Brian's Blog

Consider the following:

1. Demand. UPS released their earnings earlier this week. From an article about the earnings release:

   United Parcel Service Inc. (UPS) executives Tuesday forecast slower global economic growth in 2012 compared with 2011 but offered a relatively upbeat U.S. outlook, saying conditions clearly have improved since early fall. “I wouldn’t call [the U.S.] a robust economy right now,” Chief Executive Scott Davis told analysts on a post-earnings conference call. “But we certainly are seeing a better U.S. economy than we would have thought” several months ago. In addition, Davis said he’s hearing “a more optimistic tone” in the U.S., and he forecast continued “modest improvement” through the year.

   More shipments = more labels, not only for the products, but also for the shipments. That’s a positive for our industry. While we have to watch the global economy, the US is still the world’s economic engine.

2. Inflation. Last year at this time, we were dealing with yet another round of inflation. While there are no guarantees, input costs have stabilized for the most part. Pulp is down, oil is steady, and major chemicals are in a steady state. Tamer inflation means we can focus on growth, rather than managing costs. Another positive.
3. Packaging trends. Packaging is undergoing major disruptions. Everyone and his brother wants to rationalize packaging. In this chaos, opportunities will arise. See my post about Kashi. Start talking to customers about the advantages of pressure sensitive/flexible packaging.

All these trends point to a growing market. Let’s go earn more business!

Every year, I pick a theme for I.D. Images. I try to pick a theme based on the environment we’re in as well as something we need to improve. Our recent themes have been:

2009: Be Creative
2010: Be Professional
2011: Build Relationships

In 2012, our theme is Be Accountable. I was inspired by a line from Stephen M.R. Covey’s book, “The Speed of Trust.” Covey wrote, “Remember – the people you rely on most in your company – the performers – like to be held accountable and want others to be held accountable, too.” That line hit me like a 2×4 across the face. High performers like to be held responsible. They like to be measured and want everyone around them to be measured as well.

Shouldn’t we be able to rely on everyone within our companies? Business isn’t like little league – we can’t stick someone in right field and hope the ball isn’t hit there. Competition won’t allow that to work; companies that keep underperformers will ultimately underperform. The performers will exit in droves. The converse is true as well – people who aren’t performers don’t want to be measured. They will self-select themselves out if you set standards.

Part of my commitment to accountability is providing a copy of Covey’s book to every member of the I.D. Images’ team. We are also spending work time discussing the book. By the end of 2012, everyone at I.D. Images will have read Covey’s book. I have also made a habit of outlining my goals and objectives each year with our management team. I spend more time focusing on the goals I missed than the ones I hit. I believe those discussions have helped our team understand I hold myself accountable and also recognize we all (even me) make mistakes.

I’ve had two very interesting meetings in the last few days. Last Friday, I was invited to speak to a group of logistics professionals (including the proud, but tired looking, parents of a bubbling 6 month old. Be careful of office romances! Ha, ha.) about how I, as an executive, want to be sold to. One of my messages was that I want to hear about the soft costs and associated soft savings with your product or service. Everyone talks about hard costs; I discount those supposed savings. Very rarely do they materialize.

However, there are significant costs with changing suppliers. Those range from the expected – setting them up in your system, for example, to the unknown – dealing with changes in packaging or shipping quantities. While very hard to quantify, they exist. We all do our best to plan for changes, but things happen. As a quant geek, I used to struggle with these “soft” costs. As a business owner, I know they cost me tons of money. If you want me to be interested in your product or service, you better be able to explain what I should expect. Most importantly, being able to have that conversation demonstrates you understand my business and have thoughtful solutions for my problems.

This became a huge conversation topic after my presentation. We had a long and lively discussion on how to communicate these costs and savings.

Earlier this week, we met with the leadership and sales team of a major supplier. Our discussion evolved to the hidden costs and savings associated with business. We had a candid conversation about the things we do as a customer – order patterns, order quantities, for example – that create hidden costs for them and things they do – packaging that is challenging to remove – that create hidden costs for us. Having those candid conversations with prospects and clients will help you grow your business. To do it right, you have to understand their business. Do you?

