Is the Direct Thermal Shortage a Sign of Things to Come?

October 17th, 2017

Over the last few weeks, it has been widely reported that direct thermal (DT) paper manufacturers have put their customers on allocation.  A Chinese company, Connect Chemicals, has shut down its main manufacturing facility due to environmental issues.  (It is unclear whether the stated environmental issues are a result of Connect Chemicals or other companies in its industrial park.)  It is estimated that Connect Chemicals supplied approximately 70% of the leuco dye, a key component in DT paper production, for Europe and Asia.

The DT paper shortage is expected to significantly impact the receipt paper market.  In addition to price increases, most suppliers have put customers on allocation.  Thus far, the DT label business appears to have an adequate supply of DT face stock, but a price increase in the near future wouldn’t surprise me.  Our vendors have assured us that they have an adequate supply of DT paper.

Those of us in the label world lived through a disruption in the thermal transfer ribbon (TTR) market a few years ago, as manufacturers of thin PET film moved capacity from TTR to more lucrative markets.  In many markets, global consolidation has led to one or two suppliers having dominant market share.  A major disruption in the supply chain of one of those firms will have a dramatic impact on the markets they dominate.

We’ve lived through many years of low volatility in our supply chain.  The last announced price increase from our vendors came in 2011!  The years of supply chain tranquility are coming to an end.  To avoid supply disruptions, choose your partners wisely.  Remember, price is irrelevant if your supplier cannot deliver.

You’ve Got to Show Up

October 10th, 2017

I was out with a good friend last week.  He’s in a professional services business.  Over the years, his firm, like many other companies, has embraced the concept of work-life balance.  Many people at his firm take advantage of the flexibility they are afforded and often work from home.  His next comment was telling.  He said, “We’re in a relationship business.  Relationships with colleagues matter.  You don’t develop relationships working in your pajamas from home.  You need to show up in the office once in a while.”

Earlier this year, IBM announced it was reducing the flexibility of many of its internal technology and marketing people, citing a desire for more in person collaboration among its staff.  IBM was a leader in the work from home movement.  Previously, IBM had said its work from home policies helped increase productivity and reduced its real estate and operating costs.

It is ironic that the more connected technology makes us, the less we invest in developing true relationships.  Relationships take effort.  If you want to stand out in your company or with your customers, take the time to meet in person.  We’re social creatures and the best way to socialize is in person.  As Woodie Allen supposedly quipped, “Eighty percent of success is showing up.”

The Bureaucracy Runs Wild

October 3rd, 2017

This is a real headline in today’s Wall Street Journal:

Big Tobacco to Spend Millions on Self-Critical Ads in U.S.

Makers of Marlboro, Camel to buy prime-time TV spots, newspaper ads with ‘corrective’ messages, as part of settlement in long-running legal case

The US Department of Justice, part of our extremely efficient and consumer-focused government, “settled” with the large tobacco companies by forcing them to run ads in prime time that say things including, “Altria, R.J. Reynolds Tobacco, Lorillard, and Philip Morris USA intentionally designed cigarettes to make them more addictive,” one ad will say. Another reads: “More people die every year from smoking than from murder, AIDS, suicide, drugs, car crashes, and alcohol, combined.”

Who does this help other than media companies and a few attorneys?  Does anyone at the DOJ remember the phrase, “There’s no such thing as bad publicity?”  Do the people who watch prime time TV not know cigarettes are bad for you?  Does the DOJ really think it accomplished something with this settlement?

We live in a world with real problems that a functional government could help solve.  Instead, our elected and unelected officials continue to fight yesterday’s problems.  For years, the federal government bowed to pressure from tobacco producing states and did not regulate cigarettes.  If the government wants to stop people from smoking, how about creating an Obamacare exchange that is the only place smokers can get health insurance?  “Punish” the tobacco companies by having them subsidize the healthcare costs of smokers!

To succeed in capitalism, you need to solve today’s problems or, better yet, help people avoid future problems.  Bureaucracies have a tendency to look backwards.  That’s the major reason businesses and governments clash.

A full link to the article is below.  It might require a WSJ subscription.

You are the President.  This Isn’t Reality TV.

