Giving new meaning to Penny Wise and Pound Foolish

At a recent consultation for a prospective client I took notice of an item that was identified as “documented savings”. The item was a film for vertical baggers. This company used approximately 10,000 pounds per month. I asked for a sample of the film and obtained the spec’s and purchasing history from their system. I was immediately able to show my client where their buyer has lost the company at a minimum $120,000, however it was recognized by the company as a $60,000.00 savings. It could be happening at your company and you would never know either.

First the data: The purchasing notes in the company’s system showed the film spec at a thickness of 2mil. The notes also showed the past vendors price of $3.00 per pound and the new vendors price of $2.50 per pound. A $0.50 per pound reduction is indeed significant over a year. Unfortunately the much too often mistake of buying on price ended up costing the company almost 3 times of what they thought was saved. How? No one at the company measured the films mil thickness when it arrived; the film received measured out as 3mil. A practice some film companies use to overcome price objections. When presented with this discrepancy my clients response was: “We paid for a thin film and received a thicker and better film for the same price? What’s the problem?”

Here’s the problem: For every 1,000 pounds of 3mil film they were yielding 22,000 lineal feet less than if it were the 2mil film. Over the course of a year that is 2.6 million feet of film, or 58,000 pounds. At $2.50 per pound, this purchasing error just cost my client $120,000 in the past year! This doesn’t even include incorrect production waste factors and miscalculated commission payments on cost of goods sold.

Company’s like mine save manufacturers, processors, and copackers money. Our knowledge of materials, manufacturing, and industry practices benefit our clients. We consult, procure, manage, and distribute packaging materials to our customers on time and at reasonable costs. Everyone from our front office to our dock door are continuously educated on all materials that flow through our facility. Our first consultation is free, however your company may walk away with money like the example above; and yes they signed a contract within two weeks.

Don’t be Penny Wise and Pound Foolish. Allow my company to procure your packaging materials and your company can focus on producing and selling quality product.

Thanks for reading.

Michael O’Keefe
Vice President of Sales
Pioneer Packaging Chicago
Consulting Procurement Distribution
Tel. 630-348-3118

Samurai Initiatives

Back in the day when Lean Manufacturing reached its peak and Six Sigma was the next brass ring to grab on to, I was asked to provide simple words of wisdom, which were called Samurai Initiatives, to manufacturers that didn’t want to reinvest in the Green Belt and Black Belt certifications. The focus of Lean Manufacturing and Six Sigma were much the same: employee accountability and production efficiency. I was recently sent a packet with copies of those Samurai Initiatives from a colleague that has moved into a COO position. With the packet was a nice note thanking me for these Initiatives and advising me that they apply today as simple reminders of where to maintain focus. It was quite a compliment for a program last active over 10 years ago. Below, I have shared a few of my favorites. These are even more critical today as companies purchasing departments spent the past few years trying to get blood from a rock.

SI: Determine the measure of financial performance, customer satisfaction, and internal malfunction; money, human resources, and time, respectively.
Improve those things that have the potential for the quickest return on these investments. A continuous improvement on measurable results is necessary.

SI: Profit is not dependent on the product alone, but rather on the level of efficiencies at which the product is manufactured.
Focus on taking costs out of the supply chain, not the supplier.n understand how your suppliers work and use those suppliers that bring solutions and value to the table.

SI: Focus on the costs out the back door; they are of greater importance than the price of products coming in the front door.
Automation improvements will increase speed and efficiency, reducing the cost to your customer and increasing your company’s profits.

Eco-Message FAIL. Who’s to blame?


When a message fails to be clear to the consumer, who is to blame. This failed message from Good Foods Group Chef Earls Brand is a great example of an internal communication breakdown. It also shows how important the suppliers are in recognizing your message and assisting in its execution.

The message is clearly stated: Eco-Friendly Packaging, entirely compostable, plastic made from cornstarch.

The failure is also clearly stated: a Recycle symbol #1 PETE is clearly visible on the lid below the above statement. This lid is not compostable.

Who is to blame for this fail? Marketing, Sales, Procurement, Production, Supplier?

How does cash flow adversely affect operations?

Cash flow becomes compromised. The cost of inventory on a company’s floor (and books) becomes much greater. The days of buying out 90 to 120 days are no longer feasible; the cash on hand is just too important to daily operations and to commodities. The capital dedicated to a company’s packaging inventory cannot be utilized for expansion or current operations.

What will happen when a commodity cost spikes and the cash to buy in is not there? The banks will not respond favorably with an excess of packaging inventory on the books.

Companies must be open to new concepts in packaging procurement. By acknowledging procurement outsourcing solutions, companies can remove this function from their internal procurement team.

We advocate to anybody that doesn’t claim that their sole source competency is to purchase packaging, that they should outsource this function.

The economics of the solution are very compelling. All it takes is the willingness to put the status quo behind you and a bit of education.

Procurement Outsourcing; “The Next Great Thing” … again.

Savings continue to be made and realized on bottom lines at leading companies through the utilization of Third Party Services.  There was a time when Procurement Outsourcing was regarded with much distrust by a lot of companies and CPO’s felt that outsourcing prevented the function for acting in a more strategic way.  Now procurement organizations at leading companies are increasingly convinced that there is a way to make outsourcing work for them.

