From Dixon Ticonderoga Co.’s sales statistics, it looks like the computer geeks who have been predicting the demise of the pencil since the personal computer was born will have to wait perhaps another century before getting close. “The U.S. pencil market in total imports in any given year for the last 15 years has been between 3.2 billion to 3.7 billion pencils annually,” reports Tim Gomez, CEO and vice chairman of the board. “Of that market, Dixon is approximately 50 percent.”
The company has been producing its premium-brand Ticonderoga pencil for more than 100 years. Its other pencils are the Oriole-branded pencil, the Dixon-branded pencil and private-labeled pencils for several retailer partners.
Dixon Ticonderoga also produces Prang ready-to-use paints for the arts-and-crafts market, a brand that is more than 125 years old. Prang’s flagship watercolor products are sold at retail locations and in the education market.
Dixon has been producing art markers since the 1960s. It also has developed a process for Renew Recycled Pencils to manufacture them from scrap wood left over from its pencil production. “We are able to create a finger joint and gluing process that will take that scrap wood to create a new wood slat that allows us to generate renewable pencils from that scrap,” Gomez explains. “Because of that process being effective and efficient, we’ve gone to market with it offering our customers a value proposition, selling them for 8 percent to 10 percent less.”
With the finger-joint and gluing technique, consumers of the recycled pencils reportedly pay only for the erasers tips, ferrules and manufacturing costs. Dixon’s plastic art markers also are recyclable. “Dixon leads from the front on having eco-friendly, environmentally supportive programs, not just with our products we’re selling in the market, but end-of-life programming to have a sustainable business model for end-consumers,” Gomez asserts.
Dixon Ticonderoga is responsible for nearly 1,500 containers of products being imported into the United States annually. The company operates from factories in China, India, Mexico, Italy, Germany and France. Dixon Ticonderoga also has commercial subsidiaries in the United States, Canada, Mexico, Chile, Argentina, Brazil, Singapore, Australia, China and India, to name a few. “We are truly the only global education and school supplier that participates on the writing side and the arts-and-crafts side worldwide,” Gomez declares.
Forecasting demand is done one year in advance. “When you’re vertically integrated, the strategic planning of your demand chain becomes much more important,” Gomez notes. “So we have to start well in advance. Because our products are manufactured from natural raw materials-based trees, vertically integrating your demand requirements dictates how much wood you need for your product during that upcoming year – because the current year you’re in is when the wood is harvested, not the year you’re looking to distribute. We have integrated enterprise resource planning systems that allow us to match up our raw materials with that demand chain, but it’s not a push system – it’s a pull system based off of the demand requirements.”
Forecasting demand is done in conjunction with Dixon Ticonderoga’s customers. “We have very longstanding, reliable relationships with our customers in education and the retail side,” Gomez notes. “We will negotiate with these customers in the summer of 2014 for implementation in 2015.
“So we’re very quickly able to take these projections SKU by SKU – and we have over 10,000 SKUs – and we know the trends of the purchasing patterns of these customers on what we call our rolling 18-month cycle,” he adds. “We have an in-house demand chain drive system we call SMART forecasting.”
This system involves what Dixon Ticonderoga calls a “scrubbing process” in which the data is evaluated. The company then can determine the amounts of materials that will be needed. “With SMART forecasting, we‘ve been able to take about $2 million of logistics cost out of our supply chain in the first year,” Gomez reports.
That first year was 2009. Since then, Dixon Ticonderoga has saved $1 million annually by optimizing full container shipments while the company has been growing 50 percent annually in size.
The company has been able to optimize its shipments by classifying each product with the letters “A” “B” or “C.” “A” products require eight to 10 weeks of inventory to be on-hand, while “B” level products require three months of inventory and “C”-level products can have up to a one-year supply on-hand.
“By being able to effectively manage this with an eye toward the demand chain, it allows us to vertically integrate with our factories,” Gomez points out. “Because we own our own R&D centers worldwide, we are able to respond to market needs with the highest quality and lowest cost possible.”