September 26th, 2017

Virtually every day, I wake up with the hope that this is the day Donald Trump finally figures out he did indeed win and is the President of the United States.  Every day, I’m disappointed.  President Trump seems to think acting like a provocative reality TV star is an effective way to govern.

The latest “Twitter storm” with professional athletes over the National Anthem found a new low.  Do I agree with people kneeling during the National Anthem?  Absolutely not.  I find it offensive to everyone who has served in the military or lost someone who has served in the military.  Do I think players have the right to protest?  Yes.  I also have the right to not buy tickets or merchandise from the teams that choose to protest by kneeling or whatever else they decide to do during the National Anthem.  I have exercised that right.  (Admittedly, the Cleveland Browns’ continued ineptitude makes my decision quite easy.)

The Office of the President has a unique opportunity to act as a uniting force.  FDR did it at the dawn of World War II.  Kennedy inspired a generation with his space speech.  George W. Bush did it in the immediate after math of 9/11.  Thus far, President Trump has demonstrated he is incapable of using his position to inspire people.

I try my best to remain optimistic.  I didn’t want to end my post with a negative thought.  Fortunately, I found an article about a positive leader.  I’ve written about Terry Francona, the Cleveland Indians’ manager before.  I copied part of an article below and included a link.  “Tito” exemplifies a great leader.  Listen, Mr. President, listen!

Mr. President, please read the words of a real leader.  Terry Francona, the Cleveland Indians’ manager, continues to amaze me with his leadership skills.  An excerpt is below with a full link following.


Manager Terry Francona talked to some of his players – including African Americans Austin Jackson and Greg Allen – before Sunday’s game against the Mariners at Safeco Field to see if they planned on protesting.

“I talked to a couple guys, and I’ve talked to them before,” said Francona. “My point to them was, one, I wanted to listen. But, I just kind of wanted to express that I wasn’t talking to them to dissuade somebody. I just think, if somebody felt strong enough about it, there would be a way as a team to show support, because we do things together.

“It’s easy for me to sit here and say, ‘Well, I think this is the greatest country in the world,’ because I do. But, I also haven’t walked in other peoples’ shoes. So, until I think, not just our country, but our world, until we realize that, hey, people are actually equal — it shouldn’t be a revelation — and that different doesn’t mean less. It’s just different. We’ve got work to do.”

Wisconsin vs. China: The Economic War is On

September 18th, 2017

Last week, the state of Wisconsin’s gift to Foxconn came one step closer to reality.  Wisconsin’s  state senate approved a $3 billion incentive package in return for Foxconn’s promise to build a liquid crystal display (LCD) factory in the Badger state.  If you recall, Foxconn created a feeding frenzy among state politicians who competed for the facility to be built in their respective states.  This facility will be Foxconn’s first in the United States.  Foxconn is headquartered in Taiwan and most of its facilities are in mainland China.

Wisconsin is the largest paper producing state in the U.S.  It is estimated there are over 15,000 jobs in paper mills in Wisconsin.  That number is down from over 20,000 ten years ago.  (See links below for more data.)  I know, the world is going digital and paper usage is down.  I also know China has built multiple paper mills.  The U.S. paper industry and U.S. politicians have accused the Chinese of subsidizing those mills.  Wisconsin is subsidizing Foxconn to move jobs, or at least potential jobs, from Asia (mostly China) to Wisconsin.  Does anyone else see the irony/hypocrisy/choose your expletive here?

We just elected a guy as President (with the help of the state of Wisconsin) who campaigned about China not playing “fair.”  Did Wisconsin play “fair” against other states and China to land the Foxconn jobs?  Do two wrongs make a right?  Only in politics.  Wisconsin’s politicians can brag about the jobs they supposedly created.  I’m pretty sure they won’t talk about the subsidy per job, which is estimated to be $230,000 to $1 million per job.  That money is coming from somewhere and someone.  Either someone’s taxes are going up or someone’s services will be cut to provide this money to Foxconn.

Would Wisconsin politicians have ever dreamt of giving the paper industry $3 billion in incentives to maintain 5,000 jobs?  Why is a job at Foxconn worth more to the state of Wisconsin than a job at a paper mill?  That’s essentially what Wisconsin politicians decided.

