Lessons from a Transformational Leader in M&D

Bob Cohen:

Happy to. Happy to be here.

Travis Epp:

Could you please start by giving us an overview of the Acme Corrugated Box Company?

Bob Cohen:

Acme Corrugated Box was started in 1918 by my dad. My dad had an eighth grade education and like many sons of immigrants, he was faced with the challenge of finding work. His father was a tailor in Russia, and when he came to the United States, he went into the rag business, which was industrial rags. He would take old clothing and cut it up and use it for oil spills and manufacturing operations. So my father decided to branch off and started on a horse and wagon collecting used boxes and scrap metal, and that's the way his business started. That was the genesis of how he got started in his enterprise.

Travis Epp:

And how would you summarize the business today?

Bob Cohen:

I would say that we are state-of-the-art in almost every aspect of our business. We just finished a $40 million expansion. We are an independent in a marketplace dominated by four or five major producers that control about 80% of the market. So we have to be more agile, more flexible, more responsive to compete in that marketplace.

Travis Epp:

One significant development over the last number of years is obviously COVID. COVID is now over officially, but what I think a lot of companies in the manufacturing distribution world learned is they weren't ready, they weren't prepared for many different scenarios. Could you comment briefly on some of the lessons learned you feel came out in the industry and then how it's also impacting what you've done already and how you will think how it'll change the future as well?

Bob Cohen:

Well, the heroes of the pandemic were my plant floor workers. They didn't miss a beat. In the beginning of the pandemic, it was very scary because no one knew how the virus is spread. There was all kinds of concerns about close contact. And we were concerned in the beginning that if we had one case of COVID, we'd have to shut down the facility.

Frankly, one of our competitors in New York kind of led the way in terms of how to handle that. So we actually isolated it down to if we had an incident of COVID-19, we would shut down that machine center. We would do a spray. We had electro, I think it was electrostatic sprayers that took away the virus, the issue of the virus in terms of handling the machinery. We used all kinds of prophylactic remedies to be sure that our people were safe. We allowed our office staff to work remotely.

And I think the lesson learned for us was that it was unpredictable. We were considered essential. We were in the supply chain where boxes actually packaged a lot of the pharmaceutical products, and we sell probably 20 or 25 pharmaceutical packers, mostly generic pharmaceutical packers, primarily in New Jersey. And they needed to keep operating and we needed to operate to be able to facilitate their ability to get to market.

Travis Epp:

You mentioned supply chain. Can you describe any hiccups or challenges, whether it's for either your company or your competitors in getting the raw materials they needed to do the processing?

Bob Cohen:

It's a very interesting thing. Our business in March of 2020 dipped 20%, and in April it dipped about 15%. And then from May on it was gangbusters. And our last quarter of 2020, our volume was up about 20%. So it put a significant strain on our company and we went from being a supplier that could produce at about 95 to 100% on time to sometimes we were as low as 40% on time to our clients.

The other interesting thing about that raw material became very tight, paper supply became very tight in terms of the demand, meeting demand, and we actually saw ourselves on allocation with a number of suppliers. So we had to scramble to find paper to be able to service our clients. We did, but it was no easy task. So the supply chain was affected in many ways.

And then we saw our clients purchasing patterns change from the Toyota just-in-time, it went to when can you get it to us? And also they would parallel their orders. They would place orders for the next two or three months because even though we were performing, we were performing poorly, but so were almost every other raw material supplier. So the key was not to run out of anything. So the last thing they wanted to run out of was packaging. And so we had to respond to that.

And again, it was very difficult maintaining the operation through a pandemic and satisfying clients. And I'm sure it was a problem for our clients because the other issue that I had never really experienced before, except for once in the early '70s during the gas shortage, was a constraint on converting capacity. Usually, the constraint was on paper-making capacity, and it was usually very short-lived. But if you were a client of ours and you were unhappy with us, you couldn't do anything. You couldn't go anywhere else.

