Kelly Box Celebrates a Year of Safety

Kelly Box has always focused on safety. This year it really paid off. Not only did we get through a year without a lost time accident, we actually made it through the entire year without a single safety report!

"We've had several years without a lost time accident," said Joe Kelly VP of Production, "but I am pretty sure this is the first time we've gone a whole year without a single incident. That is pretty amazing."

Kelly Box tries to keep the safety conversation going through a number of high profile initiatives. Every week without an incident Joe Kelly buys the production team lunch, cooking out hamburgers on Friday. This keeps the focus on safety front and center. After a year the menu is upgraded to steaks for a week and everyone gets a new KBPC jacket or sweatshirt and a picture on the front lawn.

It is a great accomplishment for our team and a record we are very proud of....let's make it two years!

Kelly Box Investing in the Future

At Kelly Box and Packaging we believe, and our customers demand, that we continuously find ways to improve performance and reduce costs. This is never easy. Fast turn-around, agility and responsiveness are key elements of the services we provide. As our business continues to expand and the volume of packaging we run through the plant increases we have to look to technology for answers.

Over the last twelve months Kelly Box has implemented a number of new technologies on our plant floor to improve performance and reduce costs. We installed a robotic feeding system, implemented a new inventory management system, invested in new plant management software, and now we are adding a new 66 x 135 two colorHycorr Rotary Die Cutterand an AG Stacker

We expect the new equipment to increase productivity 20-30%. This in an important improvement as we continue to grow our business while maintaining and improving the level of service and responsiveness our customers expect.  

Recycling Means Recovering

Recycling is about recovering the material far more than it is about using recycled material in the first place.

This is a complicated subject and there is a lot of disinformation out there, so it is nice to come across some hard numbers once in a while that are unambiguous and point the way clearly.

In 2012 91% or 29 million tons of the corrugated packaging used in the U.S. was successfully recovered for recycling. This makes corrugated the most recycled packaging material, outstripping all other mediums by a wide margin.

Most OCC (Old Corrugated Container) gets recycled into new paper products. More than 50 percent was used to make new container board packaging. An additional 12 percent was used to make recycled paperboard and more than 34 percent was exported.

Yes, we are working on a corrugated bottle to replace those plastic bottles filling up the Pacific ocean.


Interesting Talk by Charles Moore http://www.youtube.com/watch?v=en4XzfR0FE8 about plastic.

What is the Recycled Content of Your Packaging?

We are often asked to provide a measure of the recycled content in various corrugated products we use in the design, manufacture and production of packaging. Like many things, this question is a lot more complicated than it might appear. 

At Kelly Box and Packaging we source our paper from a variety of vendors. Not every corrugated vendor is the same.They each have products that are better suited for some applications more than others. In addition the recycled content that our vendors provide to us often changes from run to run. As a result, it is virtually impossible to know the precise recycled content, unless we source from a completely recycled provider. 

In some applications completely recycled material may be effective, but as anyone who has worked with 100% recycled material can attest, there are definitely cases where this is not a good solution. So we analyze the role the packaging plays, the characteristics of the product, its handling and environment to identify the best vendor at the best price for the raw sheets we use to produce our finished packaging. As a rule, all corrugated packaging will have some recycled content, and the amount of recycled content is increasing. Currently there is approximately 45-60% recycled content in the packaging we produce. 

If you really want to know how much of the packaging is recycled content there are not too may ways to find out. Fundamentally a mass balance approach is recommended since no physical or chemical test method is currently available to determine absolute recycled content of a finished paper product. Mass balance is an application of law of conservation of mass to the analysis of physical systems by accounting for material entering and leaving a system. 

But the real story is not about recycled content, but the down stream recover-ability and here corrugated truly shines. There is a thriving global market for OCC (Old Corrugated Container) and the recapture rates of corrugated are the best in the world. Much of this is reused and the share of the (RCP) Recycled Content Paper in Corrugated is rising. 

Kelly Box Deploys Top Gun Inventory Management System

At Kelly Box we consider our plant and extension of your plant. By integrating our order management systems directly into our ERP software we continue to push the envelope on reducing and managing inventories and tightening delivery and turn-around times. 

We recently implemented the Top Gun inventory management system to increase our real-time awareness of inventory. This system is mounted on all forklifts and provides drivers with real time information about the location, status, count and position of finished goods inventory throughout our multiple warehouses. This will reduce the time to locate load and deliver customer products and save time and money that will help us maintain a competitive advantage over other packaging producers. More efficient deliveries, less errors, better service, lower cost. That is the Kelly Box commitment and Top Gun is another tool to help us serve our customers better. 

Consolidation and Closures

“International Paper closing three US box plants, one sheet plant as consolidation continues
SAN FRANCISCO, May 3, 2013 (RISI) - In addition to previous reports of two box plant shutdowns,International
Paper this week said it will close three corrugated container plants and a sheet plant in the US by mid-year.

The company will close box plants in Indianapolis, Lake Wales, FL, and Kansas City, KS, and a sheet plant in Jacksonville, FL.

