CORONADO, CALIF. — Supplying plastics parts may be difficult now, but demands from original equipment manufacturer customers will only get tougher. That's the message that three OEMs — representing the medical device, computer and truck industries — gave to the plastics executives at the Western Plastics Processors Forum 2000, held May 11-12 in Coronado.
"OEMs and plastics processors must reinvent the supply chain and shrink the pipeline, streamline operations and increase cash flow, smash transaction costs and demand electronic efficiency," said Christopher Serocke, general manager of Edwards Lifesciences Corp.'s cardiopulmonary products division.
Smashing costs means reducing labor content and expediting traditional business practices.
The medical device industry demands absolute quality, rapid service and the best cost, Serocke said. "More than 65 percent of the sales in my division are in customized products."
Edwards Lifesciences of Irvine, Calif., became a freestanding, publicly traded corporation April 3, when it spun off from Baxter International Inc.
Serocke described a program involving one of the company's custom injection molders. The New Jersey-based processor built a through-the-wall plant adjacent to an Edwards plant in Puerto Rico, eliminating documentation and inspection costs, reducing the manufacturing cycle from six months to two weeks and cutting inventory by 94 percent.
Serocke's staff presented him with a mounted chunk of the masonry wall to commemorate the program's success.
"The supplier has doubled sales to the OEM creating 31 new jobs," he said, calling the move "a way of the future."
Edwards, the largest company focusing exclusively on the late-stage cardiovascular disease market, operates nine manufacturing plants on four continents and recorded pro forma 1999 sales of $809 million.
Global network computer provider Sun Microsystems Inc. wants speed and value from its suppliers.
"The manufacturing strategy relies heavily on supplier innovations to keep Sun competitive in the market," said Tony Cavotta, e-solutions development manager with Sun in Newark, Calif.
Typically, Sun deals with a small set of contract manufacturers, he said.
"Sun awards enclosure and plastic assembly business, not plastic part or resin business," Cavotta said. Metal and plastic purchases account for at least $800 million per year.
Sun operates plants in Newark and Linlithgow, Scotland, and relies on suppliers capable of "robust multiple core competencies," he said.
The contract players face Sun's scrutiny on whether they can manage a product from a concept through tooling and manufacturing.
Mold makers are on notice for eight-week cycles. "Those companies getting tools faster will get more business," he said.
Of those taking longer than eight weeks: "You guys are going to die," he said.
Cavotta said another change in supplier/OEM relations will involve Web-based commerce. He observed that businesses have conducted 400 reverse auctions since January, about one-third involving direct material purchases.
"Reverse auctions will tell the true market price," he said. "Then the buyer must decide whether to buy." He characterized the business-to-business e-commerce market as "80 percent hype and 20 percent reality."
Sun reported profit of $1 billion on sales of $11.7 billion for the fiscal year ended June 30. Sales should exceed $14 billion this year.
Truck maker Paccar Inc. of Bellevue, Wash., has almost tripled its number of plastic parts in four years, Thomas Floyd, director of purchasing, said in a presentation.
"Ten years ago, we didn't buy a lot of injection parts," he said. Principally, Paccar develops and makes light-, medium- and heavy-duty trucks under the Kenworth, Peterbilt, DAF and Foden nameplates.
Paccar operations used 960 parts made of plastic in 1996. That is up this year to 2,742 parts, mostly thermoformed or vinyl-clad reaction injection molded. Use of structural foam has grown "as a cost-effective process for instrument panels," Floyd said.
The Kenworth line was more receptive to plastic content than Peterbilt, which has favored aluminum in its truck cabs.
A Peterbilt model change provided a window of opportunity, but it took six months to convince management to use plastic on the highly visible front grille crown, he said. Traditional metal processing would cost $2 million for the tool and $300 per part. The plastic solution involved a $700,000 tool and $80 per-part cost.
Paccar expects plastics suppliers to be QS 9000 compliant, Six Sigma advocates and capable of meeting key measures that get stricter each year. The measures include part rejection, warranties and first-article inspection.
Paccar's Six Sigma program invested $5 million and realized a $2 million return in its first year. Now in its third year, the program projects a $50 million return on investment.
The firm aims to build more trucks without more plants by delegating responsibility to Tier 1 suppliers.
"Timing is becoming very important in the launch of our vehicles" and pushing rapid tooling to the forefront, he said.
In March, a Paccar division formed e-commerce company Truckxchange.com to create a virtual global marketplace for goods and services in the commercial vehicle industry. Commerce One of Pleasanton, Calif., supplies trading exchange technology and services, enabling Truckxchange to link manufacturers, customers, dealers and suppliers.
Paccar reported profit of $583.6 million on 1999 sales of $8.6 billion.
SPI's Western Region plans next year to vary its usual Coronado meeting location. Tentatively, the region will hold its conference May 16-18 in Hawaii.