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July 15, 2005

The New Tech-Free Industry

We've all heard the "Back to the Basics" buzzword from coaches of losing sports teams. Its a bit more chilling to be hearing a similar song being sung by a wide range of otherwise bright folks in the plastics industry lately. This time the tune is being played by owners and managers justifying the gradual but continuing disappearances amongst their middle management staff. We do consulting, so we necessarily work in general with the mid-level technical folks whose function is to keep the process going. Lately the number of new, fresh talent types showing up in every meeting has gotten our attention. The trend and the mind set at top management looks like this. "We need to cut costs. We can't reduce cost of raw materials. We can't stop packaging costs from increasing. We can't reduce profit margins any further. We have to reduce personnel expenses. We're not cutting our own paychecks. We have redundancy in Engineering. Let's downsize by eliminating the mid level engineering supervisors. We can keep the top man, and the newest, cheapest Engineers and Techs. They can do their own management if the top man keeps an eye on them. After all, we haven't had many real emergencies there in quite a while. Problem solved." It hasn't been that abrupt in most cases or in most places, but we have seen an amazing increase over the last 18 months or so in mid-level, "Go To Guys" turning up missing until that call comes in from that fellow looking  to hook up with someone else. The hazard here is that most places now have downsized to the point where there are no longer any capable folks on staff who have the experience, training, and practical ability to deal with any complex system failures. What' left is a skeleton crew that can only keep ordinary functions going at a normal level. What we have here is yet another wave of American Industry responding to competition not by reacting aggresssively to combat the threat, but instead by tossing out the problem solvers to reduce day to day operating costs. The flaw in the grand plan here is that these same Plastics Industry mavens are now doing significantly more "Outsourcing" of their problem solving to consulting groups that are fast becoming surrogate middle management for them. Good for the consultants, poor economics for the Company, and a real disservice to those loyal employees who put in the time to get the expertise, only to be downsized out by our new way of rewarding employee loyalty. So as the fellow says, "What's the bottom line?" Once again our Industry is cheerfully shooting itself in the foot. The same mentality that started going to Portugal for molds thirty years ago to save 20% on the cost of molds, and wound up practically killing mold making in the USA as their chase of "savings" went from Portugal to Singapore to Indonesia. That chase landed eventually in China, Korea, and India, and eventually those clever cost savers killed themselves when the cheaper, lower quality molds did not last, and the solution was "Lets mold over there, where the molds are built, because they're used to running junky molds and they'll do it cheap." How many injection molding Companies do we know of who offered imported tools to cut out their local competition, and are now gone because their customers took the savings plan that one obvious step farther?  We hear every day about offshore competition and what a crime it is that this is happening to us. The pity of it is that nobody looks at the history, or refuses to admit that WE did this to OURSELVES. Now there isn't even a US owned Company left that builds injection machines, unless you count Milacron, whose machines are more and more being "assembled" in the US, or brought whole from Japan. So what's the solution? Back to the Basics, of course. Injection Molding and other plastic processing Companies here are going to have to rely upon innovation, niche products that for some compelling reason need to be made here. We have to spend some serious effort for once working on any possible ways that still exist to grow our businesses in a positive manner on the basis of innovation and new products, rather than continuing to play the price cutting game amongst ourselves and against the offshore guys, who will ALWAYS be able to copy our stuff cheaper, once all the development work is done. Meanwhile, we're rooting for the American plastics companies, our customers, to get an attitude adjustment in place that will cause them to hold on to their experienced, skilled, valuable people, rather than going the same "cost saving" route with people that has served them so well in the past with their injection mold and equipment choices. It's one thing to chew off a foot to get out of a leg-hold trap, but why start at the neck?

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