Not a day goes by where I am not asked or I don’t ask someone about growth. We all want to grow our businesses, our incomes, our responsibilities. For regular readers, I’ve written several times about growth areas I see in our industry and in the economy in general.

Fundamentally, there are two ways to grow:

1. Take more of the pie. Examples include taking market share and doing what you do more efficiently to improve profitability.
2. Grow the pie. Two examples of growing the pie are expand your product/service offerings or enter new markets.

At its core, every growth strategy is based on taking more of the pie or growing the pie. Most people and businesses focus on taking more of the pie. It’s not necessarily easier than growing the pie, but it’s a lot more visible. We all see market share statistics of our competitors and put dollar signs on percentage points we can take. Salespeople “know” they are better than their competitor and can win more business at an account. A lot of time and energy are focused on short term wins.

It’s a little more abstract to think about how our products can be used differently or offerings we could add that would make our customers’ lives easier. The results often take longer to achieve as well. Given that we all have developed the attention span and patience of three year olds, it can be psychologically challenging to think longer term. Most incentive systems are not built around the long term, particularly in smaller companies – we want results yesterday.

Successful people and businesses balance short and long term results. They invest time and money in both the short and long term. Think about your 1, 3, 5, and 10 year plans, for you, for your business. Do you have them? If not, now is a good time to think about them.

After a week of R&R, it’s time to hit the ground running in 2012. It should be a fun year to write a blog or be a late night comedian. Elections, the continuing saga that is Europe, the Olympics, and an unsteady world economy should provide lots of fodder throughout the course of the year. Keeping focused will be a challenge.

Focus will be a big theme in our industry this year. Just yesterday, Avery Dennison announced the sale of its office products business to 3M. The sale of this division had been rumored for a while, as 3M had developed a very strong global platform in the office products space. Avery will focus on its pressure sensitive and retail branding and information services businesses, two businesses that have much more significant market share than office products did. I expect to see a lot of companies to refocus on businesses where they are positioned to grow. Remember: one man’s trash is another man’s treasure. That axiom will hold true this year, as we will see companies exit certain markets or sell business lines. Keep your eyes open for opportunities.

I traveled today with an industry veteran. Over lunch, we talked about business philosophy. He asked a relatively straight forward question: What’s more important, a happy customer or the bottom line?

My reply: A happy customer. If the customer is happy, your bottom line should take care of itself.

Our conversation continued and we agreed that a satisfied customer is better provided the following:

1. You know how to operate a business. If you don’t know your costs and don’t operate efficiently, you can make your customers very happy, but that is probably a result of your ignorance and/or ineffectiveness. Your customers might be happy for a while, but eventually you will disappoint them in dramatic fashions.
2. The industry you are in is sustainable. You can have the happiest eight track customers in the world, but the few people that still have eight track players probably can’t sustain many suppliers.

This conversation really made me think. How do we get happy customers? It starts internally by having happy employees. I think it has to move externally as well, to your suppliers and service providers. Creating a positive environment for all parties in your ecosystem will lead to a healthier bottom line. As I’ve learned, even though that sounds trite and somewhat easy, it’s hard to execute.

An excellent supplier partner and good friend showed me this product today. She picked up the Kashi Bars at a major retailer. The packaging is a pressure sensitive label that holds together six (6) Kashi bars. Let me repeat: THE PACKAGING IS A PRESSURE SENSITIVE LABEL. For all the non-believers in pressure sensitive growth, I supply this picture as Exhibit A to refute your beliefs. Until the innovative use of the pressure sensitive label, this product was distributed in a box that was less environmentally friendly, less attractive, and more costly than the pressure sensitive label solution. I should add that the label solution probably cost 80% less than the corrugated package the Kashi bars used to be shipped in. I wish I had thought of this solution.

I applaud Kashi for being able to think outside the box (pun intended). I applaud Terracycle for recycling the wrapper. I don’t know that the picture shows the Terracycle logo, but they will recycle wrappers. I try not to be a commercial and Kashi and Terracycle have not paid me for this promotion. Should they choose to pay, I’d gladly accept any remuneration in any denomination (my wife loves Kashi bars).