So it was a very unusual time. And of course, that's reversed itself. But in a period of time of a two-year period, year and a half to two-year period, clients could not move their business because they couldn't get the product anywhere else. The other interesting thing is the business is cyclical, and usually the larger producers take advantage of a market like that we had during the pandemic. And what they would do is continuously raise prices and sometimes not based on anything other than they just desired to raise prices.

So during the course of the pandemic for a two-year period, the prices went up almost 30 to 32%. And so clients didn't even argue about the price because of the supply chain issues.

Travis Epp:

How have the procurement strategies maybe changed for you or even your customers in the last year or two since the pandemic?

Bob Cohen:

Well, I think there's been a greater appreciation of us as a supplier, which is always nice to see. I do think that some clients have put their business out to bid because they were so, I guess shellshocked by the increases that they saw during the pandemic.

We thought it would affect, we were a sole supplier in a number of accounts and we thought it would impact some of those clients seeking a secondary source, but so far that has not happened as much as we thought it would. And of course, my sales group is out there and a lot of times they get more of a hearing today because of the supply constraints during the pandemic.

Travis Epp:

Can you give a little bit of an outline of what your strategy is?

Bob Cohen:

Obviously, we're constrained by the product that we sell because of its bulkiness and its value. So we sell in a five-state region. We don't really come up to Long Island or New York due to freight costs. During the pandemic, what we found is a lot of people who were in the age range in their sixties, whether they be in the trades or being factory workers, they look for early retirement. I think the pandemic chased a lot of people out of the workforce.

And so getting drivers was very difficult. And actually we use a logistics carrier. The drivers don't work directly for us, they work for a third party. And they were having a difficult time finding drivers because of retirements. And the wages started to escalate considerably. That's one of the other things that the pandemic raised. There was a lot of talk about a $15 minimum wage. You can't hire anybody for less than $15 today, so that's a moot concern.

But drivers went from making fifty-some thousand dollars a year to 75. Probably today, our drivers are making $80,000 a year without overtime. So there was a significant escalation of wage costs. And certainly with freight to attract drivers, they were really, freight companies were poaching off of each other for drivers. So it did cause some issues for us.

Travis Epp:

Just want to take your comments to maybe a little bit more of a global issue and talk a little bit about US manufacturing because traditionally we've outsourced our manufacturing [inaudible 00:10:00] to many foreign countries. With what you were just talking about, the prices have only increased making us maybe a little bit less competitive. What are your thoughts on US manufacturing in general?

Bob Cohen:

I think people are going to reconsider offshore manufacturing where they can, certainly pharmaceuticals. I think the issue is automation, can you automate because finding workers is still very difficult. So can you automate your operation to the extent that the cost per unit continues to shrink? And can you make it competitive with places like Southeast Asia or China?

And I think with the logistics issues and the geopolitical issues that I do think that more people will consider coming back, whether they come back right to the United States or come back to Mexico. I think if I was selling a product in the United States, I'd try to find a way to automate to be in this marketplace if possible. For a lot of reasons. I think the pandemic showed the fallacy of the supply chain being squeezed or the issue of the supply chain being squeezed. So I think there's definitely an uptick in people figuring out a way to make the United States work as far as a manufacturing center.

Travis Epp:

Yeah, I agree that companies are looking at the idea of reshoring. One challenge I still see is that companies still tend to focus on the short term, whether it's the quarterly earnings as opposed to long-term. So I think there's still a little bit of headwind on reshoring, but I think what's happened in recent years shows the value of having a more domestic supply chain.

Bob Cohen:

Well, I belong to a council, Delaware Valley Industrial Resource Council, that works with companies to improve profit, to improve their processes, et cetera. I've been a council member for 20 years and I've been involved with DVIRC for probably 25 years. And you would be amazed at the different types of products that are manufactured very locally, the intricate products. So I think the more specialized the product is, the more chances it'll be reshored. But I find that most of the manufacturing people in my group, and they're a diverse group, are very optimistic about what they can do domestically.

