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1 posts from October 2005

October 11, 2005

Leaves Are Falling, Levees Already Down....

Seems we've reached the end of summer finally, and maybe the end of the hurricane season that has been so devastating this year. Hard to believe that so many dirty birds could all come home to roost at once, down in the Gulf States. Politics, poor planning, likely some outright tomfoolery with emergency management funds being diverted to some folk's sticky fingers, etc. are things that make us look not too bright. Having your fleet of evacuation buses swamped because you evacuated the drivers has to make you feel brilliant, if you are the Mayor of New Orleans, and having the police disarm the citizenry would have been another dazzlingly bright and stunningly illegal move, had it not been for the fact that most of the police had already left town......... Feels to some of us like rain and flood waters either make high officials act silly, or perhaps just wash away the veneer of political acumen that had been hiding their inherent silliness all this time. Granddad always used to say, "If you want to see whether a fellow is a good swimmer, toss him overboard, and you'll know quick!" Seems only a very few "good swimmers" came out of the Katrina/Rita double whammy, at least amongst our politicians, anyway. OK,OK, everyone's asking what the devil does this have to do with Plastics, The Spiral Path, and so forth?  Just a bit of a reflection on how other folks deal with sudden unexpected situations, and an object lesson to those of us whose businesses were put at risk first by the storms, then by the slow and sometimes strange recovery efforts and the sudden presence of way more government in our lives than we had seen before.  Our industry has been fighting its own "storms" and the generally negative effects of our various levels of government "helping" us to ride out the effects. Thanks to government assistance, or the lack of it, we'll be seeing resin costs continuing upward, (polymer plants washed away, don't you know) costs of supplies and deliveries going up too (fuel costs out of control) and processing costs spiraling up as well (polymer, delivery, electricity, natural gas, all up from last year), so 2006 looks to be a challenge year for us all. Meanwhile, most foreign governments continue to subsidize their own Plastics Industry segment of their local economies, supporting growth of Plastics processors and moldmakers as a vital part of the various countries' interests. China continues to add more manufacturing plants and expand the existing ones at a great rate. Most other Pacific Rim nations are finding out that Plastics is a business with relatively low investment required for massive returns, almost as cheap to grow into as textiles were 20 years ago. United States processors, especially those involved with injection molding, are going to have to make some fast and furious moves to hold on to their businesses in the coming year, as all sorts of costs increase and customers continue to flock overseas like sharks swimming toward the blood in the water. What we are seeing more and more are USA Fortune 1000 companies taking it as Gospel that our kind of products are inevitably going to be migrating to the Rim for manufacturing. As consultants, we have lately been seeing clients not even doing cost comparisons anymore, just some thirty-something "Acquisitions Manager" doing a knee-jerk reaction, "Its Plastic, Quote it in Asia" ten second decision. If any of us are going to be in this industry when 2015 rolls around (NINE YEARS and a bit from NOW), we are going to have to find a way to get that guy to quit making that particular flip of the coin.

I personally have been advising clients most strongly to consider ALL the costs involved in projects, not just the "cheaper molded parts" picture that is very hard to fight. Nowadays, I find myself telling clients to look at geographic areas in the USA where labor rates are low, and consider moving entire plants into such areas before just shipping the molds overseas. I make arguments that center around the lesser cost of delivery, the avoidance of Customs costs and delays, the lesser cost to send inspection teams to the factory to deal with problems, the language issues and the cultural differences that impact communication, and the potentially catastrophic cost of a major quality issue or tooling mistake. Unfortunately, there are as many success stories as failures with offshore sourcing lately, and the influence of the Internet on business is such that everyone now seems to believe that overseas manufacturing carries with it no significant risk.

Having had one foot in each camp now for a very long time, I can predict that the "other guys" are going to continue to get better at what they do, so we are going to have more trouble touting "Made In USA" as a better quality product that has to cost more, even though in many cases that is EXACTLY the truth of the matter. Housewares, Electronics, Consumables, and even some Automotive parts are being assimilated into offshore production successfully, to the detriment of US manufacturers who are seeing much of that business going away.

The solution?  Get even better at what we are still doing, so the prospect of moving the work overseas needs MAJOR justification at upper management levels within the client companies. Once the decision to move turns risky again, much of the exodus will stop, Much of what we need to fight is not that the "other guys" are so cheap, but that they are so good at dong our jobs, and have such a low reject rate, that all the weaselly little sub-manager types feel safe making the move away from US production. What we have seen once or twice this year have been these fellows getting fired when an "outsourcing" (read screw your old USA supplier) project went bad, and folks like our company getting hired to find a way out of the mess for the client.

American manufacturers need to turn things around, quit giving up projects without a fight, and most importantly when a project does go away, keep watching for a mistake to be made and then jump at the chance to recover that "outsourced" project again. It can be done. I've seen it happen. One caution about that. The competition are serious people. Given the size of the population in Asian countries, and the way their society is arranged, you are very seldom competing with an "average" guy. All the "average" people are farmers. Only the best are allowed to become educated enough to ever be seen by an American. If you expect to beat them at the game, you had better plan on bringing only your own best people with you.

I saw a project go the wrong way lately too, just because of a faux pas by a processor at an injection molding company here in the US. Short story, then I'm done. Client hires an outside design/build firm to make a production mold for their product. Mold is to be built to a specification, and to a price. Mold when finished and tested (offshore) is to be brought in to be run here by a custom injection house that did not bid on the mold. Mold is delivered, along with 50 test shots, checks as accepted by the client. Custom molding house has a few start-up problems, then gets to production start status, customer comes in for the start of production approval process.

The process technician on the floor, while making the start-up approval shots, takes it upon himself to point out a host of "defects" in the mold design and fabrication that had made it "nearly impossible" to get good parts off the mold. This was about the usual level of carping everyone is used to doing whenever a "not made by my pals up the road" mold is in play in a custom shop. In this case, the client doing the approval was the same gentleman who had approved the design and the completed mold at the offshore factory before allowing it to come to the USA for production.

The day after the approval session at the USA molding house, I got a call from my client instructing me to have the mold packed and shipped back overseas, to be run there instead of in the USA. When I asked what the problem was, the response that came back was: " If the people there are not satisfied with the mold now when it is new, then I can only expect more complaints as production goes on, and its always going to be the mold's fault, even if it isn't. If we run it where it was built, I'll never hear about the mold again, and if any parts are bad, they will not get on the boat. And they'll be about 20% cheaper when they do get on. It's a win-win for me, and I won't have to hear about this project ever again after this week unless a boat sinks."

While we all struggle with the 10,000 possible problems that come with any project, it's a good idea to make sure that we, ourselves, do not become the last straw that drives our customers into the open arms of our competition. Nobody wants to play with a stupid loser, except at poker.


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