Thermoformer’s survival through thick and thinThermoformer’s survival through thick and thin

With the retirement of their father, Barry Shepherd, brothers Todd and Mark Shepherd took over responsibility for daily operations at Shepherd Thermoforming (Brampton, ON). Todd, the company’s president, has worked for the company for 23 of its 25-year history, and shared with us some lessons learned during that time, plus some thoughts for the future.

MPW: Tell us how Shepherd Thermoforming started.
Todd Shepherd: Barry Shepherd worked at Kodak for a number of years, then went into the corrugated industry working for smaller companies, and finally became an agent for Alloyed, a company that made heat sealing equipment and did custom thermoforming. His experiences at Alloyed really interested him and he decided to expand his agency into contract packaging, which also included thermoforming.

In 1990 he bought his first inline former with a partner and began doing contract packaging and heat sealing. The problem was that in contract packaging we were in competition with sheltered workshops, and didn’t really want to be a competitor to them. By this time, however, the plastic thermoforming side of the business was really taking off, so we focused on thermoforming and sold off the contract packaging side.

We’ve done well even during the tough times and this year we’re celebrating 25 years in business. Dad’s a couple of years into his retirement and only just retired from an active role with the SPE Thermoforming Div., where he served in a number of capacities such as the Roll Fed Technical Chairman for the 2009 Conference and as a member of the board of directors. The last two years, during this transition, have served as a great launching pad for us.

MPW: Your company has both thin-gauge roll-fed and heavy-gauge sheet-fed forming capabilities. That’s a bit rare for thermoformers—they’re usually one or the other. How did that come about for you?
TS: That’s an interesting story. About four years after starting the company, Dad saw that it was going to be a successful business and wanted to buy out his partner, who had helped him get started in thermoforming. The shareholders’ agreement contained a shotgun clause in that our partner could have bought us out, leaving four Shepherds out of a job. Not really knowing how it might turn out, we bought a small heavy-gauge former.

The heavy-gauge industry was getting a lot of press with rotary machines that were becoming more versatile, faster, along with lots of talk about twin-sheet forming and new materials coming onto the market. We began looking at some heavy-gauge jobs in case the partner bought out my dad. We ended up having a great shareholder’s buyout and both sides are happy with the way it went.

During the 1990s, the heavy-gauge work took off and we just let it grow. Over the years it became an important part of the business, allowing us to ride out the business cycles more easily. At times, the thin-gauge business was weak and we relied on the heavy-gauge business to get us through that period. Now, it’s the other way around—the heavy-gauge work is down but the packaging side of our business in the thin-gauge forming is doing very well. It’s interesting how it all works out, not from a great plan or anything but from a need.

MPW: What have been some of the most valuable lessons you’ve learned?
TS: When Dad was running the business there were so many changes in direction. It seemed that we were constantly going left, then going right, changing course. I always said that when my turn came, I’d be more constant in how I ran the business. Now that I’ve been running the business for a few years, I’ve learned that day-to-day you have to be able to react: be flexible and change quickly. But also you have to get people to understand why you’re changing something.

I always thought I could be consistent, but the need to react to what’s going on in the market—to sustainability issues, to the economic downturn, whatever—is critical to being successful, especially in tough economic times. We’re at $7 million in sales, so it’s harder to turn this ship around than it was many years ago. I find I have to stay ahead of things—to be more proactive than reactive.

MPW: What has been the biggest change you’ve seen in the business over 25 years?
TS: I guess there have been no huge changes. It’s been more evolutionary. Back in the 1990s the environmental push came on pretty strong, and we were very focused in RPET. One of our marketing strategies was getting customers to convert to it. Equipment changed to some degree, with servos on inline equipment. Mostly it’s been a gradual evolution, but we’re always asking ourselves, “What’s the hot button next year?”

Three years ago, shortly after I took over, we thought the material handling products market and the heavy-gauge business would take off, and we focused on marketing that. However, currently consumer packaging has been our growth market. Even with our focus on material handling, the market went in a completely different direction. Retail packaging is the biggest portion of our business right now. Three years ago I wouldn’t have thought that.

MPW: To what do you attribute the fall-off in heavy-gauge work? What markets do you serve in that business segment?
TS: We do a lot of material handling products such as pallets, dunnage, containers, and such. That has fallen off primarily because automotive is tied heavily into that segment. When automotive took a downturn, so did our auto business.
We serve a handful of customers in that market, and we have adjusted to its peaks and valleys that occur about every five years. So we got lucky with the timing on this cycle—the economic downturn aligned with the bottom of the cycle in this market. Next year it will start picking up for us in heavy-gauge. We’ve been focused on getting ready in sales and production, poised for the upturn.

The U.S. portion of our business has been growing, and we’ve been able to meet the changes in demand with respect to our customers’ inventory requirements. In the U.S., as the economy got tough, customers wanted to buy less product [but] more often. We’re shipping weekly now to more customers. Because of our ability to do low-cost tooling and short runs, we don’t need big long-term commitments. Our average run is about 20 hours, so we change out tooling on a daily basis on every machine. A lot of customers are going to more of a just-in-time with spot purchases. Buyers also like the flexibility of quantity on orders, avoiding the problem of getting stuck with inventory. That’s where our flexibility fits.

MPW: What is your biggest challenge today and why?
TS: Trying to figure out where the market is going to go—figuring out the next marketing steps for us. Prior to the recession, it was all about sustainability, carbon footprint, etc. The last year and a half, that’s really gotten quiet as some of the focus shifted to survival and making money. With our customers, I think they’re trying to get through the recession and get back on the sustainability wagon when things are good again. The question is, how long will the focus be on recouping losses before sustainability can take hold again?

Every month I talk with our bank; I call, giving them the good, the bad, and the ugly. I find it helps the relationship and your bank can provide some interesting perspective on industry. The big surprise is how many companies are still struggling. This concerns me—how long the manufacturing recovery will actually take.

MPW: What does sustainability mean to Shepherd Thermoforming?
TS: I believe we have to look at sustainability in the big picture, not just what bioresin can we make our products from. Our customers really struggle with what sustainability means to them. What do they have to do? How can they get their head around it? It’s a big animal but the recession gave people the opportunity to rethink it. I like how sustainability works for North American manufacturers. There are so many angles to sustainability; I often believe it is too complex, creating too many opportunities to manipulate. I understand the goal; however, I’m not sure the public will.

MPW: What about bioresin materials with respect to customer demand? How is Shepherd Thermoforming responding to this?
TS: Again, I think we have to look at the big picture when it comes down to those bioplastics. We’ve experimented with them for customers, and made some sample parts. But when you go through the heat distortion problems, the contamination problems they can cause in the recycling stream, you have to understand there are hiccups. If a customer wants PLA, we do what customers want. We just have to let them know the benefits and weaknesses for all materials, and find out what suits their goals.

MPW: Does Shepherd extrude any of its own material?
TS: No, we buy all our material. We don’t make any of our own sheet or film in-house. We do over 20 turns on inventory annually, with 80% in RPET materials, some HIPS and PVC for tamper-proof packaging and barrier films. Back in the early 1990s when environment was all the rage, even if customers were requesting PVC, we’d recommend RPET, just to keep that option in front of them. RPET is not easy material to use. Back in the early days, forming it was challenging, trimming it was harder. I like to think we were ahead of the curve with RPET and the jobs we took on back then, and the role that has played in the success of Shepherd Thermoforming.

Todd Shepherd is president of Shepherd Thermoforming, a leading North American processor and one of that rare breed of thermoformer who is engaged in both thin- and heavy-gauge processing. The family-owned and -run company is celebrating its 25th year in 2010.