Related to the Indianapolis closure by early July, IP cited overcapacity in its corrugated packaging system in some areas following the February 2012 combination with Temple-Inland.

The Indianapolis shutdown will eliminate 91 jobs, and the closure in Lake Wales near Lakeland will impact 61 workers.”

Lighter is Better? Less is More?

 In addition to tighter supply, increasing OCC costs and the lack of virgin fiber inputs other changes in the paper market are making their way into the packaging sector. The decline in demand for other traditional paper markets with advent of digital information has created excess capacity in lightweight paper mills: think newspaper. Couple this development with the increased dependence on short fiber raw stocks and better paper making technology that improves the performance of paper at lower strength/basis weights through the use of fiber alignment technologies and we are seeing an increase in the variety and prevalence of lightweight liners.  

In 1978 six different paper weights comprised 95% of the market for liner board with 50% of that market in 42# liner. In 2011 there are a bewildering number of paper weights, (you can find paper that has a basis weight for every number between 15 and 90) with 42% of that market between sub 26# and 37# liners. This trend is only going to accelerate as new stronger lightweight liners make their way into the market. Many customers and packaging suppliers faced with this level of complexity in the market simply throw up their hands and go for heavier paper or worse simply revert to old and expensive mullen grades.

Knowing how to manufacture packaging in this environment is critical. At Kelly Box and Packaging we have invested heavily in testing equipment and technology to ensure that we can deploy these new materials and still deliver the kind of packaging performance your products, processes and customers demand. We have testing and design capabilities that let us take advantage of these newer paper combinations to create cost effective yet reliable packaging. 

Container Board Prices Increase $50/ton

In our Post of March 13 (http://kbpcblog.blogspot.com/2013/03/the-price-of-paper.html) we discussed the long-term drivers of the potential price increases and speculated that there would be a strong push for an increase in the second quarter. 

The second quarter is here and so is the price increase. Containerboard prices moved up $50/ton from $685-695/ton to $735-745/ton. 

US containerboard producers have pushed through their announced $50/ton price increase for April. Which should translate to box price increases in May. The price increase appears to be holding with suppliers unwilling to take orders at the old price or offer rebates against the new price. 

What is driving this increase? In the earlier posts we have talked about structural drivers of this market, but this increase hinges on a few key short-term issues. 

Near term the market is expected to tighten because of significant maintenance and project downtime plus the normal seasonal pickup in box demand. Box plant and mill inventories fell by 123,000 tons in March despite lower consumption due to two less shipping days. Total US containerboard inventories are 8% below last year. The April-June quarter have usually seen and average decline of  133,000 tons or about 6% over the past decade, but maintenance downtime and a favorable calender (22 shipping days in April) are driving expectations even lower, closer to a 200,000 ton drop in inventories.

US box shipments are essentially flat for the year. This is a supply side increase, with only little overall increase in demand. Box shipments fell in March by 6.8% to 28.911 billion ft² on an actual basis, though this reflects two less shipping days. Adjusting for the extra days, the shipments were up 2.5% from a year ago. Year-to-date box shipments are down 2.1%, , but after adjusting for the lost shipping days the first quarter shipments were up a very modest 1.1%.

Total containerboard production fell 2.6% in March 2013 vs. March 2012 and production is off 0.6% year-to-date. 

In a nutshell, mill inventories are down, supply is tight and prices are rising against seasonal demand. Recent consolidation and an emphasis on profitability will drive non-performing mills into the black or into extinction.

Endless Recycling?

The recycled content of liner board continues to increase, and the fact that U.S. OCC (Old Corrugated Container) has a 91% recovery rate is a great story for the environment. Although technology continues to find ways to use these highly recycled fibers to produce liner, the simple reality is that paper fibers are not infinitely recyclable. The more we recycle paper the shorter the fiber lengths become and these short fiber materials are dramatically impacting the performance characteristics of finished packaging. The amount of Recycled Content Paper (RCP) is growing.

Virgin fiber provides great crush and puncture resistance at low strength/basis weights, however the amount of virgin paper being produced in North America is not going to change any time soon, if ever. The regulatory environment effectively prohibits to construction of new virgin paper mills here in the US and at this time there are no plans to build virgin fiber mills anywhere in the world. There are rumors that Russia is evaluating the possibility, but for the foreseeable future the virgin content of packaging will be static while the worldwide demand for packaging increases. So RCP will be an increasing part of the mix for a long time to come.

Robotics: The Future is Now

Lean manufacturing is about constantly striving to do more with less. This is particularly important to  packaging companies like Kelly Box and Packaging where the material and operating costs are continuously rising. But lean manufacturing presents its own challenges in a company that runs 36,000 different parts in any given year, where the corporate culture is one of service the customer in whatever way necessary, including assembly, setup, component aggregation and many other services. "In many ways we are just a big job shop," says Joe Kelly, VP of manufacturing for Kelly Box, "but we also have a commitment to lean principles, and we strive to build in efficiency everywhere we can."  

