NWPCA Leadership Conference Tackles Tough Topics

The recent NWPCA Annual Leadership Conference and Expo garnered industry attention due to the presence of CHEP's top brass and a special meeting by CORE, the new recycling council formed to unite independent recyclers against unfair market practices. The meeting produced limited fireworks, even when the corporate packaging manager from Wal*Mart took the stage on a panel discussion. However, the conference did provide solid nuts and bolts information to help pallet operations deal with the uncertainties of the future and the problems of today.

Held in sunny Marco Island, Fla. the conference covered a wide variety of topics from succession planning to export regulations to facing the insurance cost crunch. Our staff has come up with our best nuggets of wisdom from the conference. So just in case you could not make the meeting or you happened to miss a session, enjoy this review.

Capitalizing on the topic of changing for the future, the Conference kicked off with a presentation based on the best-selling book Who Moved My Cheese?. Jones Loflin, a business consultant from Denton, N.C. compared corporate goals to cheese as mice work through a maze.

The presentation can be summed up with the fact that customers are a moving target. Companies cannot afford to stay in the same spot when customers have moved somewhere else because their needs have changed. Some people sniff and scurry about looking for new business. They will try things and make mistakes. But through trial and error, they eventually find new customers.

Others sit around and try the same old things, which offers diminishing returns. Eventually, their customers are gone. Then they respond by asking, “Who moved my customers?” People become complacent and lazy. Going into the maze to find more business is considered dangerous by the complacency crowd. They believe customers will return when they probably never will. Fear holds them prisoner and may eventually drive them out of business.

Jones encouraged attendees to answer the question, “What would you do if you were not afraid?” He said the key to planning for the future is to adapt to minor changes so that you are ready for the big changes. Ironically, one of the most interesting lessons came from the tiny piece of plastic cheese the speaker handed out. On the side of the toy cheese was a sticker with “Made in China” written on it.

Unless you have been living on a deserted island, by now everyone has heard about the forthcoming regulations for non-manufactured wood packaging including pallets, dunnage and crates. A panel of experts covered the topic including the latest on the implementation of the global standard, the fumigation certification program and the heat treatment program.

According to David Lamb of the U.S. Animal and Plant Health Inspection Service (APHIS), the European Union (EU) has indicated that it will likely adopt the IPPC phytosanitary standard for non-manufactured wood packaging this summer. The EU has yet to send official notification of its plans. David said that the EU likely will offer a grace period similar to what it did when the EU issued the emergency regulations for coniferous wood packaging.

Although the EU has set this summer as a target date for adoption, EU officials have not established firm deadlines or implementation schedules yet. Depending on what the EU decides to do with its implementation of the standard, packaging headed to Europe may need to be IPPC compliant by the fall or winter 2003. The replacement for the no-bug mark will be finalized in a couple of weeks, which should allow the IPPC standard to be taken out of suspension by April 1.

APHIS will be finalizing its rule by the end of the summer for exports into the United States. APHIS will harmonize standards with Canada and possibly Mexico.

China continues to regulate coniferous wood packaging material by requiring heat treatment and paper-based certification. China has indicated a general support for the IPPC standard. But it remains to be seen if and when China will implement the IPPC standard or a variation of it.

Recently, Argentina has begun to crack down on shipments. According to APHIS,

Argentina wants a shipper declaration with customs documentation that wood packaging is bark free and pest free.

The NWPCA and APHIS are in the final stages of working out a certification program for fumigation. The NWPCA has opened the program up to the industry, not just its members. For the most part, the fumigation program will be similar to the heat treatment program. There are a few notable differences, for example, the fumigation mark can only be applied to assembled packaging not component parts. Despite plans to phase out the use of methyl bromide due to environmental concerns, it will continue to be available for quarantine applications such as the treatment of wood packaging.

Claudia Jo Willis, an attorney specializing in family law, spoke on the legal aspects of succession planning. She said, “Postponing succession planning can lead to disastrous results.” Key managers, customers and employees look to the owner to set the tone for a business. If the president/owner unexpectedly dies leaving a leadership void, the vacuum can literally destroy a business.

Claudia suggested starting by setting a time frame to have a plan in place. There are a number of key questions that must be asked:

· What is a realistic value for your company?

· What value does the business have to the family?

· Will children be interested in running the company? Are they capable of running the company? Are they good managers? Do they have the necessary drive?

· Will non-family key managers stay if successive generations take over the company?

· Will you draw a salary when you leave the business? How will you support yourself? Do you want to sell to an outside buyer or competitor.

Claudia warned against making prejudgments without asking your family what they want. You may be surprised the answers you receive. Don't forget to keep non-family managers happy and motivated via incentive plans or possibly even giving them a stake in the business. Non-family managers need to be reassured that they will still have a voice in the business when new company management comes onto the scene.

