Brian's Blog

Occasionally, a member of our sales force has a lapse in judgment and thinks it’s a good idea to take me on a sales call. Rumor has it one of them has even been on record as saying, “Brian actually presents well to customers.” Remember, sales people like to talk so I hear what you say!

I’ve had the privilege to go out a few times in the last two weeks to visit current and potential customers. We had a pretty good handle on our current customers’ wants and needs. For the prospects, we prepared our standard presentation and talked about what we thought they were interested in prior to the meetings. The bad news is, we were completely wrong on what two prospects were interested in. The good news is, we were smart enough to listen to them and provide potential solutions that meet their needs. They were interested in our newer products – integrated labels, digital printing, linerless labels, ribbons, and printers. Fortunately, the new things are exactly what I want to talk about, so I was able to “present well.”

As I thought about the conversations while sitting through an airport delay this evening (shocking, I know), I kept coming back to a common theme that came from both our customers and the prospects: what’s NEW? It is clear to me the main pain point most of our customers have is having nothing new to sell. If you’re not offering something new to your customers, you will not be selling them anything in the near future.

I got a lot of feedback from last week’s blog about the inconsistency in order patterns – thank you.  As luck would have it, we went from a poor week last week to a great week this week in orders.  This has our production and operations people pulling their hair out.

I had a conversation with an industry friend yesterday. He reminded me of some great advice I got early in life.  When I was very young, my Dad told me, “All of life is sales. Don’t ever forget that.”  Bob put a slightly different spin on it, “Nothing matters without an order.”   We could be the most efficient label converter in the world. Without an order, we won’t be around for long.

We all want to be lean and efficient. We all measure productivity and have developed metrics to push productivity, whether it’s in manufacturing, order processing, shipping, or any other function. In a perfect world, demand is perfectly predictable and perfectly linear. No hiccups occur in the supply chain either. Everything runs the way it’s supposed to.  No one calls off.  Customers understand that their order is in the queue and will be done in the quoted lead time.

Now that you’re done laughing, let’s get back to reality. Demand is getting more variable by the day. Customers really don’t care what impact their order patterns have on your operations. I have a metric I’ve followed since I’ve been at I.D. Images to track our weekly order bookings. Our variance in weekly order bookings has increased over 35% this year versus last year.  Last year’s variability increased 25% from 2010. I lost a bet to a member of my management last year that I could predict our weekly bookings within 10% of the actual amount. I would not have lost that bet in 2010. I also didn’t place a wager with him this year. I don’t enter battles I know I can’t win.

So those of us on the traditional “sales” or “commercial” sides of our businesses need to help the “operations” folks understand what is happening and why. We also need to work with them to develop ways to better respond to our customers. Of course, at some point metrics and evaluation/compensation practices will need to be adjusted as well. But that’s a different story for a different day.

Yesterday, ADP, the large payroll processing company, released its jobs report, which showed the economy added jobs at its slowest pace since September. This data got the economic pundits in an uproar. Today, the government released data showing unemployment applications fell more than expected last week, prompting a sigh of relief from the pundits.

“This offsets the concerns from yesterday’s ADP number. You’re getting mixed signals…It might not be as bad as we were thinking after ADP,” said Phil Flynn, a senior market analyst at PFG Best in Chicago. (Link to full article:

http://finance.yahoo.com/news/jobless-claims-tumble-may-calm-123228569.html)

What’s one to think with all of this confusing and seemingly contradictory data? As I’ve written in the past, I think the “new normal” is inconsistency. Expect good days and bad days, good weeks and bad weeks. Don’t get euphoric over a good week of sales and don’t panic over a slow week. Stay close to your customers. Prepare to handle emergency/rush orders. We have experienced significant inconsistency in orders this year. Our distributors tell me they are seeing the same trend.

On a business note, we have had great success with our delivered pricing program. We are dropping the minimum order requirements for the month of May. We are also adding thermal transfer ribbons to the program this month. Contact your sales rep to learn more.