Travis Epp:

One thing that I find very interesting about my position, my job, I get to see a lot of great US manufacturing companies. And like you said, it really is interesting the abilities they have and what they can produce in this company.

I want to shift a little bit and just now we were talking a little bit globally, maybe talk about a couple areas where you address and focus on Acme a little bit is you've just done a major expansion. I know automation versus employees were a key thought. Can you expand on why you did the expansion and why you felt it was necessary?

Bob Cohen:

Well, the best technology comes out of Europe because in Europe, most of the countries are a mix of capitalism and socialism. And so what you have is when you hire a worker, you almost can't fire them. So most of the innovation in automation is coming out of Europe. So we've made several trips to Europe to look at cost savings issues and automation, particularly because of the labor issues. And we think they're going to continue. And I don't foresee labor changing for a long time in terms of the ability to hire labor, to find labor even at the right wage levels.

Travis Epp:

What I've seen that's common with a lot of manufacturing distribution companies, and we've talked about it previously, is it's a limited workforce. There was challenges with loyalty during the pandemic because people would jump to other opportunities that were in the short term best for their family. And I think that's also going back to your overall concept where automation is what you think is key to driving the success of your company forward.

Bob Cohen:

The equipment we buy, the modern equipment we buy, first of all, it's much safer and safety's a big issue in a manufacturing facility. It's also much more productive and efficient if utilized correctly. And I don't want to go to an old bromide, you don't have to worry about sick days and vacations and everything else that the automation's always there. We want to have interaction of humans and automation. The problem is that the base for employment is so limited. And you cited something that was crucial. During the pandemic, if we didn't pay the right wage, which I believe we do, but if a guy could make 50 cents more, they just left. There was a lot of mobility between workplaces. Now that's not the case because people read the newspapers, they see the news, they see the issue of layoffs. A lot of companies have instituted layoffs because of the economic conditions, and so people are less likely to chase a new job. So we found more stability over the last six months.

Travis Epp:

Maybe just expanding on that a little further. Obviously, there's been significant inflation. I've seen forecasts where they expect it to come down a fair amount in the coming year. Interest rates are up. What are you expecting over the next year or so regarding product demand and what you're going to see from the economy?

Bob Cohen:

Well, I think we were already in a recession. We were a pretty major indicator, and we saw business fall off in June of 2022. And now it's at a stable level, but it really reflects the levels of 2019. So our volumes are basically there. Our revenues are up because of the increases. But because of capacity in our marketplace, and we can talk about that, I know we're going to talk about that further, prices have dropped because there's more competitions, there's keener competition, and people, as I mentioned before, were not during the pandemic, not able to go out and price out their product. They can do it now.

So we've seen heightened competition and we've seen demand fall. And we've seen order patterns change. People are not ordering way in advance. I do still have some customers ordering in advance, which is kind of funny because they don't have to. But we went from delivery dates four to eight weeks out, and now we're back to what I would consider normal, which is three to five working days.

Travis Epp:

Okay. So my understanding is that obviously your customers are very critical to you and you operate in a competitive environment. Let's get it back to the expansion a little bit and how that helps you to better address your customer needs.

Bob Cohen:

As a business man, I only know one way and one way is forward. I don't know how to go backwards. We were faced with a question, do we stay where we are or do we meet demand that kept increasing? And it's funny, I said to my middle son, Jeremy, who's operations manager now, general manager, I said to him, "I don't think I can deal with the townships." The townships are murder to get permitting from, and even when you're going to add tax dollars to their base, they're an organization or an institution that likes to say no. And I really didn't want to deal with that. So I said to my son, Jeremy, "If you want to expand and I think we need to," we were at capacity and we had issues of when our raw material for production reached a certain level, we had to shut our major piece of equipment down because we didn't have the space. But I said to him, "If you want to go forward with this, you're going to have to carry the ball with the township."

