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Mack adapts focus to win new business
By Bill Bregar
PLASTICS NEWS STAFF
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Mack leaders have reinvented the Arlington company to serve medical, office furniture and other new markets, while retaining core strengths such as complex molding and assembly.
Throughout the changes, Mack has held onto its hometown values of good employee relations, community involvement, strong customer relations and technological innovation — all important yardsticks that helped the firm become the Processor of the Year. Plastics News presented the award Feb. 27 during its Executive Forum in San Diego.
Mack grew dramatically in the 1990s, when it became one of the plastics industry’s most well-known contract manufacturers. Mack’s sales neared $500 million in the late 1990s — more than 10 times its level in the late 1980s.
The Internet was booming. Y2K was coming, fueling huge demand for new computer systems.
About 70 percent of Mack’s business at that time came from molding and contract manufacturing of large computer equipment such as servers and mass storage devices for the electronics “Big Three” of Sun Microsystems Inc., Xerox Corp. and Hewlett-Packard Co.
Mack expanded its headquarters plant from 120,000 square feet to 310,000 square feet. In addition, Mack invested $5 million to bring sheet-metal fabrication in-house, buying high-end machines for laser welding and laser cutting, to make large enclosure racks.
“All of this was gearing up for the next wave of computer work. It was pretty dramatic. We had huge expectations,” said President Donald S. Kendall III. “Then everything changed overnight. The big computer companies started outsourcing offshore.”
The Internet bubble burst. Y2K fears fizzled, leaving a glut of computers on the market.
Mack officials were surprised when their big customers started moving production of servers and mass storage devices to China. Northern division President Jeff Somple said company leaders “thought we were very clever” throughout the 1990s by avoiding cell phones, personal computers and laptops — high labor-cost products that seemed destined for China or Mexico. But big servers, which are more expensive and require relatively little labor to make, seemed safe.
Unfortunately for Mack, the work did go offshore. Since many of the internal components were coming from China anyway, computer makers decided to produce the entire systems overseas, Somple said.
“We were riding the tidal wave of information in the ’90s, when information technology was skyrocketing. It came to an end around 2000-01,” Kendall said.
Executives held brainstorming sessions at the northern division, which includes injection molding operations in Arlington and Cavendish, Vt., and Gardner, Mass., and at the southern division, with molding in Inman, S.C., and Statesville, N.C.
“It was a real hard look in the mirror,” Somple said. “The first thing was, face the facts. ‘Look guys, this is going to go away.’ You could see it coming. And once we did that, we got that kind of watershed moment — that yes, this 10-year run we’ve been on is over and is ending very, very quickly. Then we could get down to work.”
Mack’s sales hit a low of $201 million in 2003. Making the first-ever major layoffs in Mack history was a painful experience, said company officials.
But the pain was a necessary part of diversifying Mack. Mack’s sales have rebounded, to $277 million in fiscal 2006, ended June 30. Hiring has kept pace, as employment climbed to 1,850 today, from 1,250. Mack is profitable, although Kendall declined to get specific.
The company runs 121 injection molding machines.
Today, sales are pretty evenly divided between medical devices, transportation, office furniture, industrial products and business equipment. A 16-press plant in East Arlington turns out large storage containers for industrial batteries, a solid Mack business for decades.
“We really had to think about global trends: what business is going to stay in North America and what businesses are going to leave North America,” Kendall said.
Kendall supported the strategy to move into new markets, which included buying some very large-tonnage injection presses for the southern division.
“It was easy to decide to do it. We had to, because we were faced with extinction if we didn’t do it. But the hard part was the execution, actually doing it,” said the soft-spoken Vermonter.
Some central beliefs have not changed. Manufacturing in China is not part of the plan.
“We don’t want to be a big multinational,” Somple said. “We want to be a North American manufacturer.”
The goal was to build on Mack’s strengths to make the company as China-proof as possible — concentrating on big, bulky parts that don’t stack well for large trucks; office furniture calling for frequent color changes and technology such as gas-assisted molding; and complete medical devices fully assembled on a rolling cart. Mack put in a water-based paint line so it could efficiently handle color changes demanded by office furniture customers.
“Some of the products we do right now are so low-volume and so complex that, who in their right minds would want to do it in China?” Somple said.
A key strength is Mack’s longtime customer focus, through program-management teams that track each job from design through production. The contract manufacturer honed those skills for the big computer players, whose products can have life spans measured in mere months. For the new business, Mack has hired more people for program management, manufacturing engineering and quality management.
Somple, who headed Mack’s move into medical devices, said those products have much longer life cycles, some of 10 years or even more.
Not an easy road
As more basic molding work moves to low-cost countries, scores of custom injection molders are looking to get into medical. However, Somple said, “The medical market is not for the faint of heart.”
It takes money, people skills, meticulous record-keeping and above all, patience, Somple said.
“A lot of people aren’t willing to pay the price. It’s a huge price. And it’s a long time to get your bona fides. We’ve been pursuing this for six years and just in the past year or two, we’ve been recognized. [Medical customers] want to see that you’re in this game and you’re committed to it,” he said.