We had an interesting meeting with our logistics partner yesterday. Normally, when you ship more product, the cost per unit shipped goes down. We shipped 11 skids instead of the standard 10 for a customer. The freight charge went up 65%. The customer was not happy. Our logistics folks explained, “The LTL (less than truckload) carriers are doing what the parcel carriers did 20 years ago. They have invested in technology to maximize revenue. They are looking for any way they can to raise revenue.” If you ship parcels, you know the pricing grids they provide require a PhD in statistics to understand . In a nutshell, the new shipment’s “linear footage” exceeded a limit imposed by the LTL carrier, causing a significantly higher charge. We were used to living in a world where all that mattered was a shipment’s weight.

Airlines have done this under the guise of billing for what you use. Check a bag – $25. Want food? $10. Numerous companies use surcharges and other fees to accomplish the same thing.

I understand technology has made it easier to charge customers for what they truly use. I want to maximize revenue too. There’s nothing wrong with that. However, I think you have to be careful in your approach. The parcel carriers could start the accessorial charge wave because they have an oligopoly. We don’t have too many choices to ship parcels. If your business is not in that situation, you run the risk of alienating customers and sending them to your competitors. Southwest Airlines has had a lot of fun with the baggage fees imposed by other airlines. I know a lot of business travelers that have abandoned the traditional airlines for Southwest because they’re easier to do business with. I want to know what I’m going to pay from soup to nuts, no surprises.

On a scary note, there’s a shortage of truck drivers and LTL carriers aren’t investing in new equipment. Diesel continues to rise. Expect higher freight rates to become the norm.

“How’s business?” The answer depends on whom you ask. A packaging equipment manufacturer I am friends with is seeing record orders. Many equipment manufacturers are quoting longer lead times due to volumes being up. Those are good signs for the future.

Most consumable guys respond, “Good but not great. Very unsteady order patterns.” That’s how our year started at I.D. Images – we had a great January, OK February, and OK, but unsteady, March. Typically, it’s the opposite – the year starts slow and March is a great month.

Traditionally, the pressure sensitive industry slows in April and May for seasonal reasons. I’ve never heard a good justification for the seasonal causes, but volumes generally are the lowest of the year in April and May and then pick up in June. My guess is this trend will hold true this year.

Based on the good news the capital equipment guys are reporting, I think we are just in the traditional spring slow down, just a little earlier than normal. Barring any exogenous shocks, I think volumes will pick up in May and June and we will see strength for the rest of the year.

April 15th (or 17th this year), the day tax returns are due, is approaching. Our politicians are beginning their fall campaigns in earnest and talking about tax reform for the umpteenth time. We are going to hear about fairness and simplification of the tax code that make for good sound bytes for the next 7 months so much we will become immune to them.

I have two simple ways to create meaningful reform and put meaning behind fairness and simplification. Here they are:

1. To make fairness meaningful, end automatic withholding of all tax payments. Make everyone write checks to the federal government and their state and local governments if necessary. As an employer, I will deposit all pay, including my contributions to Social Security and Medicare into employees’ accounts. They can then write checks to the respective institutions their earnings support. See what that does to people’s definition of fairness of tax rates.

2. Simplification: Make every elected official do his/her own tax return. I know this will irk lawyers and accountants – good. In a perfect world, I’d have everyone complete his/her own tax return. I admit – I am not capable of doing my own return anymore. Having politicians do their own returns will accomplish my goal without creating self-inflicted pain.

There you have it. Doing these two relatively simple things will create the perfect environment for meaningful tax reform.

Last week, I was the mystery reader for our son’s class. I picked out a few of his favorite books and showed up to read to the class. As I walked through the school to his classroom, I could feel the energy. The kids, the teachers, the staff – everyone was excited to be there. Granted, I was there at the end of the day on Friday, so that might have contributed to the cheerful atmosphere. But, I think it’s more than that. We are naturally excited and enthusiastic. We do things as a society and in our businesses that destroy enthusiasm. We need to bring it back. It starts at the top. Say hi to people – don’t walk with your head down. Smile. Simple things will start building a culture of enthusiasm.

