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A lot can change in a year; even more in two, which is when we last surveyed the Canadian injection molding industry. Indeed our fourth survey in the last five years points to a number of new trends–some significant–in the markets served, size of companies, number of machines, buying intentions, scrap rates and management practices at Canadian injection molders.

If there is a key, overall theme to the survey’s results it is, with few qualifications, growth. Fueled by freer trade, the largest and longest economic expansion in the last 40 years and a low loonie, Canadian molders seem to have at long last adopted the some of same aggressive business practices of molders to the south. Another theme that follows from analysis of the survey’s data is diversification: Molders seem less inclined to put all their shots into the molds of a single market. On the troubling side, perhaps in part because of expansion, the survey suggests some decline in quality and management capabilities. And, not surprisingly, the survey shows that Internet use (see e-commerce story, pg. 31) among molders has exploded.

Our analysis is divided among three benchmark categories: business/market, equipment and management. The survey is ideally suited to a charts-and-graphs presentation, which is more or less self-explanatory. Noteworthy trends and comparisons are included in the text that accompanies each set of graphs and tables.

Business/market benchmark

This year’s survey data , when compared to the surveys of previous years, shows a number of gradually evolving trends in both the type of molding operations and company profiles of respondents. Table 1 illustrates the gradual upward shift (nine percent) over the last four years of the number of shops doing exclusively custom molding. The rise in the percentage of companies doing solely custom molding is accompanied by a drop in the percentage of those shops doing custom molding with some mix of either proprietary or captive molding. The trend could be explained by a number of strategic business factors, including the desire for more flexibility among molders, or the decision of large, global customers to out-source captive molding operations for economic or other reasons.

Figures 1 and 2 indicate that in terms of numbers of employees and numbers of machines, respondents’ shops are getting larger. In 1997, for example, the largest segment of molders (32 percent) had operations with 20 to 49 employees. In this year’s survey the largest group of molders (24 percent) has operations with 50 to 99 employees, a segment that has grown by eight percent over the last three years, while the number of molders with 20 to 49 employees has dropped nine percent over the same period. That said, the Canadian injection molding industry is still dominated of by small- and medium-sized enterprises, with 51 percent of the companies reporting 49 or fewer employees.

The number of machines at molding facilities has been on the rise over the last few years also. The number of plants with 11 to 15, and 18 or more injection molding machines have grown by five and eight percent respectively in comparison to the survey two years ago, indicating that more respondents have been buying machines for additional capacity, rather than for replacement.

Consumer goods remains the main market for the majority of respondents (Figure 3), however the number of shops molding primarily for automotive has grown by seven percent over the last survey. Molders who describe their main market as electronics has also grown by 3 percent in comparison to the survey data from two years ago.

In comparison to the previous survey, reject rates have risen somewhat at smaller companies (20 or less employees) but have generally decreased at larger molders, with a higher percentage of companies reporting reject rates in the zero to two percent range (Figure 4). The percentage of companies exporting a higher percentage of their product has risen in comparison to the results of the previous survey. Given the low dollar and the over-heated U.S. economy this comes as no surprise.

The survey data on the percentage of quotes (Table 2) that turn into new business is difficult to interpret. A 12 percent increase in the percentage of molders reporting quoting success in the 11 to 20 percent range, would seem to indicate a nominal decrease in the numbers of molders bidding successfully on new business. Also, the number of molders reporting quoting success at 50 percent or above has fallen from 24 to 18 percent. In light of the growth, in terms of machinery and employees, indicated by the survey results, these figures may simply mean that business for many injection molders is mainly being driven by capacity upgrades for current customers.

Equipment benchmark

An indication of the level of the growth in the Canadian injection molding industry is provided by the survey respondents’ machinery inventory (Table 3). There are 169 more machines reported in this year’s survey compared with the 1998 survey. As the total number of responses is roughly the same (213 in 1998 vs. 218 this year), this translates into an estimated real growth of about nine percent over two years, or 4.5 percent per year. Most of that growth has occurred in the range of 500 tons and below, implying that the predicted trend to larger tonnage presses has yet to affect the Canadian market.

Injection molders’ robust growth and confidence in the market is reflected by the increasing percentage of respondents with plans to purchase injection molding machines over the course of the next year (Figure 5). The most dramatic increase in molders’ intentions to buy is at shops with 10 to 19 employees (up 22 percent), although the results show buying plans have significantly risen at operations of all sizes.

There is only a two percent increase (from 14 to 16 percent) since the last survey in the number of shops reporting the capability to centrally download real time machine operating information through a data acquisition or other network. Machine utilization (Figure 6) shows that the bulk of molders are operating equipment in the range of 70 to 80 percent of capacity, which in a market increasingly dedicated to custom molding is perhaps only slightly below ideal operating efficiency.

Management benchmark

Molder capability in the areas of assembly/finishing, in-house moldmaking, electronic data interchange (for invoices, purchase orders, etc.) and just-in-time delivery (Figure 7) shows some size-dependent variability. For example, while only 16 percent of molders with 10 to 19 employees report moldmaking capability, that percentage rises significantly for larger shops. Paradoxically, EDI capability shows no size-dependent pattern; with the rise of Internet usage among molders there may be some confusion about the exact definition of electronic data interchange.

Training and R&D budgets (Figures 8 and 9) are comparable to the results of the last survey, with the exception of the eight percent increase in number of molders spending zero on R&D. Overall, more molders have obtained ISO certification (Figure 10) although, once again, that percentage is higher for larger companies.

Conclusion:

The “snapshot” of the Canadian injection molding industry given by this year’s survey results is significantly different than the one provided by the survey two years ago.

Business/market benchmark: In terms of both number of employees and number of machines, Canadian injection molders are getting bigger. This expansion appears to be mainly driven by growth of existing customers and/or product lines, rather than entirely new business. Custom molding has nominally risen over the past few years, while captive molding has dropped off, pointing perhaps to the increased tendency of OEMs to outsource molding. More molders report automotive, electronics and construction as their main markets.

Equipment benchmark

Based on the increase in the number of machines reported, growth at injection molding operations has averaged about 4.5 percent per year ove
r the last two years. The number of molders which indicate intentions to buy new machinery in the upcoming year has increased in comparison to two years ago. Buying intentions are up at both big and small shops; although the most dramatic increase (22 percent) is at shops with 10 to 19 employees.

Management benchmark

Molder capabilities, and budgets for training and R&D show little change from the results of the survey of two years ago. ISO registration is up about 13 percent, with a higher percentage of larger companies being ISO registered. Twenty-six percent more molders report using the Internet to access business information (Table 4).

In short, the survey suggests times are good at the majority of Canadian injection molding shops.