Company officials decided to stick with the strong point of delivering to customers finished, assembled products. Somple pointed to a knee kit, showing sample sizes of knee-replacement parts mounted on a laser-welded metal tray, made for Stryker Corp. The customer first came to Mack about a small program to overmold a soft-grip handle for a surgical instrument.
People from Stryker saw the sheet-metal equipment while on a routine tour of the Arlington plant.
“And the next thing you know, that little handle turned into this case and tray program,” Somple said. High-tech machines originally bought for computer cabinets now are being used for medical parts.
Mack also makes Class III medical devices at its Arlington headquarters, which in November won approval under ISO 13485:2003. Somple said Class III is a designation for a device that sustains human life, the most demanding level.
Each Class III device must get pre-market approval from the Food and Drug Administration. “The FDA will come in to the manufacturer and they will go through your entire process,” Somple said. “That’s what makes it difficult and that’s what makes it time-consuming. But that’s what makes it a market that we’re pretty excited about.”
The barrier to entry is high, cutting many potential competitors out of the picture. Mack spent two or three years working on one medical program that just recently came through. Workers prepared samples and went through clinical trials, while documenting every step, with no guarantee of a payoff.
“We have right now three or four programs that I would call in the incubator stage that are not at the market yet, and may never get to the market. ... So you have several of these going on, and hopefully one or two are moving to production,” Somple said.
Mack’s growing list of medical products includes fully assembled medical instruments such as a defibrillator, a heart monitor and a cart for delivering medications in hospitals. A blood-testing system for Johnson & Johnson’s Therakos unit has the clean look of a copy machine on wheels.
Mack has beefed up its talent, hiring people with medical-device background and promoting key company veterans. Medical molding required hiring an FDA compliance officer.
The Arlington site does not have a formal clean room, but the company is installing an enclosed area on its molding floor to house new, small-tonnage injection machines, including one of Mack’s first all-electrics, a Milacron Roboshot press with 55 tons of clamping force. A 390-ton Toshiba all-electric will be installed soon at Mack’s plant in Cavendish.
The judges — Plastics News reporters and editors — gave Mack Molding strong marks in all of the seven criteria of financial performance, customer relations, quality, employee relations, environmental efforts, public service and technological innovation. Mack was nominated by Julie Horst, the company’s communications director.
Being debt-free helps
Mack’s move into medical would be a good model for other molders — but it helps to start by being debt-free.
“In fairness, there’s a lot of people who would want to do what Mack does,” Somple said. “It’s easier to do this when you have no debt, when you have money in the bank and when you’re not saying, ‘How are we going to make next week’s mortgage payment?’ We were in a unique situation.”
Kendall said the company doesn’t pay dividends to its family stockholders: “We take all of our profit and reinvest it back into the company.”
The Kendall family has been involved in plastics for nearly 90 years. His grandfather, Donald S., co-founded the company in 1920 to mold thermoset bottle caps. Another early product was a plastic handle for Otis elevators.
Mack moved to Vermont in 1939.
Kendall was thrust into the company’s top post after his father, Donald S. Kendall Jr., died of a heart attack in 1973. Donald III was just 26 years old and green, having only worked for six months as production manager at Mack.
The Arab oil embargo meant nobody could get resin. “It was not good timing,” Kendall said.
But Mack stayed true to its old-fashioned Yankee fiscal conservatism and survived. And in the go-go 1990s, when computer and cell phone dollars lured many molders into a debt-fueled party of acquisitions and global manufacturing, Mack held back — and later avoided the crushing hangover that put many companies out of business.
Mack finances its own acquisitions and capital investments.
“If you look back on the history of injection molders, two things ultimately kill them. Either they get too dependent on one customer, or they carry too much debt during the good times and in the bad times they get hurt,” Kendall said. “We learned from it … because we know this business is very cyclical, it goes up and down.”
Kendall is 58. He didn’t want to talk about succession planning, but said: “Our plan is for Mack to continue as a family-owned company for as long as possible. It’ll be a family-owned business for the foreseeable future.”
Large parts, large presses
During Mack’s transition, the northern division invested in people experienced in its new markets, especially medical. The southern division inverted too, but more in machinery — new, much larger presses.
Before the new strategy, the company already had big machines, some as large as 2,000 tons. “But being limited to that tonnage size excluded us from a number of opportunities,” southern division President Ray Burns said.
“We already were involved in the heavy-truck industry, and we saw a lot of opportunity for exterior cab parts with larger-tonnage requirements than we had.”
Officials saw a chance to use Mack’s skills in gas-assisted injection molding to win work molding truck-cab parts that had been made from sheet metal and other plastics processes like reaction injection molding of polyurethane, Burns said.
The southern division plants also diversified into other areas such as utility vehicles, golf carts, all-terrain vehicles, lawn and garden products and big-screen televisions.
Mack built a 25,000-square-foot addition to its Inman plant to accommodate presses of 2,500 tons and larger. Today, Inman’s smallest press is a 700-tonner. Its largest one yet — a 3,350-ton Toshiba — will be delivered in May, Burns said.