I also applaud the pressure sensitive supplier and the label converter for providing an innovative solution to their customer. Those that innovate will win.

Over the last two weeks, we have received price increase letters from a few film suppliers. I was somewhat surprised by the timing. Most of our vendors have indicated raw material prices have stabilized over the last two quarters. After the insanity of the previous eighteen months, the procurement folks earned a well deserved respite. Unfortunately, I have a feeling the respite is only temporary.

In response to concerns about global growth, several paper and chemical companies have delayed capital investment plans or even announced capacity reductions. This trend will have the greatest impact on future pricing moves, as opposed to demand increases for commodities used in pressure sensitive products. The 2010 and 2011 increases were driven by a surge in commodity prices. The 2012 increases will be driven by a continued rationalization in capacity that is occurring throughout our supply chain.

I expect we’ll see price increase announcements in Q2/early Q3 of 2012. Of course, all bets are off if we enter a global recession. As I’ve written over the last several months, I don’t think the US will enter a recession, but my opinion on that subject is worth about what you’re paying for it!

We worked over a year with a distributor client to pick up a large piece of business. The quality and packaging requirements are stringent and we made sure we did everything right. The labels shipped and we were proud of the order. Then, we got the dreaded phone call. All we were told was, “Your labels aren’t working on our print and apply line.” Those words cause normally calm label professionals to start twitching and stuttering.

Of course, the call came the Tuesday before Thanksgiving. Lisa Stang, our account’s sales rep and a true sales professional in every way, left that night to meet our distributor at the end user site the day before Thanksgiving. The size of the order warranted our supplier coming along as well.

Lisa got to the site, only to learn the equipment was brand new and the equipment technicians were on site fine tuning the equipment. None of that information was presented on the phone call. The equipment technicians were able to solve the problem and Lisa was told our labels look “beautiful.” I’ve never heard that term to describe a shipping label, but I’ll take it.

Thankfully, the problem was solved. Even better, the end user presented our customer with another opportunity. Why? Because he and his supplier responded. Maybe it was a test by the end user to see how the distributor would respond. It is certainly a large enough piece of business to justify the response that was provided. Was the trip absolutely necessary? Probably not, but we would rather observe problems in person whenever possible and let customers know we care.

Most customers understand problems, as long as you respond in a timely manner and make their issues your priority.

I was all prepared to write a simple reflective paragraph on Thanksgiving. Then, word “leaked” out that the so-called “Super Committee” is going to break up without an agreement on how to tame the deficit and reduce our debt. This failure to deal with the government’s fiscal imbalance proved too much for me to pass up. The committee was supposedly set up because it would be easier to get 12 congressmen to agree than 535. Obviously, that assumption proved to be a falsehood. We are left with worthless talking points blaming the other side and warnings of dire consequences because Republicans won’t raise taxes and Democrats won’t cut spending.

Indulge me for a moment with this scenario: Imagine the board of directors/management team of a major public company discovers accounting improprieties. It turns out the company is broke. The board meets secretly and decides to do nothing. Shortly after, a story gets out that the company is a fraud. Jobs are lost, the stock goes to zero, and an investigation ensues. Congress wants answers! Congress discovers the secret board meeting. I can picture Barney Frank and Ron Paul grilling the management team.

OK, back to reality. Change board of directors/management team to Congress. Change Congress to us, the people of this great nation. See any similarities?

What frustrates most Americans, including yours truly, is the lack of leadership our politicians display. I blame us for that. We, the people, have forgotten, we have a government “of the people, by the people, FOR the people.” My translation of FOR the people means they work for us, not the other way around. We put these people on pedestals and they start to believe their own excrement doesn’t have odors. Guess what? It does. And it’s about time we call them out on it. Both parties continually demonstrate a complete lack of leadership. If they were a company, shareholders would vote with their feet. Banks would not lend to them. A raider would come in and get rid of all of them. It’s about time we the people do the same.