When Ralph Rupert and his brother Karl discussed the idea of acquiring a business five or six years ago, they were considering various options. A series of serendipitous events, however, pointed them in the direction of specialty wood packaging and Johnson Industries. They were attracted to the company’s focus on non-standard wood products and its ‘can-do’ approach to meeting the unique packaging needs of customers.
Ralph happened to bump into the then-owners of Johnson Industries while shopping and found out they intended to sell. The plant is located in Sharpsville, Pennsylvania, near the Ohio border. It had been in its current location since 1963 and, over the past 60 years, expanded to include six buildings. It employs around 30 people.
Ralph was familiar with the company and its owners. To begin with, Johnson Industries is a 15-minute drive from home for each brother. They passed by it for nine years every time they visited each other. Additionally, Ralph knew the previous owners professionally through his role at Millwood as well as personally through family connections. They lived only a mile apart, and, on occasion, the previous owner would deliver samples to Ralph’s house while he was working for Millwood.
Given his years of experience as director of Virginia Tech’s Center for Packaging and Unit Load Design and more recently as Millwood’s manager of unit load technology, Ralph has a good understanding of the industry. That information helped inform their search to find a business. A pallet recycling operation was not a consideration. “To me, that’s a very difficult, low-margin, dog-eat-dog market,” he said. Likewise, he was not interested in a new pallet business focused on highly competitive mainstream sizes.
Johnson Industry’s vertical and horizontal integration sparked Ralph’s interest. The company starts with the cant and then runs it through the gangsaw or bandsaw lines. Ultimately, that material is used to make a wide range of specialty products, including electrical reels, crates, and wood components for a variety of products. It also makes banding blocks, not to mention highly specialized pallets.
Custom pallet details include features such as clipped corners, beveled stringers and banding notches. One example of its unique product line is heavy-duty rounded deck pallets it produces for large, rolled products. The range of specialized crating is also vast. The company produces items as small as 12x12x12-inch boxes all the way to crates measuring 56 feet long, 40 inches wide and 30 inches tall.
While the company’s top 10 customers account for 80% of sales, those customers, on average, each require 15 to 20 different pallets. “Essentially, we make no 48x40s,” Ralph stated.
Serendipitous Events Lead to Opportunity
As Ralph tells the story, there were a lot of serendipitous events that unexpectedly came together to allow the purchase of the business. From finding out about the opportunity in a casual conversation with the previous owners to the fact that Ralph and Karl had been talking about establishing a business to Karl’s connection with a bank that facilitated the main loan to an investment from Ralph’s daughter, there were a number of dominoes that had to fall the right place. The deal closed in September 2020 after over two years of ongoing dialogue.
Ralph had known David and Debbie, the previous owners, for over 10 years. “They’re just great people,” he said. “And when we initially started talking about the acquisition and they met my brother, we found that both sides had a very similar philosophical approach about how to run a business – very family-oriented and faith-based attitudes. It was a very easy transition because of our mutual history and how their approach fit in with ours.”
Another plus for Karl and Ralph and Josiah, Karl’s son who was also coming into the business, was that Johnson Industries was already well established as a successful enterprise. “It was a really good opportunity for the three of us to come together to build a family business,” Ralph said, “especially when it was extremely well run and profitable to start with. So, it was just up to us not to screw it up. And that being said,” Ralph quipped, “we have definitely not screwed it up.”
A Can-Do Approach to Specialty Packaging Production
A can-do culture is central to the company’s approach to new packaging challenges. Over the years, Ralph explained, people would come with unique needs that the company would address. Initially, they would do it through trial and error, eventually standardizing processes and buying the equipment needed for efficient production. “It was really an entrepreneurial mindset to try new things,” he explained.
“We try to make what customers need,” he continued. “You figure out how to make it at first, but then, as that need expands, you also expand the equipment to enhance production.” As capabilities and the necessary equipment have fallen into place over time, the company has been able to pursue business for similar products.
Ralph used electrical reel production as an analogy. Initially, the company used a peg on a bandsaw to create round flanges from square panels. It was a highly manual process. Now the company has a CNC machine that is pre-programmed to make the circle and the center hole, as well as other holes for the bolts to go through. It can add the starting and end holes for the wire to go through. Johnson Industries has also invested in a Weinig molder to round the staves needed to build the drum.
Investment in specialized equipment has been a recurring theme. For example, while crate components used to be cut with a circular saw, over time, the company invested in a horizontal programmable panel saw. Similarly, they have invested in a specialized machine for cutting grooves in banding blocks.
Other equipment not mentioned above includes a number of Whirlwind chop saws, two Vista programmable chop saws, as well as two nailing machines, including a Viking Champion and a specialty Rayco. The company also relies on a rebuilt Hazeldine notcher.
Rupert emphasizes, however, that even with investment in machinery, there is still a lot of manual labor required for material preparation and assembly. “While we have automated a lot of things,” he said, “easily 70% of what we assemble is still manual nailing.”
The Transition from R&D to Business Owner
“We’ve learned a lot,” Ralph said of his transition to business ownership. “Even though I knew pallets and lumber, I was still learning how to purchase the materials. I could design a pallet all day long, but where do I get materials? Those types of things,” he said. The company has a Pallet Design System™ license, but Ralph can only use it for roughly 20% of the pallets it builds. The rest are too unique.
Still, both brothers had considerable experience and expertise to lean upon. While Ralph came with decades of unit load research and development background, Karl had taught high school sciences for decades. He found, for instance, that people skills honed through teaching experience proved to be easily transferable for plant human resources management.
One hurdle they faced was a cumbersome legacy price estimation system. When the Rupert brothers purchased the business, the existing approach involved pencil and paper. Each customer had a thick folder with every design, cut list and pricing for each item.
Ralph has subsequently migrated this process into Excel and significantly streamlined it. By simply entering changes to raw material costs, for example, that information immediately updates the cost profiles for all relevant customers and products.
Given the price volatility over the last few years, he observed that it would have been impossible to keep up with the input changes. Historically, the previous owners only changed prices every two years, whereas now prices are updated much more frequently.
The Challenges of Lean and Succession Considerations
“I’m a firm believer in lean manufacturing,” Ralph commented. He taps into his expertise from his time at Virginia Tech. Johnson Industries is establishing key performance indicators, but it is challenging because the product mix is so diverse and changes frequently. Still, the company continues to unearth opportunities for improvement. And as they improve productivity, they hope to create extra capacity to take on additional orders.
And as for succession planning, Ralph noted that he is already past retirement age, while Karl, who is 10 years younger, will reach it in the years ahead. Josiah, Karl’s son, is learning the ropes, first as an assembler and now as an area supervisor. “He is learning the business from the ground up and doing a great job,” Ralph said.
The bottom line is that, almost three years into the venture, the brothers are convinced that going the route of a custom wood packaging business was a great choice for them. “There is a lot of loyalty that comes with the specialty areas,” Ralph observed. “It’s an advantage that so many of our customers have been with us for well over 20 years. We bend over backward to service them, and that’s what builds loyalty,” he noted.
Jumping into the specialty wood packaging industry wasn’t an easy decision. But Ralph declared, “We do feel that God had a hand in this. From the happenstance comments that David and Debbie made to me one day to then talking with my brother and him saying, ‘Yeah, let’s do this.’ To him meeting a corporate loan officer for one of the large banks in Pennsylvania, coming up with a down payment, and with my daughter, being one of our investors. God has had his hand in it. And so, we just continue to have faith he’s guiding us to keep and grow the business.”