The new Toshiba will be the 21st press at Inman. Mack runs a total of 12 presses at 1,000 tons or higher, which puts the company in a very select group of processors with such huge-press firepower in the Southeast.
In Statesville, Mack runs 22 presses, from 150-1,100 tons.
Mack couples technology with size to win new business. Mack’s engineers use both internal and external gas-assisted molding to make an external refrigeration unit for semi-trailer trucks, a very large, flat part measuring 76 inches long, 22.4 inches wide and just 0.18 inch thick. The novel process allowed Mack to injection mold a part that had been made by twin-sheet thermoforming but experienced impact failures and cracking, according to Ken Kincaid, technical engineering manager at the southern division.
Internal gas pushes material through the long, thin part and reduces internal stress. External gas makes it flat and smooth. Mack believes this is the first time both gas-assist technologies have been used to make a large panel that is structural and requires a highly cosmetic finish.
The northern division uses gas-assist too, for parts such as handles for medical devices.
Mack also specializes in structural foam molding and overmolding to put soft-touch sections on surgical instruments and other products.
“The products we’re making today are 10 times more complex than the products we made five years ago,” Kendall said.
Happy customers
On a recent tour of the Arlington headquarters, plant manager Carl Bickford pointed out some highlights of the facility:
*A complete assembly operation for Pitney Bowes Inc.’s W-o-W (Weigh-on-the-Way) mailing machine. Using plastic and metal parts made in-house, plus about 200 purchased components, employees first build all the subassemblies, which then go to the adjacent assembly line.
“We make approximately 70 a day in an eight-hour day,” Bickford said. The subassemblies then are tested and sent directly to distribution.
* Injection molding operations to make 14 parts for the Chadwick office chair from Knoll Inc. Mack uses gas-assisted molding to make several of the structural parts to reduce weight and cut cycle times. A suspension seat and fabric are bonded to the frame in a two-step injection molding process.
First, the fabric is manually hung in the press and overmolded with a glass-filled copolyester frame. Excess fabric is trimmed away. Second, the seat encapsulation is loaded into another tool and overmolded with glass-filled nylon. Finally, a Ranger robot removes the finished part — a process that used to be done by hand — in a move to improve safety.
The Chadwick chair netted Mack five awards in the furniture and best single part categories last year at the Society of the Plastics Industry Inc.’s Alliance of Plastics Processors conference. Mack submitted 14 parts, its most ever, in those two categories plus medical and scientific, appliance and material handling.
Mack is a frequent winner of new-product-design awards from APP, formerly SPI’s Structural Plastics Division. Company executives treat teams from its customers to lunch and present the awards.
Mack also serves thank-you lunches to other important customers throughout the year. And Kendall means it when he says Mack is customer-focused: the annual employee bonus is based on profitability and customer satisfaction. Customer feedback is measured quarterly, and the results are posted in all plants.
“We figure if our customers are happy, everything else works out. But a lot of people say the same thing. We actually really mean it,” Kendall said.
Mack scored high in the customer-relations part of the Processor of the Year Award. “They have been willing — are not afraid — to take risks. Mack comes to us with ideas,” said a group manager at a customer in the heavy-truck sector.
Another customer, in the medical market, said Mack brings “some considerable amount of development and designing, molding and metal forming. We play ping-pong with designs.”
A maker of automated teller machines said Mack helped develop a lightweight front fascia using external gas-assist molding.
Mack also has strong employee programs that encourage physical fitness. Four manufacturing sites have fitness facilities that are free for employees and their families. The most impressive, at the Arlington headquarters plant, has a racquetball court, a squash court, a workout room and a large room for aerobics classes, which are sometimes led by Kendall’s wife, Nancy.
Employees in Arlington also can take yoga classes — practicing their Mountain Poses while looking at Vermont’s tree-covered mountains.
A full-time nurse in Arlington develops wellness programs, including monthly blood-pressure and cholesterol screenings and annual hearing tests. Mack also employs a part-time occupational therapist. The company spends $40 per employee for hospital screenings to create a personalized wellness strategy.
Proof that Mack is a good place to work came in April, when Mack received the Governor’s Workplace Safety Award from Vermont.
Another way Mack creates a good work environment is through quarterly housekeeping inspections at all plants. Employees in the winning plant get two extra vacation days; the runners-up get one day.
In Vermont, Mack is famous for its Christmas party, on its Arlington grounds. The event includes horse-drawn wagon rides, sledding, a visit from Santa and fireworks.
Mack has even made its own snow. In 2004, the Arlington Fire Department hooked up a pumper truck to a snow-making machine. A year later, Mack said thank you by donating an all-weather “snowbulance” to handle emergencies in wilderness terrain.
Arlington is a town of just 2,500 people, so Mack is a giant force. Arlington Memorial High School has just 235 students in grades six through 12. Principal Kerry Csizmesia said Kendall’s door is always open.
Mack donated $200,000 to build the new 140-seat Mack Performing Arts Center at the school, the first time the community has had such an auditorium. The company also has donated a technology laboratory with 17 computers.
Kendall grew up in Arlington. He put it plainly: “We’re a family company. We like to know our employees. We like to see them, do things with them. It’s real hard to do when you have plants in China.”
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