Procurement Outsourcing is a value-added, strategic sourcing of materials.  When considering outsourcing, companies need to think differently about what procurement is and how it should be used.  The procurement outsourcing group will work with the client supply chain team to develop successful strategies that align with the client company’s objectives.  This partnership improves the performance of the chains operations, as well as cost efficiencies.  The client company then has a greater opportunity to focus on business growth.

Packaging is an area where procurement felt it could use outsourcing to take out cost.  However, there is no “one-size fits all” approach.  This is where distribution comes into play.  Packaging Distributors are a great option for procurement outsourcing, especially for smaller business under $200mm in sales.  As an extension of their client’s in-house procurement and their client’s warehouse, packaging distributors provide the scope, scale, and expertise of the packaging supply chain to the clients operations. 

Distributor’s services include:

  • Stock and Custom Product Sourcing,
  • Supplier Negotiating and Benchmarking,
  • Warehousing/Inventory Management,
  • Supplier Qualification and Management,
  • Procurement Operations,
  • Category Management,
  • Supplier Performance,
  • Contract Management,
  • Freight/Logistics Optimization, and
  • Competitive Validation.

Is a Packaging Distributor right for your company as your outsource of packaging?  If it can help achieve savings, perhaps there is no reason why it should not be embraced.

Michael O’Keefe is the Director of Sales at Pioneer Packaging in Chicago. 

Pioneer Packaging is a packaging distributor serving the packaging procurement needs of food manufacturers, processors, and consumer goods companies.  

Tel. 847-357-0010



“This article may be freely reprinted or distributed in its entirety in any e-zine, newsletter, blog or website. The author’s name, bio and website links must remain intact and be included with every reproduction.” 


Retail Ready Packaging

So your company needs to provide Retail Ready Packaging for your customers, the Retail Distributors; Wal-Mart, Costco, HEB, etc.  Easy enough, right?

Sure you will just need to have your packaging buyer:

  1.  call your carton or film/pouch supplier,
  2. then your box supplier,
  3. then maybe another supplier for your trays,
  4. and if the boxes or trays need to be printed you may need to find another supplier,   
  5. Maybe the RRP requires a header!  Is it a litho laminated header or a digitally printed header?  They may need to find a supplier for both.

Then once you have all these suppliers lined up you are ready to get a quote for each component, correct?  No, only if the RRP was all predetermined by the Retail Distributor.  If it was not, then your buyer will:

  1.  have to size the consumer package (carton or pouch),
  2. then the tray or display,
  3. then the header,
  4. and then the HSC/RSC

So now all your packaging buyer needs to do is to:

  1. Find multiple, dependable suppliers for your cartons or film/pouches, boxes, tray, printed boxes, and headers.  At least TWELVE total!
  2. request pricing for each component from TWELVE different suppliers,
  3. receive pricing for each component from TWELVE different suppliers,
  4. review pricing for each component from TWELVE different suppliers,
  5. choose supplier to manufacture each component,
  6. issue purchase orders to at least FOUR different suppliers,
  7. attend press approvals where necessary at multiple locations for each component,
  8. coordinate the timing for manufacturing and delivery of each component (lead times will vary from material to material),

So now product has been delivered, your receiving departments’ needs to:

  1. schedule multiple Docks Times,
  2. review multiple Bills of Lading,
  3. Cross-reference multiple Bills of Lading against multiple Invoice received from multiple Suppliers for each component, and adjust of confirm accordingly.

More than likely your buyer has purchased a 60 day inventory of product because it made sense from a price standpoint and preparedness to better serve your customers requirements. 

And chances are that this means your Accounts Payable Department is:

  1. cutting multiple checks,
  2. against multiple invoices,
  3. from multiple suppliers,
  4.  for product that your company has not even used!

Now that all these steps have been broken down, you can see clear costs added to the purchasing of packaging material for Retail Ready Packaging, and everyday packaging for that matter.  This is real time and real money that your company will not see a return on!

Now if you contacted a Packaging Distributor your company would:

  1. Call ONE supplier for all components,
  2. Receive ONE quotation for all components that have been quoted out to multiple manufacturers by the distributor,
  3. Issue ONE order for all components,
  4. Receive ONE delivery of only components required for the scheduled production; all other components will remain on the Packaging Distributors floor until needed or up to 60 days,
  5. Receive ONE invoice for only material shipped,
  6. Pay invoices within terms for only product received; so your terms for complete payment of all components would be extended from 30 days to 90 days.

When choosing a Packaging Distributor it is wise to visit their location, meet their key people, confirm they have a clean warehouse, their own trucks and drivers, online inventory access, and satisfied customers.

And when someone tells you that it is cheaper to cut out the middle man and go direct, remember that your internal time and money will increase by 75%.  Also remember that if you are negotiating with suppliers for the best cost with only $1 million in packaging, the Packaging Distributor will be negotiating with their suppliers with at least 5 to 10 times that value.  This is a benefit that will show in your direct cost of product, in addition to the reduction of your indirect costs of purchasing and managing your packaging materials for Retail Ready Packaging and your everyday requirements.

-Michael O’Keefe is the Director of Sales at Pioneer Packaging in Chicago

Tel. 847-357-0010



“This article may be freely reprinted or distributed in its entirety in any e-zine, newsletter, blog or website. The author’s name, bio and website links must remain intact and be included with every reproduction.”