DETROIT - Companies that do both molding and mold making are more successful on average than competitors that focus separately on either business, a new study says. Companies also do better if they are not too dependent on the automotive industry, with its intense cost-cutting efforts aimed at suppliers.
In a survey of plastics companies completed in May, the accounting and management consulting firm of Plante & Moran LLP also found that molder-mold makers achieved shorter product development lead times than did either the molders or mold makers separately.
One explanation may be that molder-mold makers ``niched'' themselves more effectively in end markets, targeted industries with better operating margins and had control over tooling costs and lead times, said Timothy J. Erdmann, Plante & Moran's senior consultant in plastics industry operations with the company's main office in Southfield, Mich.
``If I'm a plastics guy, I really want to get myself intelligently niched,'' he said.
For the survey, its first, Plante & Moran solicited information from 1,500 companies nationwide and received responses from 58, a return rate of 3.8 percent. Among the respondents were 22 molders, 12 mold makers and 24 companies that do both. The companies responding to the survey were predominantly from the Midwest, but included some others from East Coast and West Coast areas.
Erdmann said Plante & Moran plans to do the survey again late next year and hopes to generate more responses. The complete results of the study have been released only to participating companies, whose names are confidential, Erdmann said. However, companies that did not participate in this year's study still may get the results by completing a questionnaire.
To gauge the health of survey respondents, Plante & Moran devised an ``aggregate success measure'' that looks at return on assets and compound sales growth rate. The combined measure is designed to show both short- and long-term drivers of success: profitability and growth.
One finding of interest was that molder-mold makers reported losses or only very narrow gains in operating income in their tooling operations. But the advantage molders have in doing their own tooling was in controlling lead times, Erdmann said.
He also advises an ``arm's-length'' relationship between molding and tooling operations within the same company. Too often, Erdmann said, molding and tooling are ``joined at the hip'' without devoting enough attention to tooling costs. A molder should look at a tooling department as a type of captive supplier company that might, in some cases, justify dedicated salespeople.
``The [molder-mold maker] companies that had the most successful mold-making operations had independent sales in mold making,'' Erdmann said.
Plastics companies in the automotive industry, where cost-cutting pressures are intense, showed smaller rates of operating income compared with certain other industries, such as packaging and medical products.
Erdmann also said that automotive molders, especially those operating with thin margins, need to take a very hard look at costs. If the vehicle industry takes a downturn, many molders will be hard hit.
``If you're in plastics and you're in automotive and you haven't been making much money in the past few years, you're in trouble,'' Erdmann said.