Breaking New Ground
By Michael Legault
If you've heard it once you've heard a million times: Find your core business, ensure you do everything to meet your customers' needs, and you shall profit and grow. Yet, if business simply reduced to this formula, you probably wouldn't have to co...
If you’ve heard it once you’ve heard a million times: Find your core business, ensure you do everything to meet your customers’ needs, and you shall profit and grow. Yet, if business simply reduced to this formula, you probably wouldn’t have to come into the plant every day. Just log into the laptop and send out the orders.
In the reality of today’s global market, however, injection molders are not only confronted by a host of hard choices and shifting strategies to secure and grow their customer base, they are often challenged by the very concept of what it means to have a niche. Do you define it by process, product, market, or a little of each? One molder recently interviewed in an industry trade magazine leaped over such details, declaring that his niche was to serve his customer’s niche.
There’s a certain beauty to this approach. The customer-driven organization is the most touted business paradigm of the day. But there can also be risks in becoming overly dependent on certain customers and allowing it to adversely affect your business decisions, say some molders.
“I don’t think chasing your customers around the globe is a good idea for most firms,” says Dave McQueen, president, Plextron Plastic Assembly Solutions (Toronto, ON). “Every market you enter is a new business that requires a considerable effort to manage and finance. Even for very large companies the cost of entering new and unknown markets is proving to be very expensive.”
Plextron is carrying forward the storied history of one of Canada’s original custom injection molding companies, Toronto Plastics, founded in 1951. For marketing purposes, the firm’s name was changed to Plextron in January, 2003. The company’s main markets are automotive and business machines with small amounts of business in the medical and consumer areas. The company employs about 130 people and operates 20 injection molding machines ranging from 50- to 700-tons in clamping force.
McQueen says there sometimes may be compelling reasons for molders to pursue a customer and consider a presence beyond North America. He recalls, however, a few years ago when you “had” to have a presence in the U.S., and later, in Mexico, noting that both of these markets now have challenges at least equal to those in Canada.
OFF-SHORE JOINT VENTURES GROWING
For many suppliers and manufacturers, Asia, and particularly China, is the new “have to be there” market. The reason for this is not only the rapid rate of growth witnessed in China over the last five years, but the general business trend that has seen a steady migration of manufacturing to low-cost countries. Some molders have opted to minimize the risk of entering this large, but volatile market by forming alliances and joint ventures with Asian partners.
Custom injection molder Titan Plastics recently inked a joint venture with Elec-Tech International of Zhuhai, China, creating Titan-ETI. The joint venture is intended to allow the companies to capitalize on Elec-Tech’s diversified manufacturing capabilities and customer base, and Titan’s marketing, product development and manufacturing competence.
Titan is one of the 30 largest injection molders in North America, with nine facilities in the U.S., Mexico and Canada. The company’s Canadian plant, based in Brampton, ON, has 41 injection molding machines ranging from 40 to 390 tons, and serves a variety of markets, including electronics, appliance, industrial and transportation industries. One of the plant’s niches is the molding of housings and components for home security hardware.
Titan vice president of sales and marketing Andy Macleod says there were several factors that figured into the decision to enter into the joint venture. “The types of companies we’re partnering with as customers are global players. They are requiring suppliers to be more than just regional.”
Macleod says the j.v., which had been in the works for about 18 months, was kicked off when Titan was introduced to Elec-Tech by a highly reputable third party. Macleod says Titan’s partner is a large, high-quality injection molder with multiple capabilities, include various post-molding operations, die casting, printed circuit board manufacturing and the ability to do complete design and product-build for appliances and other product lines.
“When your customer here sees you’re in China, it opens up additional opportunities to do business in Asia as well,” says Macleod.
One catch to the rosy China scenario could be the high rate of growth, which some experts believe is creating a potential economic bubble. Others in industry are skeptical of the harsh view that North American manufacturing is facing an inevitable, steep decline.
“There’s a lot of installed automotive capacity in North America,” says Plextron’s McQueen. “Transportation, logistics and politics all argue for continued local manufacturing to supply at least a large part of this market.”
McQueen argues that ultimately a molding firm has to know what its customer wants and think critically about how it can deliver value in the long term.
“You have to know your cost structure. You have to have a plan that doesn’t rely simply on having the lowest cost for labor.”
McQueen says he worries less about his competition moving off shore than his customer base of larger Tier Ones and OEMs. “If there are companies manufacturing here, there will be customers for me.”
PROPRIETARY LINES: CONTROLLING YOUR OWN DESTINY
Canadian Plastics annual injection molders’ survey has tracked a gradual increase in the number of molders who report doing some amount of proprietary molding. In 2000, 42% of molders said they did at least some or mostly proprietary molding. In last year’s survey (2003), the number of molders doing some proprietary molding jumped to 50%, an absolute increase of nearly 20%.
Some people in the industry view proprietary molding as a healthy alternative to custom molding for automotive and Big Box retail markets where the cost pressures have steadily eroded profit.
“More molders are looking for a niche that will help them survive,” says Bob Gemmill, title, president, Contract Executive Partners, Inc. “The approach can work as long as the product is unique. Plastic patio chairs can be copied.”