Once we got all the permitting, there was a certain time period for the permitting, so we decided to go ahead. That was, the expansion started in November of 2020, and the process took about two years to build a building. It's much easier to do a greenfield startup than to integrate two separate building, the expanded building and the current building.

We also upgraded our corrugator, which was capacity constrained, and we started to conveyorize our entire plan for material handling. Again, wherever we could eliminate labor in terms of material handling. Not only to eliminate labor, but labor doesn't want to do that and labor does not want to handle bulk product anymore. So what we wanted to do was provide the ability to combine automation with ease of manufacturing.

So we conveyorized our entire plant. We put a work-in- process system in that is new to the United States, but not new in Europe. In Europe, because of land constraints, they go vertical, and so do we. My son Jeremy was actually in Eastern Europe where you would think they were behind the times, but frankly they were ahead of the times because they bought the latest automation as they started to ramp up their capabilities on the consumer products level.

And we saw this racking system in Romania and it was 60 feet high and it held about two days worth of production from our corrugator. So when we came back, we decided to build the space not only to accommodate more roll stock, we buy rolls of paper from major producers, and also to add equipment, but also to add this work-in-process system, which is based on the material comes down and it's integration of software that allows the material to be taken down by a automated robot, a crane robot. And then it's put on transfer cars. And these transfer cars operate without anybody on them. They're totally automated. And they take the material to the converting line, and then it's converted.

There's human intervention in the converting operation, but no human intervention from the corrugator through to converting. And then once the product is produced, it goes down a main line and is packed for shipment. It goes right into our shipping department.

Travis Epp:

I think it's a great illustration of a local company using global expertise to help customize their plant and the automation to really help you meet the demands of your customers on a timely basis. And one thing I also want to briefly touch upon is you've been at the company over 50 years, but you have the mindset that you're not the expert in everything. Not everybody, not every CEO has that mindset, so I'd just like some comments on your thoughts on the importance of surrounding you with advisors and key management team members.

Bob Cohen:

Well, as an entrepreneur, I know what I don't know. I've had a board of advisors that are non-fiduciary for the last twenty-some years, and that board meets four times a year. And they prove to be a sounding board for my executive team, that it's almost like a report card for all the executives that I have in my company, my CFO, my sales management team, my general manager, my HR manager, because we're obviously always trying to manage our company better.

And what we try to do is I try to get people on the board that have come from different disciplines. For instance, somebody who's been in sales in his time in business. I have a couple of retirees. I have a board member who worked for an equity company running several different entities for that equity company. I have a business board member who was in a family business similar to mine. And they sold their business about five years ago. And actually he now puts together boards of advisors. My wife is on our board. She's an attorney and a businesswoman.

So what I find is it's therapeutic in a lot of ways to have somebody come in and say, "Did you think of this or did you think of that?" I don't think every entrepreneur is a genius. I think that they look for ways to find better systems and better ways to do their business. But somebody who comes with a little bit of a critical view of what may be part of an operation, I think is very helpful. So I firmly believe, in fact I've helped other business people get board of advisors because I think it's so integral to success.

Travis Epp:

So it sounds like your willingness to listen to other parties who have different sort of skillsets and knowledge helps you to achieve one of your goals where I think you would try and make every one of your departments a profit center versus a cost center.

Bob Cohen:

I'm glad you brought that up because I think a lot of businesses, particularly big businesses, look at different parts of their operation as cost. And I think as soon as you do that, you demean the people in that department. You make them less than they are. And to me, every part of my operation is a profit center. Every part of my operation can be improved and can work to the benefit of the company and the revenue the company generates and the profit the company generates.

Travis Epp:

So as we're wrapping up, you've been there about 50 years. You have some family members in the business. You have some other experts. I guess you're starting the sort of thoughts on succession planning, and that'll probably take some time as you continue to figure out how involved you want to be in the business.

