Moldmaking report (September 01, 2005)

Increasing competitive pressures on Canadian moldmakers are causing many to look overseas not just for new markets but for leveraging overseas design and manufacturing skills.

In mid-July, Mississauga, Ont.-based Profine Molds Inc. announced it had opened an applications and sales office in Kowloon, China to support its manufacturing capabilities in the region. The Kowloon office is the first step in a multi-phase plan the company has to expand globally. The office will support Profine Molds’ growing Asian operations and the Asian market, and will enable the company to provide North American customers with more competitive pricing.

Manuel Gomes, president of Profine Molds said the expansion into Asia was driven by customers looking to work with Profine Molds, but who wanted to deal with the company at a local level.

“We cannot sell a (moldmaking) machine without having technical assistance that is close to the customer,” Gomes said. “To sell a mold, we need people on the ground and close to the where the mold work will be done.”

In Asia, especially in China, there is a rapidly growing consumer market that is putting pressure on local plastic processors to keep up with demand, Gomes added. He said Profine Molds will help Asian plastics processors meet those demands by supplying multi-cavity molds capable of producing a high number of products in a single run.

“Because of these kinds of higher demands and higher volumes, along with a desire for improved quality, you need a much more sophisticated kind of mold to deliver the maximum amount of product,” Gomes added.

Making an overseas operation work successfully requires more than just producing high-quality and cost-competitive products; success comes from developing long-term relationships with local businesses and people, and a willingness to work within the local rules and customs, he explained.

“The way I see it, is that you have to know how they do things over there,” Gomes said. “It’s often not easy, as you have to take into account such things as cultural differences. But our philosophy is that we must try to understand what customers overseas need, and then develop the kind of relationship with those customers where they can say that we are a company they can and want to work with.”

Richard Myers, president of M2M International Ltd. in Wallaceburg, Ont., also believes that understanding how business is conducted in a foreign market is key to succeeding in that market.

Recently, M2M launched a joint venture in Chennai, India with Romeo, Mich.-based Synergetic LLC to design and engineer injection molding tools. By 2006, the partners will have 12 full-time designers in the Indian operation making molds for both the domestic Indian market and for export.

According to a Government of Canada internal working document report, “The Plastics Market in India (April 2005),” the plastics and resins market is one of the fastest-growing sectors of the Indian economy. With a population of more than a billion people, it is ranked as the fourth-largest economy in the world and the Indian plastics industry is among the fastest-growing sectors of the economy, with a 16 to 20 per cent annual growth rate. According to the working document, the total demand for commodity, engineering and high-performance polymers/plastics is expected to increase from some four million tonnes, to 12.5 million tonnes by 2010. Currently, India’s plastic consumption is about 4 kg per-capita but the report projects that consumption will likely increase to 10.5 kg by 2010, according to the report.

To meet the Indian consumer’s growing demand for plastic goods, the report suggests there will be a growing need for injection molding machinery. It is expected India will require some 28,000 injection and blow molding and extrusion machines in the next two years, along with a greater demand for more sophisticated molds.

Myers said it was fortunate that M2M International was able to work with Synergetic and its president Bharath Reddy. Reddy knew his native India’s moldmaking needs and how both companies could work together to use their expertise to work in the Indian market.

“When all the focus came about on thinking globally (a while back), Bharath realized there were opportunities to tap into the design people and expertise in India, people who he had interacted with over a number of years,” Myers added.

Myers said when doing business in any foreign country, especially when setting up a joint venture like the one M2M International and Synergetic is pursuing, it is critical to understand how the local market operates. The most critical factor was negotiating through India’s often complex, bureaucratic mechanisms for setting up and doing business in the country, a process that is often a long one in working through.

“We were fortunate to have Reddy on our team as his father was a land owner in India and (Reddy) knew a lot of the officials, the procedures and the proper way of getting things done,” Myers added.

Myers said that the key to any successful overseas operation is working closely with the overseas employees to ensure that the operations maintain a high level of quality.

M2M International learned this during the late 1980s when the company arranged a technology exchange with Ikegami Mold of Japan and later when it developed international liaisons with tool making companies from Japan, Mexico, India and China.

“For example, we have put together a checklist to comparing every mold that comes in (to us) to see how the offshore work companies are doing,” Myers said.

This checklist allowed M2M International to quickly find out that that the Chinese operations at first were not stamping the inside of the mold cavity with identification numbers and other information. The company discovered the reason this was happening was because the overseas workers did not understand the English stamping, so it made no sense for them to include it.

“If we had to stamp something in Chinese, would we know what to stamp,” Myers said. “So the molds would show up with no product identification stamp so we made sure that was one of the things on our checklist and something we could work on to improve.”

M2M International is planning to bring Indian engineers to its Canadian headquarters to teach them what the company and the customers will expect, thereby ensuring a high-quality product for the Indian and export market.