Business Survival Tips & Strategies: June MLG
Some companies are planning ahead with an “either-or” approach, preparing for alternate futures of either prolonged market doldrums or a return to a more robust economy. That was just one of the thoughts shared at WPA’s value-packed June Master Learning Group, which focused on business survival tips and strategies. Here are more of the highlights.
Light at the end of the tunnel?
Unsurprisingly, there is still a lot of uncertainty about when things will improve. One East Coast participant is starting to see a little tightening in the core market, although he has not lost any core accounts as of yet.
“We will have to wait until after the elections,” the participant said. “Hopefully, people's nerves will get calm one way or another. I'm not a political guy. They (the government) make the rules, and I just have to survive under them. So it's tough.
“Election goes one way and we've got all the cheap labor we could possibly want. If the election goes the other way, there will be an environment enabling investment into our companies for automation. So whichever way it goes, we're prepared for it. But as far as predicting it, it's a tough one. So right now, (we're) treading water and surviving.
“In business, you have to be like a chameleon,” one West Coast participant observed. “You're adapting, you're changing colors. You're flexible.”
Market and pricing trends
The market is highly competitive. Some participants expressed frustration about “pickup truck” pallet entrepreneurs undercutting, especially on smaller accounts. They can have a competitive advantage without significant overhead and cheap core supplies.
“Guys are taking a lot of the small customers that use less than a hundred pallets,” said one mid-sized pallet company of 40 employees. For mid-size companies, it can be challenging to serve the very large accounts, and at the other end of the spectrum, the pickup truck vendors are picking off the small accounts. “We're trying to stay afloat by trying and be cheap enough for the small customers, and cheap enough for the bigger companies. And ithere's no margin really, right now.”
Another business operator referred to the pickup truck vendors as a bit of a “pain in the side” but he believes it is possible to compete on the basis of consistent supply and quality, attractive payment terms, and an overall superior service level. Solid relationships are crucial.
Multiple participants reported they are grinding more marginal pallets that are not worth repairing in the current market. Grinding can help maintain space in pallet yards to allow the continued flow of incoming cores. With accelerated grinding going on, one company said it is struggling to move the additional fiber generation.
When you get asked for a price reduction
Pallet companies are taking price cuts to keep accounts. One person pointed out that if the customer is having a dialogue with you about the price, it is a signal there is a relationship in place, allowing you to potentially keep the business by finding a common ground.
“Everybody’s fighting to get the business, and prices are down, so we have to match that to us going,” he said.
One participant said they keep on cutting prices as low as they can, but at some point you have to walk away from the business. He recommended evaluating every customer on a case by cae basis.
“Even if you're losing 10 cents, on 10,000 pallets you're losing a thousand dollars a week or a thousand dollars a month,” he said. “We cannot be supporting other people's businesses. We are here as a For Profit Organization."
For another company, its goal is to be the lowest cost producer in its market area and just suck up the volume, even though the margins “are crunched.”
“The margins, if they're not there, it's okay,” he said. “We've got to turn pallets. We've got to keep those core supplies, and we've got to keep them moving out the door. So we're just lowering our costs as much as possible, keeping our customers happy. This thing will end at some point. It'll it'll turn the other way.”
His company will match verified requests for price reduction. It validates the accuracy of the pricing through market intelligence.
How do you get market intelligence? Relationships matter, for example, deep connections with customers, pallet brokers, and other pallet plants. Another pallet supplier attending the session finds out competitor prices by simply asking customers about their pricing when he is on sales calls. In 9 times out of 10, he said, they provide that information.
Cutting Costs
Many participants concurred that cutting the costs of incoming cores is the best way to help reduce overall costs. Other tacts included eliminating overtime, not replacing workers who leave their job, and focusing on reducing losses through initiatives such as improving plant safety. In California, labor laws make it more challenging to try things like reducing hours.
One member has brought in engineering students to help them improve their flow of materials in the plant and improve efficiency. Investing in relatively inexpensive technologies can also help in cutting costs. After installing an ERP system, another MLG participant was able to eliminate 2 to 3 clerical jobs.
But the cost of cores was the focus. A member shared that in a past soft market he had made the mistake of not shutting off the supply of cores early enough, so he sat on expensive inventory that he didn’t want to sell at a loss. It ended up being a big problem that jeordized his company. This time around, he turned off the core flow early.
“We're just going to work every day and keeping our market knowledge up,” one member reflected. “We're out there on the streets every day. We're talking to our customers. We're stopping by to see what's going on. it's about survival. We're surviving, and we're not complaining.” WPM
30 WESTERN PALLET