For some the goal of lean manufacturing is means to realize the highest productivity possible while virtually eliminating waste. Others focus on minimizing human capital and optimizing process motion and flow. At Kelly Box they focus on a variety of different tools, but one way to cut to the chase is investing in technology. For some time now industrial robots have been a natural component of lean manufacturing. Robots offer the ultimate in repeatability. But newer robots also have the flexibility to improve the performance of a company like Kelly Box where they do more than 1200 machine setups in a month. The strength of a modern robot is the inherent ability to change, adding a valuable dimension of flexibility to the production process. Rather than running repetitively day after day, they provide precisely repeated motion within a specific production cycle, with the ability to achieve the precise repetition of a completely different motion for the next production cycle.

Kelly Box has found a place for robotics in its very challenging manufacturing environment where the ability to be flexible to an ever changing range of customer needs is central to the company's mission.

Check out the link below to see the Kelly Box Robot in action. http://www.kellybox.com/autofeeder.html

Impact of OCC on Price

Mill inventories are not the only drivers of price. Container board exports were up 4% in 2012 and expected to increase again in 2013. Even anemic growth in China is still growth and export demand will also have an ongoing effect on prices. OCC prices are increasing. This is a volatile market and prices move significantly quarter to quarter but the trend line is continuously upward. The OCC market will also continue to drive Liner board prices higher.

In addition to tighter supply, increasing OCC costs and the lack of virgin fiber inputs will put long term upward pressure on prices. The increased dependence on short fiber raw stocks and better paper making technology may improve the performance of paper at lower strength/basis weights off a corrugator, but understanding the performance characteristics of these components in finished boxes is another matter. Either way, it seems we will be paying more for less for some time to come.

The Price of Paper

The cost of paper increased $50.00/ton last fall. The three majors, Rock-Tenn (NYSE:RKT), Georgia Pacific and International Paper (NYSE: IP) have all announced increases for the first week of April, and IP is saying 12% on liner and 10% on boxes April 6. An announcement is not an increase, and it is unlikely that prices will move in April, but It is very likely they will get an increase of some kind during the second quarter of 2013. 

The recent wave of consolidation is giving the mills an unprecedented amount of supply side control. Mill inventories are well below the 10-year average of 4.2 weeks. In the past when mill supplies fell below four weeks it was a clear indication of price increases coming, and it was difficult for the industry to manage supply that closely. The advent of better inventory control systems has improved the ability of the mills to reduce inventories, but as we all know, shorter lead times and tighter inventories lead to increased volatility. 

Throughout the latter half of 2012 mill inventories fell below 3 weeks and stayed there. Why? Usually mill inventories are function of increasing box demand, but finished box demand was actually flat last year (359.8B sq.ft in 2012 v. 359.0 B sg.ft in 2011) so this increase was not tied to demand. For the first time in memory, liner board prices and finished box demand have decoupled. Understanding everything that drives prices in a market is impossible, but the supply side inventory control must be seen as a consequence of consolidation. Rock-Tenn’s acquisition of Smurfit Stone, International Paper’s acquisition of Weyerhauser and Temple Inland removed two of the least disciplined players from the market and has created an environment where tighter mill inventories is likely here to stay.

Your Packaging is Changing (Whether you want it to or not)

The packaging industry is in the midst of an unprecedented period of turmoil and change. The weight, performance, fiber content and cost of paper is undergoing a radical change. The advent of new technologies and unprecedented consolidation has fundamentally changed the markets for liner board and finished boxes. Worldwide demand for fiber has significantly altered the raw material inputs for the paper industry and is transforming the way packaging performs. The cost of liner board increased $50.00/ton last year and will continue to rise. 

The paper content of your corrugated packaging is changing, and it is getting harder to know just what these changes mean for the price and performance of your packaging. We are increasingly encountering new customers that describe performance issues that seem to appear “out of the blue”. Why is this happening? The simple fact is the amount of fiber in liner board has already changed, and these changes are subtle and difficult to quantify. The chart below describes the changes. These lighter liners are already in the market. 

The paper producers claim that these liners perform as well or even better because the technology used to produce the liner has improved. This may be true. Our internal testing regime has produced mixed results. The fact that corrugated sheets will perform at ECT32 off a corrugator does not mean those same sheets will deliver the same performance as the heavier ECT32 sheets we are used to running. The process of converting sheets to finished packaging impacts performance characteristics. This puts pressure on the box maker to have effective tools to measure the performance of the packaging we produce. It also forces us to carefully evaluate the performance of sheets from different suppliers, because each supplier is doing different things to get their performance up and they are not sharing these secrets. Some mills produce better paper than others.

Consequently we have invested in new testing equipment to augment our current testing program. We have to. The variety of liner board and paper combinations we encounter when working with new clients is impossible to evaluate without careful testing. Buyer beware. ECT32 is not the same old ECT32 you are used to, it could be better, but it may worse. It all depends on how you are using it.