Pearson Packaging Systems’ Progressive Approach to Business
Turning the traditional machine builder model completely around, the OEM is breaking new ground in e-commerce and systems integration, while adopting cutting-edge technology, like blockchain. A risk? Yes. But it’s paying off with skyrocketing revenue.
Behind the scenes of a $100 million company pioneering new and somewhat risky industry technology, Michael Senske hangs his hat every night. Then he asks himself, “How could we have done it better?” As the CEO and president of Pearson Packaging Systems, based in Spokane, Wash., Senske leads by example. His continuous improvement mindset has transcended to the shop floor and beyond. Pearson doesn’t rest on its laurels, from its people to its equipment. Because of this, it appeals to companies like tech giant Amazon. Companies that needed an out-of-the-ordinary solution to handle the unpredictable and everchanging e-commerce market.
Andrea Zaman, COO of Pearson Packaging Systems, will never forget opening the New York Times to find Pearson’s name on a Fanuc robot. The article was about how Amazon deployed more robots to work alongside employees. But to her, that doesn’t mean Pearson packaging systems has reached its peak. Zaman and Senske celebrate and acknowledge milestones, but the focus is always on what’s next and how they can optimize it.
“Growing from $20 million, when I first got here, to over $100 million now, you can’t just keep scaling the same way. You have to do it differently,” Zaman says. “And now, at more than 100, we’re again changing how we analyze our business and how we become scalable."
As Pearson Packaging Systems continues to scale, the OEM prioritizes business initiatives that will propel its growth. In some ways, this could potentially change the OEM business model altogether. With the company’s “continuous improvement” whiteboard full of new ideas, Pearson is ready to ride the wave of whatever market needs packaging and palletizing.
Adaptation paves the way for future development
Pearson Packaging Systems' facility: 180,000 sq. ft.
Founded in Spokane in 1955, Pearson Packaging Systems invented the first automated six-pack carrier erector. In 1994, the company expanded its facility to 110,000 sq. ft., which still serves as the headquarters. Seven years later, the company shifted its focus from building machines to completing end-of-line solutions. Then it implemented lean techniques in 2003 to improve customer quality and lead times. In 2004, the OEM began offering robotic systems, which positioned it for explosive growth. Four years later, Pearson Packaging Systems went into acquisition mode. First, they bought Goodman Packaging Equipment, giving it a presence in the Midwest. They kept Goodman’s Chicago office open with 20 project managers, service personnel, and mechanical engineers. The company’s portfolio continued to grow with the addition of bliss/tray forming technology from Moen Industries in 2012.
Most recently, Pearson Packaging Systems acquired Flexicell. The Ashland, Va.-based robotics-only picking, packing, and palletizing solutions provider launched Pearson toward its next level of growth. While Pearson and Flexicell share similar product offerings, the companies didn’t share much customer overlap. So both stood to gain by joining forces. Pearson finds itself in a hard-to-reach place in the Pacific Northwest, disconnecting itself from the rest of the packaging industry. By purchasing Flexicell and leaving its operations in Virginia, Senske says he hopes to reach, service and support current and prospective customers more effectively. The second most prominent reason behind the Flexicell acquisition revolves around Pearson’s dedication to offering robotic solutions.
Embracing a new approach at Pearson Packaging Systems
The premise that it would solve packaging and warehouse automation problems with robots only was Flexicell's foundation. This appealed to Senske. “Historically, we are more traditional machine builders. We have been integrating and implementing robots since 2004. But we always look at problems from a more traditional approach first and then apply robotics second,” Senske says. “Whereas with Flexicell, they were exactly the opposite. They wanted to solve problems from a robotic perspective only, and we thought that was healthy. We think that’s the direction the industry really needs to go because of flexibility, reliability, re-deployability and all those things that the robots offer.” Pearson’s robotic offerings have also propelled the OEM into the e-commerce space. The addition of Flexicell’s approach to packaging applications will further increase OEM’s presence in the industry.
