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1 posts from June 2005

June 07, 2005

Offshore Competition, the Club Mentality at Home - What Else Can We Do To Screw Things Up?

Some of us over in the injection forum were bemoaning the fate of yet another large Injection Molding company that looks to be circling the drain, and the discussion ran toward the "who can we Blame?" direction. The last post we put up on the subject seemed worth spreading outside just the injection community, since the same sorts of things seem to be affecting the whole Plastics Industry to one degree or another. Text of the post follows:

Seems we're all on a bit of a rant about the Government, the role of education versus experience, the contract mafia, etc. We've been kicking around the industry 30 years and a bit. We have watched it go from a Wild West scenario, with anybody having a garage big enough for an Arburg becoming a "Custom Injection Molding Company" to a bureacracy scenario where most of those original entrepreneurs could not get a job with any of the medium to large plastics captive operations today.....no BS degree, no entry to management.

Of course we've also been "across the desk" from plenty of those newly minted managers, whose degrees were truly BS....... got the paper on the wall, but could not solve a single problem on the process floor. Problem is, once the places we work with get past their beginnings, and develop the extra offices the original owners did NOT have: Personnel/Human Resources, Key Accounts Manager, Accounting Manager, etc. you start an inexorable move to the Cub mentality.

Entry to the Company becomes entry to the Club, and the folks running the organization are no longer specifically interested in "Plastics" as such, just in making sure that nobody without the proper Club credentials ever gets to climb the management ladder. Many of the failing and about to be failing plastics Companies we run across now have almost no one with any specific Plastics Industry background making the substantial management decisions.

You have a surplus of MBAs, Accountants, and other degreed general management types in position to overrule Engineering, Plant Management, and certainly anyone in the Technician/Processor group at any time, even if they would not know a PolyPropylene pellet from a ball bearing if it was on the seat of their BMW.

We encounter experienced plastics people all the time who are migrating away from the industry in frustration because they can no longer do their jobs in the face of increased pressure for more performance, with less and less support for facility improvement, or even maintenance of critical systems required to operate the plants they are trying to run.

Any Company needs to engender some degree of team effort in order to survive. In our industry, the Club mentality, with legions of non-specific degreed managers gradually freezing out the experienced professionals who "don't fit in", and replacing them with newer, more "acceptable" people is in effect killing off a whole generation of lessons learned on the plant floors all over the country.

We are literally seeing instances where items like "high self esteem", "highly motivated individuals" and "proper credentials for the employment category" are being used to drive out the folks who are really necessary to keep our industry afloat. How often have you looked around and been able to "see" that dividing line being drawn between the "progressive management" types, and the "does not fit the corporate image" employees who actually get the product out the door?

We see the Chinese, the Mexicans, the Taiwanese, the Indians, etc. etc. taking work out of this country on a daily basis, sometimes with the cheap labor everyone always points to, but just as often with lower prices that have nothing to do with the cost of labor as we think about it.

Many offshore Companies are cleaning our clock because they can do our jobs with a lot less people than we nowadays typically throw at a project. In many cases we are losing to some guy in China, or India, or Pakistan, who has one or two old Arburgs running in his garage, or under a tent. (See the start of this rant)

Its not always the big scary giant from Asia knocking us off. Lots of times its that one little guy who would not be "qualified" to be a member of the Club over here, who's figured out how to approach our customers and offer them a real value for their money, without forcing them to pay for all those happy office wanderers that lots of us feel we have to carry if we are going to have the right image, and be able to look good to our peers.

Its not the contract labor Mafia killing us, but by and large the entrenched, non productive, bureacracy Mafia, that Club that keeps wanting to grow its own numbers at the expense of any kind of efficiency. Lots of those jobs could go the contract route, and maybe we could then afford a few more of the not-politically-correct technical people who could actually improve productivity, rather than just continue to run "studies" of it.

Back there at the start, we made the comment about kicking around the industry for 30 plus years, and seeing the changes going on. We have to a degree been hit by offshore competition and by our own government either mixing in too much or leaving us alone too much, at one time or another.  No doubt that OSHA and all the attendant changes they brought along had a cost impact on all US industry, and of course NAFTA and other such dimbulb moves toward a "free" trade economy have also had their impact.

Trouble is, most folks we see in everyday life in the business are not doing much of anything about the new challenges, other than echoing the mantra "we can't fight it, their labor costs are so low we don't have a chance". This is not the attitude that is going to keep this industry alive in the USA.

Back to that labor cost problem. There is no way a US Moldmaker is gong to compete against a Chinese company that pays a few dollars a day to their workers, unless the US manufacturer develops procedures that reduce the impact of the labor cost. Everyone must know by now that a CNC machine running by itself making components here actually costs about the same as one running in Canada, or Mexico, or China. What makes ours more expensive is the man running it, or in lots of cases, watching it. Same situation with a molding machine. Direct labor here is expensive compared to offshore; most other costs are about the same.

Where we need to be in the next ecnomic cycle, assuming the US Government is not suddenly going to make imported plastics subject to a 250% tariff, is to make a serious effort at reducing the cost impact of our higher wage rates on the overall cost of goods produced. Automating all our processes is one way to go at it. Retraining our people so they can be multitasking is another approach. There is no reason why a press operator can't run 2 or 3 or 4 presses at once, if the proper amount of planning is put in place. Since we can't realistically expect our workers to meet the low labor costs of offshore competition, what is needed is for management to take a different view of the problem.

Our competition is beating us now because they can afford to put lots of extra people on the line to work very cheaply. Our management challenge should be to realize that our expensive skilled labor is an asset that must be used much more wisely than is the case overseas. If labor costs us dearly, then it must be used with the highest level of efficiency we can muster. Once we put our collective houses in order on that point, then we may find that there are any number of advantages to the industry here, and any number of ways to prevent further migration of our work and our jobs to all those tiny little towns whose names we can't pronounce.

We do have one encouraging story about moldmaking here compared to China, provided by one of our consultancy friends. Seems they were hired for a multiple mold project by a Fortune 500 company, did all the design work and built one set of molds for the client, then waited a few months for the release of the next set, basically a group of tools worth upwards of $350,000.00. The client company got into a "cost saving" frenzy and contracted with a source in China to do the second and possibly third through fifth sets of molds, using our friend's designs and the initial molds as "samples". Happily the buyer was such a dolt that he actually went to the lowest Chinese bidder to get the dirt cheapest price imaginable....

Now our pal the consultant and his merry band of USA moldmakers are back making the rest of the molds for the client, and the buyer is reaping the whirlwind after having two very large sets of soft steel paperweights built in China. Lesson learned there is that cost savings tend to be ephemeral if you do not have the ability to qualify a vendor who may or may not decide to build to the original specifications. While we cannot depend on these kinds of fiascoes to keep us alive forever, it is nice to see someone who really deserves a shellackng actually get it once in a while. Bad enough to "steal" the development and design work, but then to shop it to death besides, to get to the cheapest of the cheap, is just too piggy to be allowed to stand. Another case of our own folks turning the screws on us, and this time the story having a happy ending, from our point of view.


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