This roll- and folded-paper manufacturer changed its infrastructure and invested in technology to gain marketshare. Stephen Schwartz explains.

We do not often contemplate the time and energy spent in designing, manufacturing, and customizing the receipts we receive from retailers. But the management at RiteMade Paper Converters, a 100% ESOP headquartered in Missouri, does, and the retailers who casually hand us those slips of paper are their newest target customer base.

RiteMade manufactures roll paper products for machines such as cash registers, POS systems, and ATMs. The company sells these products on a national basis to dealers, distributors, and major regional and national end users, such as grocery stores, department stores, restaurant chains, and banks.

Since its inception in 1952, the company’s primary focus has slowly evolved from working exclusively with paper product dealers and distributors to developing relationships with major regional and national end users that purchase those products independently. As such, the company has also started changing its management structure from two divisions—one focused on the end user segment and one on dealer/distributors—to a vertical structure with a marketing arm.

Stephen Schwartz

Breaking it down
Schwartz said the roots of RiteMade’s structural evolution were planted nearly 15 years ago when the retail environment began experiencing explosive growth. Malls, restaurant chains, and shopping centers started popping up faster than flowers in spring, and RiteMade’s business philosophy began to look outdated.

“Our operation and foundation from 1952 until the mid-’90s was almost exclusively focused on dealers and distributors,” he said. “The theory was by only calling on dealers and distributors, we could say we don’t work both sides of the street. But as the retail world exploded, it became clear we had our heads buried in the sand.”

Schwartz categorizes end users into three groups. The first are operations with a large percentage of franchises in which the parent company doesn’t get involved with these kinds of supplies. They leave it up to the individual franchisee that may operate one or multiple units to source their roll supplies.The second category comprises operations with inhouse purchasing and distribution capabilities. RiteMade ships to one or more of their distribution facilities, which, in turn, supply the individual stores. The third are regional or national retailers that do none of their own supply distribution. “They negotiate pricing for the distribution with organizations that specialize in distribution and then put out a product bid to companies such as ours,” said Schwartz. “We agree upon a price, but we don’t ship it to the end user. We ship it to the end user’s distributor, such as Staples.”

Initially, RiteMade approached these end users with the sales force used for dealers and distributors. The company soon discovered the purchasing process and buying cycle for end users was entirely different, and the sales force wasn’t making much headway. The company decided to create a marketing division to approach prospective accounts using phone, fax, and e-mail in an attempt to establish a relationship and identity, create credibility, and ultimately an opportunity to quote on their business.

The results
The end user division was formally set up in the fall of 2003 and operated separately until early 2007, when Schwartz and his team decided to change the company’s infrastructure. Since February, they have started integrating the end user division into the overall operation and converting it into the marketing department. By late October, he expects the transition to be completed. The marketing department will focus on opening a pathway for sales people to follow up on a person-to-person basis with prospective accounts of all types. “We’ve been working on consolidating each division’s database, the ways in which we will go to market, and how to train our internal and outside sales forces to accommodate this new structure,” Schwartz said.

Although the company is still focused on its core business, the dealers and distributors of large roll paper, Schwartz attributes most of the company’s growth to the enhanced end user focus. In 1998, RiteMade did roughly $12 million in business. In 2002 that number grew to $30 million, and for 2007 he expects the company to hit $50 million.

“We’ve been growing at a double-digit rate for the past five years, and a large part is increased sales to end users,” he said. “But we’ve barely scratched the surface.”

Another aspect of RiteMade’s growth comes from its technological investments. Schwartz said the basic manufacturing practices for rolled paper haven’t changed much during the 30 years he’s been in the business, but the equipment has improved by leaps and bounds. Thirty years ago, a two-man team of operator and paper packer was expected to produce roughly 100 cases of product in an eight-hour shift. Today they can produce at least 400 cases using the most efficient equipment.

“Twenty years ago, our goal as a company was to generate $200,000 in annual revenue per employee. Our goal today is $500,000 per employee,” Schwartz said. “With the opening of our new state-of-the-art facility in Kansas City in mid 2008, we will have taken another important step toward achieving even greater efficiency, in addition to giving us the capacity to meet future demand.”