Bob Cohen:

Well, I think my wife would like me to cut back as much as possible. I still enjoy the... I enjoy the people. A true entrepreneur, it's not about the money. I think money's a byproduct of success. I don't view it as something I chase. I've never chased a dollar. What I have chased is being better every day. How can we be better at what we do every day? How can we get to be world-class as an operation? How can we be the envy of competitors, not somebody hated by competitors, but somebody who people use as a benchmark for success and also for the way we run our business.

Reputation is very important to me. Integrity is very important to me. Being straightforward with our clients, being straightforward with all our internal people. I always call it, I call it blue-collar trust. And all you have to do is do one thing to endanger that trust and you lose your people. Maybe you lose your people forever. So it's very important, whatever we say, we do. And whatever we promise to people, we keep that promise.

So that's something that I... I'm very proud of the fact that I think most of our people trust us and trust that they're going to be included in decision-making. We do a newsletter at least twice a year. In that newsletter, I always write a statement about what we're doing as a company. Whatever we discuss internally with my executive group, they're hearing exactly the same thing. They're not hearing something different. They're not kept in the dark. We try to do a lot of internal relationship building because it's crucial to the success of the company.

And what I find is if you find people adversarial, it's a negative for a company. You want everybody to swim in the same direction. And so you really have to facilitate that environment. You have to make people feel not resentful, but part of what you're trying to do.

Travis Epp:

And just to add on to that, Bob, in looking at your website, one of the key things I saw is you like seeing the personal growth and maturation of your employees. And I think that ties into what you were just speaking about, the importance of the relationship with the employees.

Bob Cohen:

Yeah. Well, I think you can do a lot with a mature group, people who've been with you a long time. I have one young woman who works, well, she's not so young anymore, but she started working for me out of high school and she's been with me 35 years. She's got a photographic mind, she remembers, we do about 40,000 orders a year, and you can ask her about an order that happened three years ago, and she could probably tell you. It's incredible to me how smart she is. And I have built business on a lot of people like that. And I respect them, I value them. And I think if people know that they're respected and valued, much more likely that they're going to give you loyalty and devotion and be conscientious in their jobs.

Travis Epp:

One last question. I've really admired how entrepreneurial you've been over the years. Is there one piece of advice you would give to somebody who wants to start a business these days?

Bob Cohen:

Two things I would say. One is in a company like mine, if you prove your competency, I give you autonomy. I let people do their jobs. I don't want to get in front of people. I don't want to micromanage people. I want people to feel important in their roles.

The second thing, and I've told this to college graduates and I've told this to students that my wife and I provide scholarships for, don't accept the word no. People always want to tell you what you can't do, what you can't be, what you can't. There's always this issue of victimhood to me is an absolute albatross around people's necks. So I learned a long time ago when people tell you they can't do it, it's no, or you can't do it, you've got to work around them. You've got to work around that now.

And I think that's a critical piece of information I would give to any young person. Don't let anybody stop you. You have a dream or if you want to do something, don't let parents, advisors, teachers, if they tell you you're not capable or you can't do it, go ahead and do it if that's what you believe you can be.

Travis Epp:

I would 100% concur with that in trying to grow a business or whatever you're doing, if you don't encounter bumps in the road, well then, maybe you're not doing anything. So seeing those bumps in the road, to me, is actually a good thing.

Bob Cohen:

Well, I did have failures in my business. Back in the 1980s, I bought a second business and I failed at that business. And it taught me humility and it taught me that just because you think you're smarter than the guys who you bought the business from, doesn't mean that you are.

So I think if you can supplement ego, which a lot of entrepreneurs can't, do because we see that displayed all the time in private sectors, if you can't supplement ego, it really becomes a hindrance to you, an obstacle to you, I think. Because people will go along with you if they really believe in what you're trying to do, but if you're just out for yourself or if you're narcissistic or whatever, and a lot of entrepreneurs become narcissistic, I think it's a problem. And I think you could certainly have more success by bringing people all along.

Travis Epp:

Bob, I just want to thank you very much for joining us today and wish you and the Acme Corrugated Box Company all the continued success.

Bob Cohen:

Thank you very much, Travis.

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