“As an e-commerce company’s packaging or product styles are changing, we’re developing solutions. They really leverage the flexibility and the re-deployability of robots, instead of more traditional approaches,” Senske says. “Another benefit of a robot is that there still might be some annual changeover. Still, you can automate large portions of the changeover process using robots. One online commerce company might have different needs than another. At the end of the day, what we’re finding is that its automation process is very similar.”
Aside from conquering the e-commerce space, a large focus for Pearson in 2019 is ramping up Flexicell’s Virginia facility. This allows the OEM to better service most of its customers residing in the Midwest, East Coast, and Southeast. To manage the growth of the new facility, and two others, Pearson Packaging Systems prioritized implementing an enterprise resource planning (ERP) system. This permitted all of Pearson’s employees—across multiple facilities—to see all of OEM projects.
Balancing LEAN with Talent Retention
To manage rapid growth over the past couple of decades, Pearson has implemented many LEAN techniques. In 2003, the company adopted LEAN manufacturing. Since then, it developed a dedicated department with Six Sigma Black and Master Black Belts that lead a Continuous Improvement program. This includes weekly meetings on the shop floor where people can pitch ideas, and a group of managers evaluates and oversees immediate implementation. The department also leads anywhere from three to five Six Sigma projects at any given time. It offers class instruction to all employees to facilitate the adoption of LEAN principles. Pearson also has a long history of running week-long Kaizen events to improve a large number of processes. Over the last decade, it has completed more than 65 official kaizen events.
This year, Pearson was honored as the packaging leader in picking, packing and palletizing integration by FANUC America. Over the course of the past 10 months, Pearson has sold 110 Fanuc robots.
While LEAN has afforded Pearson success and growth, it didn’t come without hesitation from its people. When a company goes LEAN, there is a consensus that it means the elimination of people and jobs. Senske doesn’t view LEAN as a way to cut costs. He sees it as a way to drive growth. It’s a win-win, which is why Pearson made a commitment that it will never eliminate a position as the result of a kaizen event. The company will redeploy that individual elsewhere.
“I have no doubt that not everybody is happy here,” Senske says. “Our growth, becoming an integrator and acquiring companies, can create a bit of angst. So, I understand that there are times when people stress.
"We’re really fortunate to have really good people. We really go out of our way to create an environment that retains them because we are only as good as they are.”
Back to the basics
When Senske came to Pearson 20 years ago from Microsoft Corporation, he had a vision. He saw the company focusing on the product line, professionalizing the sales organization, and realizing the ability to integrate complete end-of-line solutions. And Pearson has done just that.
“When I first came to Pearson, we were a much smaller company, and proudly proclaimed that we had 69 different standard products,” Senske recalls. “I think part of the problem we had back then was that we were really serving 10 key customers. So they would come to us every year and we would be really willing to do almost anything they asked. But we wanted to recast the company by focusing on what we were good at. Let’s actually look at what we’re good at. Then determine whether or not that applies to broader markets and a broader customer base. Let's just be really good at that for more people.”
So now, Pearson does fewer things—specifically case erecting, packing, sealing and palletizing—but for more people.
“As a result, I think the quality of our products is better,” Senske says. “Our customers just have a better overall experience.”
Pearson could also recruit and train a sales force that knew the company’s equipment by focusing on its core competencies. Employees who understood the kind of industry Pearson deals in. Ultimately, this resulted in more sales and customer relationships for the OEM.
“I want our sales force to communicate the value that we’re creating for customers. [I want them] to better understand what they need and then provide them that solution. It’s not just about the speeds and the feeds, it’s about how it’s going to help our customers solve a business problem.”
In Pearson’s Spokane facility, the OEM has taken part fabrication out of the equation due to the availability and abundance of machine shops in the Pacific Northwest, or the “land of Boeing." The OEM was adding the most value in the design, assembly and engineering of its equipment, so it decided to outsource part manufacturing to materials suppliers and vendors within Washington.