Buckhorn Inc. has built a thriving business as a proprietary molder. The company has become one of North America’s premier manufacturers of re-useable plastic bulk containers. The company’s product line includes collapsible bulk boxes, stack and nest totes, food processing and distribution containers, bakery trays, pallets and top caps and custom interior dunnage. The container products, which are usually made of high density polyethylene, are used by a wide variety of end-users and industries, ranging from agricultural and automotive to chemical and retail distribution. The company has three manufacturing facilities in the U.S. and calls on an array of forming processes–injection molding, structural foam molding, rotational molding and others–in order to produce its containers. Buckhorn Canada, headquartered in Brampton, does not directly manufacture product, but uses a number of Canadian-based sub-contractors to carry out its injection molding.
One of the company’s major strengths is design and development of product lines, according to Buckhorn Canada vice-president and general manager, Jim Morrison. “We develop full product lines, not just one-off products. We seek to provide customers with full, customized solutions for their container requirements.”
He cites the recent development of extended-height bulk boxes for Recuperation Cascades, a recycling firm in Montreal, as an example of the approach. The company needed a flexible, easy-to-use container system to collect and recycle fine paper in office buildings. The steel bins Recuperation had been using were bulky and hard to handle. Buckhorn dispatched personnel to the office to observe how the paper was collected and moved; eventually ended up supplying Recuperation with an extended-length, heavy-duty bulk box with casters attached to the base. The boxes hold mo
re paper than those previously used and can be easily moved from collection points to the loading dock for pick up.
“We sold them a solution, not a box,” says Morrison.
Although the thought of doing proprietary molding has crossed the minds of the brain trust at Plextron, the company has not actively pursued this direction.
“We don’t really have a customer base or distribution channels that would lend themselves to proprietary products and have always decided to concentrate on our core activities instead,” McQueen reports.
Plextron does offer a Niche Market Manufacturing Program dedicated to the manufacturing requirements of short-run, highly complex assemblies, usually in the range of 100 to 5000 units. In one case study documented by the company, a manufacturer of a large assembled filter housing with an annual volume of about 1000 pieces approached Plextron seeking a way to streamline design and reduce production costs. The product was originally designed with a few, highly complex large components requiring expensive tooling and lengthy lead times for production. Plextron engineers were able to optimize the design from 10 complex components to 15 simpler parts that were quicker to tool. The resulting re-design cut tooling time in half, reduced tooling costs by 30% and reduced the lifecycle part costs by 20%.
Whether it’s diversifying your customer base or product line, most people agree it’s better to have eggs in many baskets. Despite its success as a manufacturer of proprietary container systems, Buckhorn Canada recently took this sage truism to heart with a business decision to diversify into custom molding. In a sense, says Jim Morrison, the move is a return to the company’s roots as a custom molder when it was one of the first injection molders of plastic automotive parts in the 1970s.
One of Buckhorn Canada’s custom molding services group’s first products is a slide used in playground equipment. It is also producing industrial safety masks, streetlamp enclosures and combination plastic/wooden posts. Morrison says the decision to enter custom molding was partly related to the surge of capacity the company acquired with the purchase of a number of injection molders in recent years. He says his company has set a goal of acquiring 10 to 15% of its total business through custom molding work.
“We offer parts molded to customer specifications, extensive resin selection and a complete range of hot stamping, welding and assembly processes,” Morrison says. “We also have extremely advanced capability for incorporating metal parts into the molding process, which adds extra strength and durability.”
The keys to success in any molding operation, custom or proprietary, is having a handle on your cost structure, combined with the ability to position your business in relation to your customers’ needs, argues McQueen. “We work to specifically identify where our customers expect to have engineering and service support, and then make sure we provide it.”
More people are recognizing that high levels of support and simple factors, such as proximity to customers, lend North American molders important advantages over off-shore molders.
“I think some end-users have taken the quality of our supply base for granted,” says Gemmill. “There’s a service aspect, a quality aspect that’s overlooked until it’s not there.”
Gemmill says he is hearing more tales of business returning to North American suppliers after an unsuccessful attempt to make a part or mold off-shore. In the face of rising resin and energy costs, he argues that it is imperative that molders take a stand on pricing.
“Many molders need to take a more aggressive stand on pricing. Profit is not a dirty word.”
In the ever-shifting conditions of the plastics industry, injection molders are seeking new ways to ensure profit is part of their everyday vocabulary.
EQUIPMENT UPGRADE CAN PROVIDE QUICK HIT TO BOTTOM LINE
One of the most effective, sometimes neglected coping strategies for injection molders is the purchase of new equipment that will simultaneously and substantially improve a number of operational parameters. Such was the happy result at Plasticap Inc. when it recently purchased six new all-electric injection molding machines at its 40,000 sq. ft. plant in Richmond Hill, ON. The purchase gives the cap and closure manufacturer a total of 21 injection molding machines. It is Plasticap’s first purchase of all-electric machines and owner Terry Kennedy says he intends to purchase more in the future.
“The machines provide a number of benefits, including better repeatability, faster cycle times, lower maintenance and of course lower hydro costs,” says Kennedy. He says power costs have dropped by 20% since the purchase of the machines last spring.
Plasticap’s customers include Nestle, Kraft and Heinz. With a typical high-volume run consisting of 10 to 20 million closures, high productivity and efficiency are crucial to the company’s profitability, Kennedy notes.