Certainly, there are benefits to being closer to customers for both the paper industry and Foxconn.

I’m all for job creation.  I don’t blame Foxconn for getting the most it could out of the state of Wisconsin.  They played the game our “capitalist” society created. I fear we are entering a new age of corporate welfare in the U.S.  Rather than create a level playing field, our politicians are going to pick and choose winners and losers through subsidies.  As Elon Musk has demonstrated, so-called green jobs and technology jobs are favored by our dear leaders.

Sources/Additional reading


Who is Protecting Your Data?

September 12th, 2017

Earlier this year, my identity was stolen.  When I called to report my problem to one of the credit bureaus, I was encouraged to sign up and pay for a credit monitoring service.  Reluctantly, I agreed to pay the monthly fee to have my personal information monitored by one of the same companies that keeps my personal information.  I’m the one that’s the victim and I get rewarded by spending time and money to protect my personal information.  What a system!

Last week, Equifax, one of the major credit bureaus, announced it had been a victim of a data breach.  Equifax estimates the personal information of 143 million Americans might be at risk.  They are offering a one year membership in their credit monitoring service to potential victims.  The conspiracy theorist in me says this is a great way to create demand for their service.  Yes, Equifax has gotten negative publicity.  The reality is, the big three credit bureaus (Equifax, Transunion, and Experian) have a nice oligopoly going.  If you need credit, and the US economy is built on credit, you need them.

But the entire system is fundamentally flawed.  Credit bureaus collect our personal information.  Financial institutions rely on that information to make credit decisions.  Consumers have to pay to access and monitor their personal information.  (Current laws allow for one free credit report per year per credit bureau.  There are also some protections if you can prove your information was compromised.)   It reminds me of one of my favorite lines from The Simpsons.   Lisa asks Homer, “If you’re the police, who will police the police?”  Homer replies, “I don’t know, coast guard?”  A link to a clip of the show is below.  Be warned: it includes other The Simpsons’ clips.  You can waste an awful lot of time on this link.

To be fair, there are credit monitoring companies in the US that are independent of the credit bureaus.  Consumers have to pay for their services as well.  An enterprising financial services executive is going to figure out there is money to be made by protecting his clients’ data.  Firms that build this service into their offerings so customers do not see a cost will win.  Protecting data requires scale, even though scale creates a bigger risk with each potential data breach.  Expect this incident to drive more consolidation in the financial services arena.  Also expect much huffing and puffing from Congress with little action as usual.  (If you want to get really irritated, check out Equifax’s lobbying efforts.)

(Automated) Manufacturing is Alive and Well

September 5th, 2017

I had a conversation with a friend in the packaging equipment business.  His company manufactures equipment for both direct (think consumer packaged goods) and indirect (think shipping) packaging.  The company has never been busier. The company’s backlog is up almost double what it was two years ago.  He spends his days as “chief complaint resolver,” as he put it, trying to figure out ways to get orders out the door faster for his demanding customers.

Yet anyone on the consumable side of the packaging business tells me things are just “OK.”  Most are meandering along with GDP-like growth.  Some are doing much better, some much worse than the 2-3% growth in the overall economy.  But, if I add it up, that’s probably a safe number for consumable growth.  What gives?

In this specific example, a lot of the equipment is going to consumer packaged goods (“CPG”) companies.  Their customers, predominantly major retailers, are getting hammered by the internet and consumer desires for fresh foods, among other things.  Retailers screaming for lower prices, necessitating cost cuts from the CPGs.    I’ve written this before but it bears repeating: despite what the government says about stagnant wage growth, the costs of employees continues to increase.  Health care isn’t getting cheaper.  Workers’ compensation insurance isn’t getting cheaper.  As the costs of labor increase, the cost of capital equipment becomes relatively cheaper.  Equipment also doesn’t call off work.

Automation is a fact of life.  US manufacturing output is at an all-time high.  Manufacturing employment has barely budged since the great recession (see graphs and link below).  If you’re not automating your business, someone else will.  If that happens, your business will have no jobs.