When it comes to developing a transition strategy, you can gift $11,000 per year tax free per recipient. There are types of transitions – taxable or tax advantage. Your particular situation will dictate which option is best. Consult a financial planning specialist for more details.

Claudia encouraged owners to choose a successor. This helps eliminate any infighting among the heirs when a clear leader has been chosen. The owner should prepare a family tree with characteristics, strengths and weakness of each person. The family should meet to develop a plan and deal with unresolved issues. Claudia believes that family members should work outside of the family business before working inside it.

Claudia said, “Most family business owners like to minimize or dismiss family factors such as sons or daughters not getting along… Keeping the family business in the family is the toughest management job.”

One creative example provided financially for the mother while the children took over the business. The property from the estate went to the mother. She used the rent checks to support herself. The business went to the children who ran it and paid rent to their mother.

Only 13% of successful family businesses survive to the third generation. But a successful plan can help keep your business alive long after you are gone.

One thing we can never get more of is time. Each person only has 24 hours in a day. Thus, time management plays a crucial role in being successful.

Based on his years in the military and management at a major pharmaceutical company, Thomas Hudgin spoke on time management. “A key to your success or even survival is repeat business,” Thomas said. “I don't know of any company that can survive on one-time customers except the funeral business.” Better managed time results in happier customers, which leads to more repeat business.

Thomas warned against procrastination. Instead, he said to deal with the tough things first, because they will be a distraction until they are completed. One trick Thomas uses is to spend the first ten minutes of the morning with his door closed, writing down things that he must get done during the day. This exercise helps him keep focused despite distractions throughout the day.

Thomas uses the following tactics to keep others from stealing all of his time:

· Keep work on top of the desk so it can haunt you.

· Learn to say no to some requests.

· Take time to communicate with others.

· Put activities in categories and assign each a priority level.

· Set aside private time where others know not to disturb you.

· Get up and stand when unwanted visitors come by your office.

Every person tends to have a most productive time of the day. Spend this time focused on the most difficult tasks. For example, do the most important things in the morning before lunch, especially if you tend to drag after lunch.

Don't waste time at aimless meetings. Make sure to have a clear agenda and give advance warning of expectations to others. This will allow participants to come prepared with the right answers. Establish the start and stop time of the meeting and stick to the schedule. Set action items and designate individuals to be responsible for completing them . Always provide minutes for the meeting in a timely manner including a list of action items.

The end user panel involved some major players including representatives from Wal*Mart and IBM. When asked about the future, Ronald Reed, corporate manager of Packaging for Wal*Mart Stores, pointed to safety as a major concern. He would like to see more plastic packaging used to ship and market products in the future. Broken boards, exposed nails, wood dust, etc. can cause damage to product or endanger employees.

Susie Burleigh, staff engineer with IBM Corporate Packaging, said that the international phytosanitary standard has impacted IBM's pallet decisions. In some applications, IBM has moved more to plywood pallets because manufactured wood is exempt from the regulations and tends to cost less than plastic.

Robert Rankin, manager of packaging procurement for Armstrong World Industries Inc., said, “Cost is everything today…We will be looking to ways to reduce cost.” He added, “I think wood is going to be our most viable alternative going forward.”

The international phytosanitary standard has directly impacted both IBM and Armstrong. IBM is managing the issue on a location by location basis. Customer requirements and shipping destinations are impacting IBM's packaging. Likewise, Armstrong has shied away from the one-size fits all approach. Even though Armstrong ships a significant amount of product overseas to Europe, it has decided to only buy certified/treated packaging for export shipments. Armstrong has separate packaging for export shipments even though this has caused some problems having to keep two pallet inventories.

Armstrong uses only new wood pallets. None of its pallets are recovered, but Armstrong would like to identify a way to retrieve its pallets if possible. IBM buys mainly new wood pallets and does not recover them due to the logistical challenge of doing so. Wal*Mart does not buy very many pallets, but it does purchase a limited quantity for its import distribution centers. Product manufacturers buy and supply pallets for product loads shipped to the retail giant. Wal*Mart encourages its suppliers to ship on CHEP pallets as part of its logistics contract with CHEP.

Coming back for a second year, Larry Laufer of Sales Process Consultants spoke on how to ask the right questions in the sales process. Larry said that you must be a good listener to be able to ask good questions. By asking questions, we learn the customer's view of the world. Larry offered the following suggestions for asking the right question:

· Take notes. This slows the sales process down. It keeps you focused on what they are really saying and not what you think they are going to say.

· Don't be a passive listener. Don't go on mental vacation when listening.

· Look for cues. For example, when people preface something, that is what you have to listen for because this cue alerts you to the fact that something important is coming.

