Canadian Plastics

Working with the cards they’re dealt

A lthough last year's survey indicated a trend towards larger plants with more molding machines -- more than 28% of respondents worked at a facility with more than 250 employees -- the 2007 survey sho...

January 1, 2008   By Umair Abdul, Assistant Editor



Although last year’s survey indicated a trend towards larger plants with more molding machines — more than 28% of respondents worked at a facility with more than 250 employees — the 2007 survey showed an even number of molders across the scale. Nearly 44% of the respondents worked at a facility with 50 or more employees, and 56% of the respondents were employed at a facility with a workforce of 49 employees or less.

This year, more than 21% of respondents worked in a facility with one to nine employees, compared to 3% in 2006. Conversely, only 12% of the respondents worked at a plant that employed more than 250 people, in contrast to 28% last year.

Despite the proportional increase in the number of mold shops with fewer employees, there was no major change in the number of injection molding machines at Canadian facilities. As per usual, a slightly larger number of respondents (31.30%) had 16 or more molding machines at their plant.

The vast majority (70%) of this year’s respondents were based in Ontario, but Canadian Plastics also heard from mold shops in Quebec (17.50%), B.C. (7.50%), and Alberta and Manitoba (2.50% each).

SAME OLD, SAME OLD?

Despite perceived slowdowns, automotive and consumer goods continue to be the main markets served by Canadian molders — 32% and 25% respectively. Other sectors continue to bring up the rear, with 8.50% of respondents serving the electronics market, 6.40% serving the packaging market and 6.40% working in the construction sector.

Molders also continued to favour custom molding, with fewer players involved in captive and proprietary molding. More than 43% of respondents described their operations as custom molding with some proprietary molding, with an additional 27.70% exclusively involved with custom molding. By contrast, only 14% of respondents identified their operations as captive molding with some custom molding, 11% as exclusively proprietary molding, and 4.60% as exclusively captive molding.

In 2007, nearly half of the polled molders added new production lines to their operations. Of these, 85.70% added between one to three lines, 9.50% added four to 10 lines, and 4.80% added more than 10 lines.

Full-service molders continue to offer value-added

services that make them more competitive and cost effective. Assembly continues to be the service offered by most molders, with 87% of the respondents in 2007 offering in-house assembly capabilities to their customer. Other major services offered by

Canadian molders include computer

assisted design (55.60%), inhouse mold manufacturing (50%), JIT production (45.70%), EDI or e-procurement

(37%), and printing and decorating services (39.10%).

There was also a major jump in the number of molders offering welding and bonding services in 2007: nearly 59% of molders offer the service in-house, compared to just 45% in 2006.

UTILIZATION RATES SLUMP

In previous incarnations of the survey, respondents have traditionally reported high average machine utilization rates. In 2006, for instance, 70% of respondents had an average machine utilization rate between 60 to 90 per cent. Additionally, only 7% had utilization rates of less than 39 per cent.

However, molders reported lower utilization rates in 2007, with more than 26% of molders reporting average utilization rates of less than 39 per cent. By contrast, only about 55% of the respondents reported rates in the mid-ranges, from 60 to 90 per cent.

The lower utilization rates can be attributed to a number of factors, ranging from technical issues to deliberate attempts to run leaner. For some molders, the overall decrease in machine utilization may also be a

sign of slower times.

“We have had the slowest year in the history of our plant,” noted one Ontario molder with a lower average

utilization rate when describing the plant’s revenue.

Overall, though, the lower rates of machine utilization didn’t have an identifiable impact on mold shop resin consumption and revenue. In 2007, Canadian molders used approximately 8 million lbs of resin and had a total average revenue of $21.8 million.

NEW & PLANNED PURCHASES

More than 70% of molders purchased new injection molding machines in 2007, compared to 43% in 2006 and 62% in 2005. Although 50% of these molders purchased new machines, nearly 29% purchased pre-owned machines. The remaining 21% of molders purchased both new and pre-owned machines for their plants.

The increased number of new machine purchases in 2007 may lead to fewer investments in 2008: only about a third of the respondents plan on buying new machines this year. In contrast, nearly half of the respondents to last year’s survey planned to buy new machines. On the secondary equipment side, nearly 67% of the respondents said their plant had purchased new auxiliary equipment in the last year. Additionally, approximately 69% of molders said their plants would purchase more auxiliary equipment in the new year.

Surprisingly fewer molders purchased new linear (3-axis) robots for their plants within the last year, with only 17% investing in 3-axis robots compared to 31% in 2006. However, there were some market gains for 6-axis robots, with nearly 15% purchasing articulated robots compared to 11% last year.

In total, approximately 30% of molders will purchase new linear robots for their facilities in the next year, while 12.50% will invest in articulated robot automation.

INVESTING IN PEOPLE, R&D

In addition to investing in new machinery, equipment and automation, molders are also increasingly tapping into their two greatest resources: strong R&D, and a highly-trained workforce. However, a slightly higher number of molders made little or no investment in these areas in 2007, suggesting cost-reduction initiatives at some plants in Canada.

Although a greater number of respondents spent nothing on R&D — 12.80% in 2007, compared to 6% in 2006 — the number of molders who allocated more than four per cent of their annual budget to R&D expenses remained unchanged at 43%.

The numbers for investment in employee training painted a slightly different picture: almost 15% of molders budgeted nothing for training in 2007, compared to 6% in 2006. Furthermore, just over one-tenth of the respondents directed more than four per cent of their budget to training, compared to nearly 20% in 2006. Overall,

the numbers suggest molders are spending slightly less on training their employees.

THE GLOBAL PICTURE

Over the last five years, the benchmark survey has found that more Canadian molders are increasingly relying on domestic markets instead of exports. Traditionally, over 50% of the respondents export less than half of their total production. In 2006, for instance, approximately 54% of the surveyed molders exported 50 per cent or less of their products.

This year, nearly 64% of the respondents reported exports of less than 50 per cent of their products. Moreover, 46.80% of molders said they exported less than 25 per cent of their products, up 41% from 2006.

Additionally, the number of respondents exporting over 75 per cent of their products decreased by more than 4% in 2007, with only 13% of respondents exporting more than three-quarters of their inventory.

Since 2005, the benchmark survey has asked respondents about their presence in China and India. The question was expanded this year to include any presence outside of Canada. Although more than 50% of the respondents said they had no foreign presence, many other molders are finding new markets and manufacturing hubs for their products. More than 13% of respondents have a presence in China, down from 23% in 2005 and 2006. Additionally, nearly 8% had some presence in India. The number of Canadian molders with a presence in India has been increasingly steadily over the last two years. In 2005, only 4% of molders had moved into the India
n market.

Although many manufacturers are trying their luck out east, a significant number are also continuing to build their presence with our neighbours to the south. Over 42% of the respondents said they had a presence in the U.S.

Of the respondents who did have a presence outside of Canada, a large number (44%) had a foreign manufacturing facility, 22% had a sales office and more than 11% had a joint venture with a local firm. Several manufacturers have also branched out into other markets through other means, such as distributors, sales representatives and third-party warehousing.

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The 2007 Injection Molders’ Benchmark Survey was emailed to 511 people at injection molding facilities in Canada, and an additional 516 were contacted regarding the survey via phone and regular mail. We received 66 completed surveys. This year, Canadian Plastics refined its research methodology by limiting its survey sample to one respondent per manufacturing facility. As a result, this year’s survey has a smaller sample that is more representative of the industry. Because not everyone answers each question, the percentage values in the charts and tables are given as a percentage of respondents to that question, with the number of respondents provided in parentheses, for example (n=66).

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