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Editor's Comment
May 1, 2009 By: Esther Durkalski Hertzfeld Paperboard PackagingThis year's Exclusive Paperboard Packaging Census Report finds suppliers in panic mode. The only reprieve is that slightly less (64.9 percent this year versus 68 percent last year) are worrying about energy prices.
 Esther Hertzfeld |
The loudest panic button for suppliers is box plants being unable to pay bills. The data show 67.3 percent of suppliers worrying about receiving payments, which compares to 27 percent worrying about those checks "in the mail" a year ago.
Industry overcapacity also has spooked suppliers such that 69 percent are very concerned — last year 46 percent felt this way.
Concern about box plant consolidations and mergers is most pronounced in the United States where most suppliers, 55 percent, have concerns. One in three foreign suppliers is very concerned about mergers at this time.
Cutting Investments, Services
Just as board converters are hurting, so are suppliers. They have dramatically cut investment this year. Capital and technology investment is down to 29 percent of suppliers spending any such money in this direction in 2009. Suppliers also have axed customer services, which are down to 47 percent putting money into this area.
 Suppliers Very Concerned 2009 vs. 2008 |
Sales and marketing and product quality continue to be funded. Fifty percent of suppliers are holding their 2009 R&D budget to its 2008 level and 36 percent will shave this area of operations due to cash flow.
Suppliers have reduced certain services to box makers over the last year. Specifically, suppliers have focused their cost cutting on support services such as technical support and training; pay for services such as consulting and maintenance, however, are being promoted. Box makers are giving suppliers lower satisfaction ratings this year.
A year ago, 87 percent of suppliers said technical support was very important to plants and 38.6 percent of plants were very satisfied. This year, 78.3 percent of suppliers consider technical support very important and now only 35.7 percent of plants are very satisfied.
Just when plants need all the help they can get, fewer suppliers are interested in providing training. Now, 55 percent of suppliers consider training very important, down five points from a year ago. Plants' satisfaction rates with training; consequently, have nose-dived to 24.2 percent being very satisfied compared to 32.4 percent feeling this way a year ago.
Consulting services are something that plants would likely be expected to pay for and more suppliers are now consultants. Forty-six percent think consulting very important to plants, up from 37 percent a year ago. Plants are not at all happy with this situation. Twenty percent of plants are very satisfied with supplier-consultants, down from 30 percent feeling this way a year ago.
Suppliers have also seized on maintenance as another likely fee and 52 percent now think this a very important service to plants, up from 40 percent attributing this level of importance to maintenance a year ago. Once again, plants are less impressed and 23 percent are very satisfied, a rating that has dropped four points in the last year.
The data suggest that plants are less interested in parts and that fewer suppliers rate them as very important. A likely explanation for this is the depths of the current recession. Plants are likely price shopping parts in combination with used parts entering the market from the numerous closed facilities.
Contact Esther at 419-873-9886 or ehertzfeld@questex.com