Pioneering new technology
While Pearson has now become an integrator, Senske says the company isn’t trying to be everything to everyone. Focusing its offerings on its core competencies has allowed the OEM to do what it does best. It allso can take risks on emerging technologies that have yet to impact the OEM space.
“I really underestimated how traditional of an industry this has been historically,” Senske says. “It’s taken a little bit longer than we thought it would to reach some milestones. Over the last five years, we got the rock to the top of the hill, and now, it’s rolling downhill pretty quick.”
What does the rock represent to Pearson? Perhaps it's blockchain, the technology that underpins cryptocurrencies. It can also provide a secure, decentralized approach to distributing shareable digital information that is not modifiable. It also has quite the potential to disrupt the current OEM business model.
Banking on blockchain
Pearson is currently piloting blockchain-based equipment. It gathers machine productivity parameters in real-time. Then it uses them to calculate transactional payments based on the machine’s overall performance. This Machine-as-a-Service (MaaS) model allows Pearson’s customers to get a machine up and running before they pay for the entire piece of equipment. The OEM has ventured into the MaaS model before blockchain technology existed, which meant the process was more manual. But now, implementing blockchain technology to this model has streamlined data collection and payment.
Learn more about who Pearson is Partnering with to provide blockchain-based machinery by visiting: oemgo.to/blockchain
“Instead of the customers feeling like they have to have onerous terms to force our compliance, we believe blockchain potentially simplifies the contract. Now those terms and conditions really don’t apply anymore,” Senske says. “At the end of the day, they don’t have to worry about their down payment because there isn’t one. We’re providing them a completely different service with a different financial and economic paradigm.”
Senske thinks blockchain-based equipment may restore the OEM's power over cash flow and revenue.
This case sealer was tailor-made for the e-commerce industry in response to the demand for highly flexible equipment. Instead of having uniform sealers at the end of lines, Pearson will install a sealer like this that automatically adjusts to the different case dimensions that are coming at it on the fly. The sealer has many moving parts inside, the first checks the width of the box, the second checking the height, and there are photo eyes up front that will adjust the equipment to handle whatever it sees. Finally, the tape head will automatically adjust to accommodate the different box sizes. The first moving part checks the width of the box. And then this will check the height of the box.
“We will determine a certain amount of money per unit to measure with that particular customer. They may look at that amount and say, ‘Well, wait a minute. If we just bought this equipment, it would be $100,000. If we lease for seven years, we could pay more than that. Why would we do that?’” Senske says. “But end-users will fundamentally have to step back and remember that they are not acquiring the equipment. We are giving them more flexibility, parts, service and delivering on a promise of throughput.”
The Pilot Phase
During the pilot phase, Senske says Pearson is being very selective in who it works with. That way, the OEM can fine-tune its approach to find out how to benefit both parties equally. Once in place, throughput metrics are measurable weekly or even down to second by second. A continuous annuitized revenue stream will occur as Pearson’s equipment hits its goals. This is because of the automatic invoicing and payments via the blockchain.
This approach may provide Pearson with more flexibility and diverse revenue streams in the long run. What does that mean for its resources dedicated upfront to equipment that doesn’t pay them until after the machine is up and running?
“We are going to offer this service on a couple of our machines, not the whole business right away," Senske says. "It would be a problem if every single customer said they wanted to go to that model tomorrow. We probably could offer this because we are in a favorable position financially right now. But, it would be a hell of a lot more risky than what we’re talking about.”
Pearson predicts five or six blockchain-based machines in year one and maybe 15 to 20 in year two. But, “who knows, it may take off even faster,” Senske says.
The management and handling of Pearson’s blockchain-based machines will largely depend on the metrics and how customers want to measure them. The machine’s PLC has a code that will audit machine data periodically. Pearson employees will substantiate when a customer wants to validate that the machine is actually hitting its goals. In terms of the reconciliation of funds, a consistent connection to the machine where performance data is transmittable and recorded is key. Pearson will also allocate occasional resources to help customers substantiate and audit the data and funds. After reporting machine data, Pearson's blockchain technology works the rest out.
