets so crammed full of names it seems like a birthday invitation.  Then everyone kicks back their comments with those on the cc line getting whipped through circuits of information they often don’t need.  A wonderful rule I heard one company adopt states that after the third round emailing about an issue employees had to pick up the phone. Hearing a voice also helps develop a personal relationship in a way a message does not.

Some object to calling because they desire a paper trail.  They want proof a supplier or customer agreed to something.  The alternative? Summarize the phone call in an email, or better yet, trust that an understanding has been reached like we did in days of old.  Where agreement needs documentation, say like on pricing or scheduling, a quick note following a conversation should suffice.  If we are so suspicious of each other that we need documentation of every exchange, then other problems exist, trust being the most obvious.

Digital communications can present other tripwires.  Even in my wise old age I misunderstand tone in emails.  I don’t know how many times I’ve taken umbrage at something written only to find out I got it wrong.  On the equal and opposite side I’ve seen emails from normally balanced individuals that libel the recipient.  If the person had walked down the hall to work through the dispute, or picked up the phone, they wouldn’t have raised their blood pressure and that of others.  Instead, whatever caused the issue to devolve would have gotten solved.

I know I am no saint when it comes to iPhone abuse.  Too often I forget to turn it off when I get to the office. Then it rings during a meeting.  I’ve written angry emails when I should have picked up the phone.  I’ve disciplined myself over the last year to put those aside to decide once I’ve calmed down whether to hit “Send”.  Usually I end up spiking them.  My one exception: Complaint emails to airlines.  I figure venting can’t hurt because no one reads them anyway.

The final frontier remains internet use.  Games, shopping, stock trading, and so on also clog working hours, often leading to longer less productive days.  My first boss in journalism was an exceptionally disciplined man.  He came at 9, left at 5, and  wrote more stories in a year than just about anyone else.  Our chief operating officer Pallavi Joyappa is much the same.  I’m not there yet, but I’ve started to wean from Google.

I hope our iPhone policy helps us have more productive meetings.  Undoubtedly the messages will wait for us. Unless its President Obama texting for advice on Syria.  Then company policy says make excuses, quickly step outside and answer.

Expansion, Worry and Tums

indexI remember exactly where I was when the insurer American International Group (AIG) collapsed in 2008–standing in Intercontinental Airport in Houston, waiting for a flight to Mexico. The news sent a shiver through me. I knew at that moment the long expansion of our economy had ended. I also concluded in an instant that we would not purchase the $4 million printing press that I had been on the verge of buying. Time to preserve cash, I figured. Get ready for reduced demand. Hunker down.

My mindset remained unchanged for the next five years. When we needed additional printing capacity to meet new demand thanks to competitors who had gone out of business we bought a used machine for $250,000. We upgraded our bag making equipment but that cost less than $300,000. One year we invested only $1 million, unheard of prior to the crash. During that time we did not touch our Wells Fargo line of credit, instead building a cash balance. I can’t say this didn’t frustrate them. After all, they make bucks when we borrow, not when we stockpile. Of course our strategy mimicked many companies. Paying down debt, holding onto earnings, avoiding investment became a wide practice. Given our anemic recovery, it remains the recipe.

This year has been radically different for us though. Rising demand has compelled us to buy a printing press,  additional finishing equipment including a laser system to perforate plastic so it breathes, a slitter to make small rolls from larger ones, a tandem laminator to produce multilayered packaging structures, and a pouch machine.  We’ve had to purchase a new building to make room for  these investments. So far we have ploughed over $14 million into our company, the largest amount in our company’s 51 year history. Most of this equipment is an extension of things we already do.

Not the pouch machine. It’ll be our first. It allows us to dive deeper into value-added packaging.  Retailers and grocers have embraced the stand-up pouch for good reasons.  They attract shoppers with dazzling graphics.  Pouches take up less space than the cans and glass containers they’re replacing. Their lighter weight allows more packages per truck, cutting carbon emissions.  Now we’ll be able to participate in this growing market leveraging the print quality of our ten and eight color printing presses.

If this isn’t enough we’ve become the beta site for a new print technology for flexible packaging called digital printing. We’re working arm and arm with Hewlett Packard  to launch their 30″ Indigo  printing press.  Our company is one of two in the country they’ve partnered with and the only one making flexible packaging.  It’s quite an honor HP chose us to help roll out this technology, which makes short run, customized or personalized packaging suddenly economic and at a quality unmatched by any other print technologies.  I know they picked us because we’re a thriving company and market leader in our industry.  But being a beta site rattles my nerves. We’ve never been the first to market with a disruptive technology before.

So the outlay of cash to move into the building along with the debt taken to buy the equipment has my teeth on edge. We’re investing while other manufacturers continue to hold back. I’m breaking my dictum that cash is king. Instead I’ve bet on the future. I’m betting customer demand will continue to grow, that all the new business we’ve accumulated will not disappear. As a pessimist — and who would dispute that economic fundamentals justify such an attitude — I worry. I worry hard. I don’t sleep.

But what saved us during the recession would kill us in the future. The failure to invest, to remain on the cutting edge of technology and have enough capacity to meet new demand, has undone many companies. I know that. I’ve seen it. So despite my anxiety our company has surged forward. I can’t claim to see the future as clearly as I did standing in Intercontinental Airport six years ago. But my gut tells me all will work out. I just need to keep a steady supply of Tums at my side. Ultimate Strength preferably.

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