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Census Report 2007: Suppliers Perspective
June 1, 2007 By: Esther Durkalski Hertzfeld Paperboard PackagingSuppliers are a little more positive about the environment for the corrugated container industry than the converters themselves — 53.8 percent of suppliers believe their customers operate in a thriving or healthy region. This compares to 49.4 percent of converters with that experience.
Suppliers base their positive slant on the industry because they are receiving equipment orders from plants. "The corrugators we deal with," says a supplier in South Carolina, "have had very consistent business patterns: They are continuing to grow into specialty areas."
"This part of the world is traditionally strong within this sector," says a Swedish supplier.
"We see relatively robust investment in new converting equipment, and both the bundlers and unitizing systems that we provide," says a supplier in Germany.
It's the same with the folding carton industry — suppliers are more positive than plants. Suppliers say the industry is thriving or healthy 58.3 percent of the time, which is slightly more than the 50 percent of folding carton plants with that experience.
Most suppliers, 52.7 percent, are very concerned about competition from overseas suppliers. It is important to note that this concern is pretty similar whether the supplier is located in the U.S., Europe, Asia, or South America.
Industry overcapacity, no matter where on the globe that the supplier is located, finds 45.9 percent of suppliers very concerned and 47.3 percent not too concerned.
Overall, 43.2 percent of suppliers are very concerned that box plants will move their operations overseas and 41.9 percent are not too concerned. Suppliers in Asia, however, are not concerned about this.
Most suppliers around the world are not too concerned about higher energy prices, box plants not paying their bills, and consolidations.
Profits
Three of four suppliers have integrated new technologies into the equipment they sell. This includes R&D (25.6 percent), improved accuracy/performance (16.3 percent), improved efficiency (14 percent), alternative materials (9.3 percent), and sustainability/recycling focus (seven percent). They have also developed new equipment to improve manufacturer productivity, automate business processes, upgrade existing equipment, and to provide security. "New products are the lifeblood of the company," says a supplier in Cincinnati.
Also, 27.9 percent of suppliers have focused on customer service. This includes reducing costs and providing technical support.
Suppliers estimate that 17 percent of their total sales come through their website. Almost all supplier websites provide board converters with product technical details, and 43.9 percent have technical FAQ. One in four enables customers to order online; 19.7 percent have interactive technical support; and 12.1 percent have prices.
On average, 74 percent of equipment sales are for new equipment and 26 percent are for used machines. Most suppliers — 57.3 percent — say that box makers prefer to purchase, rather than lease, equipment. When a converter leases a machine, 70.8 percent of suppliers understand that to mean a cash flow problem. Only a few believe that box makers lease equipment to access the preventive maintenance programs and technology upgrades.
This year, 76.7 percent of suppliers will be investing in sales and marketing. Most will invest in customer service, product quality, and technology. In the months ahead, 49.3 percent will increase their R&D budgets to pay for new equipment designs, new technological advances, and to serve new markets.
Also, 42.3 percent of suppliers will keep their R&D spending at 2006 levels. Nine percent will cut back on R&D spending this year, thanks to cash flow issues.