“We’re very aware of the fact that we need to further develop the model before we just open it up. We can’t be reckless,” Senske says. “But the feedback we’ve gotten from customers…a lot of people are clamoring for it.”
Looking forward
With 75 to 100 machine projects on the floor at any given time, it’s safe to say that Pearson is busy. However, lowering its lead times is a major priority for the OEM in the near future. Right now, its core equipment has a 60-day lead time. Senske and Zaman want it in 30 days or less, one year from now.
“It will no longer be that we’re competitive with lead times. No one will keep up,” Zaman says. “We want to say we have the best lead time in the industry.”
Going forward, Senske also thinks that Pearson needs to be less conservative in implementing new technology. The shape of the OEM’s future depends on how well it listens to customers and implements operational adjustments to meet lead time expectations. Not just within the obvious departments like engineering, assembly, or supply chain, but also in marketing, HR, finance, and IT.
“I think that we have a lot of opportunities in progressive technology, and frankly, we could also improve our service and support,” Senske says. “That’s one of the most important things we hear from customers…and no matter how good it is, it can always be better. We need to always push to be better and faster and create more value for our customers and the industry.
PackML moves the bar for user-centric design Coming from Microsoft, Michael Senske was shocked by the lack of homogeneity in each PLC and HMI design in the packaging industry. “That was a bad thing from a service and support perspective for us, it led to less reliability,” says Senske, president and CEO of Pearson Packaging Systems. So, as one of the first OEMs to implement OMAC’s Packaging Machine Language (PackML), Pearson saw the programming standard as a strategic approach to homogenizing the coding process for PLCs and HMIs, using templates and code library, while also reusing tried and true codes instead of doing it differently every single time. Pearson also uses PackML pack tags to make data available in a similar format on all of its machines to customers. “There were a lot of internal benefits for implementing PackML, but there were also a lot of customer benefits, as well,” Senske says. “And we have a lot of customers that are now specifying it so we made that our standard instead of having to respond on a case by case basis. Even if our average customer didn't value it or they didn't know they value it, we thought they'd get benefit from it.” Macro trends, like the shortage of skilled operators, require improvements in the HMI, as well as easier or automatic changeovers. Another trend that has been steadily manifesting itself over the years is the increasing proliferation of SKU’s and shorter product runs leading to an increased emphasis on fast changeovers. To address these macro-needs, for the past five years, Pearson heavily invested in a program called User-Centric Design, which targets the usability and accessibility of its equipment and optimizes it to the user needs. Pearson studied users in their environment to understand their obstacles, which led to many improvements on the machine—some of which are mechanical like reduced changeover points, improved access to changeover points, ergonomic adjustments and improved visibility inside the machine. “Traditional PLCs and touch screens aren't nearly where they need to be to fully realize what we want to do with User-Centric Design, but they're getting there,” Senske says. “We want to make our equipment so self-evident to run that somebody can figure it out on the spot, as opposed to having to memorize it. We want to make it more like a consumer electronic device.”
Pearson Packaging Systems
Location: Spokane, Wash.
Established: 1955
Leadership: Michael Senske, President and CEO; Andrea Zaman, COO
Revenue: More than $100 million
Employees: 275
Field service personnel: 27
Facility: 180,000 sq. ft.
Markets served: North America
Industries served: Packaging, food, beverage and pharmaceutical
Product range: Top loaded secondary packaging automation including erect, pack, seal, palletize and integration, specifically: case erectors, bliss formers, case and carton packers, bag inserters, robotic partition inserters, case and bliss sealers, bag uncuffers, standard and custom robotic palletizers and integration services
Standard controls platform: PLC Rockwell Compact Logix or Control Logix
Pearson Packaging Systems' facility: 180,000 sq. ft.