Yesterday, I had to conduct business in a local bank branch. When I walked in, the employees put on big smiles and said, “Welcome to XYZ. How can we make your banking experience GREAT today?” They all said the same thing, the same way. I wanted to respond to one of the tellers, “Upgrade your technology so I don’t have to be here.”

I’m all for establishing a customer driven corporate culture. However, scripting it doesn’t work, especially on a professional level. It’s one thing for the kid in the drive thru to say, “It’s a great day here at Steak-n-Shake.” It is completely different to hear a script in a professional environment. Professionals don’t want to deal with scripts; they want to deal with genuine people. It’s OK to have fun at work!

As a follow up, thank you to all who listened to my interview on Ohio Business Talks. The link below will take you to the archive.

http://ohiobusinesstalks.podbean.com/mf/web/tiiqst/OhioBiz-032812-IDImages.mp3

I am participating in a series called “Ohio Business Talks” this coming Wednesday, March 28th at 3 PM Eastern time. You can access the show via this link: http://www.octalkradio.net/

Al Strauss has created a radio program that allows business owners to give their perspectives on business and the economy. As I’ve written in the past, we are inundated with negativity. I think you’ll find Ohio Business Talks to be a breath of fresh air. I am looking forward to our discussion.

I just spent a few days at a customer show. It was a great opportunity to spend time with the reps that sell our products. Additionally, over 90 other vendors representing every facet of packaging exhibited, allowing for much dialogue about the current business climate.

My title refers to the recurring theme I heard from packaging reps, packaging equipment manufacturers, packaging consumable manufacturers, and everyone in between: demand is still inconsistent. Orders remain lumpy; one good day, one bad day. Customers are still reluctant to carry inventory. Quite often, the winner of the order is determined by whom can get it there the fastest because the customer needs product or equipment ASAP. One equipment manufacturer told me they worked two weeks of overtime to meet a customer’s order request and followed it up with a maintenance week at their plant because their backlog was so low. As I’ve written in the past, that puts a lot of pressure on the supply chain. Only those that are well capitalized and well run can meet customers’ demands. The good news is, just like the basketball tournament ends up with a winner, turbulence creates opportunities to differentiate your business from your competitors. Take advantage!

In a few segments of our business, particularly integrated labels and linerless, we deal with the same suppliers as our main laminate suppliers. Within the last few weeks, several of those suppliers have sent price increase letters to us. These announced increases range from 4-8%. The usual language about global demand increasing and oil/fuel/freight costs is used to justify the announcements. The global demand gibberish cracks me up – isn’t Europe in a recession and isn’t China slowing down? That means a huge amount of growth in Brazil, Russia, and India. While I am partial to the acronym “BRI” as opposed to “BRIC” for obvious reasons (use a long “I” if you don’t get it), I find it hard to believe that increases in demand in those countries can offset Europe and China slowdowns. Or, are there no slowdowns in Europe and China? My view is things are fairly steady across the world.

For regular readers, these increases come just a few short weeks after some film suppliers announced increases. The momentum is not in our favor.
If these letters keep coming, it is just a matter of time before the laminate suppliers begin sending their letters to us. Not what any of us want to get in the mail at this point in the economic cycle. We’re just starting to see stability in prices and an uptick in demand. Price increases could squash the growth. But, we need to start preparing for the inevitable. Since it is March madness time (Go Crimson!), I’ll place a bet that the first increase letter comes out before June 30th. Start figuring out what costs you can take out now. Start preparing customers for higher prices in the second half of the year. I don’t think we’ll see the madness of 2010, but I do believe an increase is on the way. This is a bet I hope I lose.