Our Politicians Fiddle While the Healthcare Debacle Marches On

August 29th, 2017

I have a friend with a chronic health condition.  This condition requires treatment once a year over the course of two visits.  It’s an outpatient procedure involving an infusion of a medication.  For the last three years, this treatment has been performed at the exact same facility with the exact same dosage.  The treatment involves setting up an IV, infusing the medication, and having the patient sit there for an hour to ensure no reaction takes place.  In all, a medical professional spends less than 30 minutes with the patient.  Following is what the hospital charged and the out of pocket charge to the patient each year:

2015                                       2016                                       2017

Hospital charge                               $5,744.44                             $6,856.02                             $8,163.04

Due from Patient*                          $955.02                                 $1,258.52                             $2,266.75

*The amount due from the patient reflects insurance adjustments and the patient’s deductible, which increased from $1,500 to $3,000 over the 3 year period.

That’s almost a 20% increase per year in the billed amount and over 50% per year in the amount the patient had to pay!  (Those of us in the label/packaging industry need to take lessons from healthcare about raising prices.)  Again, same place, same procedure.  Another fascinating factoid – the cost of the medicine increased less than 10% over the course of 3 years.  Additional “facility charge fees” from the hospital made up the majority of the cost increases in this example.

I know this is one example; I’m sure there are plenty of examples where our current healthcare system is saving people money.  We were promised Obamacare would “bend the healthcare cost curve.”  The evidence is lacking to support that claim. (  While all this goes on, we have a political party in power that complained for 7 years about Obamacare.  When they got elected, they had no plan to fix the problem.  And politicians wonder why there’s discontent among the people of this country.  Stop fiddling and start solving problems.


Have a Little More Consideration Than Preteen Boys

August 22nd, 2017

We were at our neighborhood pool the other day.  I was within earshot of my son and his friends discussing the eclipse.  They decided they were going to watch it together.  The following conversation occurred:

Preteen Boy 1:  “I can’t wait to watch the eclipse.”

Preteen Boy 2: “I heard we’re not supposed to look at it because you could go blind or something.”

Preteen Boy 3: “How could you go blind?  Isn’t the moon is blocking the sun in an eclipse?”

Preteen Boy 2: “I don’t know.  It sounds stupid to me.”

Preteen Boy 1:  “Why don’t we find someone to look at before we do?  That way, we can see what happens to him.”

Preteen Boy 3: “Yeah!  That sounds like a plan.  But who will we get to do it?”

Preteen Boy 1: “How about your little brother?”

Preteen Boy 2: “Yeah, we can use my little brother.  He’ll do it.”

Fortunately, the eclipse came and went with no one in this group damaging his vision.

After I had a good laugh courtesy of this scene right out of “The Little Rascals,” it made me think about how we act the same way in business.  We get together, discuss what we think is a good idea, and move into execution mode.  The impact on people is an afterthought in the conversation.  Don’t be as shallow as preteen boys.  Put people first and it’s less likely someone gets hurt.

Price Is All That Matters.  Until It Isn’t!

August 14th, 2017

One of our sale people got a call from a customer.  The customer was in a panic and wanted us to match a price on a product we stock.  Our sales person inquired as to why.  The customer responded, “My current supplier (our competitor) can’t ship on time.  I need an order to go out today but I can’t pay more than what they charged me.”  While the honesty was great, the logic was a little lacking.

We all want the best deal.  Too often, we revert to price as the most (or only) factor in the transaction.  An old business axiom says, “You name the price; I’ll set the terms.”  As so often happens, we have a competitor selling on price.  Our customer made the mistake of assuming said competitor would have the item available when it was needed.  Upon further digging, we were told our competitor regularly doesn’t have items available.  Stock outs happen.  Manufacturing issues happen.  But if someone is routinely out of products they supposedly stock, I think that’s their way of setting the terms of the deal.  The low price doesn’t really mean a lot if you can’t get the product.

Customers are very good at throwing out low-ball prices during negotiations.  They never reveal the other costs associated that are often associated with a low price.  The hassles of dealing with stock outs add a significant (although hard to calculate) cost to dealing with the low price.  “Ceteris paribus (all other things equal)”,  as economists like to say, a low price is great.  Quite often, that low price comes with strings attached.  As the Romans said, “Caveat emptor (let the buyer beware)!”