Minimum Margins, Maximum Returns

As its name suggests, Corrugated Supplies makes and sells corrugated paper sheets, often called cardboard, to companies that print, cut, and fold them into packaging and consumer displays. It and its customers compete with giant vertically integrated companies, such as International Paper and Georgia Pacific, that grow trees, make pulp, and turn it into boxes and other end products.

Founded in 1962, the company has seen its industry evolve into a commodity business characterized by intense pressure on profit margins. But unlike many small competitors that have fallen by the wayside, Corrugated has discovered a profitable niche, adding value in the form of fast turnaround, superior customer service, and product customization. That explains why it was able to rack up sales of more than $70 million last year, double those of just three years ago.

Just-in-time manufacturing and delivery are central to this strategy. Corrugated and its customers keep minimal inventory. The company receives about 700 orders a day, about half of which are delivered to customers' loading docks within 24 hours. That requires fast, accurate communications, notes David G. Pung, director of information systems. To that end, the company has invested heavily in network and Internet technology. Roughly 70% of orders now arrive via a Web site designed expressly for customers. The upshot, says Pung: "In the past two years we have doubled our volume and the number of transactions without adding capital equipment."

The most obvious cost savings have come from eliminating a lot of manual data entry and paper shuffling. But that's just the beginning. Pung envisions a seamless flow of data up and down the supply chain so that information on a Web order can be automatically routed to all affected parties, including suppliers of raw materials, manufacturing managers, and shipping dispatchers.

For the last three years, Pung and his staff have been developing a state-of-the-art enterprise resource planning system that will integrate with the company's intranet and the Internet. Pung expects this investment to pay off not only in manufacturing and distribution savings but also in better management. "Over this next year we can exploit the effort by disseminating data in more useful formats so management's decision making and planning are backed up with hard facts," he says. "Everything from budgets to inventory levels can be analyzed for optimization."

As margins on corrugated packaging shrink, value-added and auxiliary services will become increasingly important to Corrugated's prosperity, and technology will provide much of the impetus. Shipping, for example, is a promising growth area. Instead of relying solely on third parties, the company has created its own trucking fleet, linked to an electronic tracking system that lets a customer see an order being loaded, unit by unit. Moreover, customers can use the Corrugated fleet to deliver finished goods to their own customers.

"You can buy corrugated sheets from one of the many suppliers in the marketplace," says Pung, "but none include the integration of services that we have. Technology, such as online ordering and tracking, integrated shipping, and virtual warehousing, gives our customers new tools that allow them to compete for further business up the supply chain."