Health care costs continue to climb through the roof, which has made it difficult for pallet companies offering health care coverage. Neil Trautwein, director of employment policy for the National Association of Manufacturers (NAM), spoke on the current regulatory climate and what the future holds for employer-based health insurance.

Neil said, “Every time the government gets involved it increases health care costs. Every time costs go up, manufacturers and workers get priced out of coverage. Each time costs go up`1%, 400,000 workers get priced out of coverage.” Today there are 41 millions Americans that are uninsured.

Employer-based health care is the backbone of health care in America. The United States is one of the only major economic powers without government sponsored health care. There are some pluses and minuses to the U.S. system. One problem for companies is that employees connect problems with their medical coverage to their employer. Thus, even if a company offers good health insurance, it can become a morale buster if employees experience dissatisfaction with the system.

New HMO programs have led Americans to run to the doctor for every little problem. Most people do not understand the true cost of treatment. Workers never really equate a $15 co-pay with a $100-300 actual cost for a drug or doctor office visit.

Given the tremendous role that government plays in the whole health care arena, NAM encourages companies to get involved in the political process. NAM supports medical liability reform, flexible spending accounts that can be rolled over from one year to the next, association health care plans across state lines and other reforms that would take cost out of the system. NAM opposes national healthcare because it would be the “mother of all government entitlements.”

Neil said, “The best thing to do to help the uninsured is to make it easier for companies to offer coverage.”

The Other Wood Pallet – Plywood Pallet

With customer needs changing every day, Mark Halverson of the APA – The Engineered Wood Association, talked about the opportunities available for manufacturing plywood pallets.

Mark believes that for applications where customers are asking for plastic, plywood pallets are a strong option. He said that plywood pallets are ideal for captive warehouse or reusable systems. Engineered wood pallets keep wood pallet companies in the ball game in cases where plastic seems like an ideal choice.

Most plywood pallets cost $16-30, which makes them less expensive than a comparable plastic pallet. According to Mark, engineered pallets are durable and exempt from phytosanitary regulations. Custom sizes are no problem, and engineered wood typically holds fasteners better/reduces number of nail pops.

The first mover tends to win the business for a long period of time due to the high cost of transitioning to plastic. “Once somebody invests in plastic, is hard to get them to switch to plywood,” said Mark.

To deal with the cost concern, the APA has joined forces with a leasing company to offer financing for engineered wood pallets. Currently, APA has established a network of companies producing and marketing engineered wood pallets. APA wants your help to keep plastic from taking the market share. Visit www.plywoodpallets.com for more information.

A panel of industry veterans and academic, economic and regulatory experts discussed what the future holds for the industry and the global economy.

Dr. Mark White of the Sardo Pallet Lab dealt with standardization. Some pallet companies are worried that standards will increase competition, destroy flexibility and make the pallet even more of a commodity item. Mark said, “Standards lead to economic growth, and standards improve the efficiency of your customer doing business. So whether or not you like standards, they are going to happen.”

Hal Vandiver, executive vice president of the Material Handling Industry of America, gave a review and forecast of the overall economy. Hal explained the recent industrial recession by pointing out that just about the time capacity reached its peak demand fell off. Capacity utilization fell to 73%. Investment fell 3.5% and industrial production fell 4.6%. All of this resulted in the worse decline in 30 years. Except for manufacturing, the recession has been over since Dec of 2001. But the manufacturing sector continues to struggle because it has a lot more capacity out there than can be utilized.

Given his research of the wood pallet market, Hal believes, “The prospects for 2003 are positive with about 4.5-5% growth.”

Some of the attendees expressed concern about manufacturing going offshore. Stan Lee, president of Corrugated Pallet Corp., said that his company's biggest source of growth has been the overseas markets. Fortune 500 companies are coming to Corrugated Pallet Corp wanting to license its technology to meet overseas needs. Stan said that 40-50% of the world really does not have pallets. As multi-national companies shift operations overseas, they are looking for experts to help palletize in areas where pallets are a foreign concept.

Lionel “Corky” Trebilcock, chairman and CEO of Litco Intl., addressed the concern of managing for the future. He said, “My advice to my people is get close to your customers. Find out what they're thinking and tell us what you hear so that we can adopt to what our customers need.”

Editor's Note

The Enterprise will explore the impact of CHEP and its proposals as well as CORE and its potential impact in a future issue. CHEP, known for its blue pallets, is the largest pooler of pallets and packaging in the world. CHEP has announced that it receives approximately 42 million white wood pallets per year that it would like to use to procure CHEP-marked pallets that leak out of its system. CORE has been launched by a number of leading pallet manufacturers and recyclers to take on unfair business practices that challenge the long-term survivability of the white wood pallet markets.