Injection molder River City Plastic Inc. and a minority-owned Detroit medical company plan to form a joint venture to tap into the growing market for hospitals that want to boost their purchasing from minority-owned firms.
The partnership between River City and Ginwil Inc. will start small, probably with medical-related assembly. But both partners anticipate that within the next 18 months the companies will start an injection molding plant in Detroit, said Bret Lewis, president of Three Rivers, Mich.-based River City.
Detroit-area hospitals dramatically have boosted purchases from minority-owned firms in the past few years - the result of an initial push by Mayor Dennis Archer, said Delbert Gray, president and chief executive officer of the Michigan Minority Business Development Council.
``The mayor went to them and said, `We have an 80-plus percent minority population in the city of Detroit,' '' Gray said. He said Archer's message was: ``We have major new hospitals. Would you consider looking at your supplier diversity?''
Detroit hospitals bought about 7 percent of their locally purchased supplies and services from minority-owned firms in 1998 and 15-27 percent in 2000, according to MMBDC statistics. MMBDC said it is a private, nonprofit agency set up to boost minority business activities.
Other cities such as Atlanta and Cleveland are looking at similar programs, Gray said. The medical manufacturing industry is beginning to explore supplier-diversity issues, said Gleatha Glispie, director of supplier diversity at San Diego-based Premier Inc., one of the two largest U.S. health-care purchasing alliances.
For example, Premier convinced one of its large plastic-component suppliers to partner with a minority enterprise in delivering a finished product, she said. She declined to provide details until Premier announces the contract.
River City and Ginwil each are looking at the venture to help diversify their markets. About 80 percent of River City's business is in automotive, while Ginwil wants to increase its automotive business as well as its manufacturing capability. Ginwil does about $5 million in annual sales, selling and distributing medical trays. River City, with 26 injection presses, did not disclose sales figures.
Much of the project's financing will come from River City, but Ginwil or a related entity will own 51 percent of the new company, which has yet to be named, said Bill White, president and chief executive officer of Ginwil.
Detroit-area hospitals rely on MMBDC to certify companies as minority-owned, which requires that they be 51 percent minority-controlled.
The new joint venture's injection molding plant will start with eight to 12 presses and about 40,000-80,000 square feet of space, White said. White said he worked in training and sales for more than 20 years at Johnson & Johnson, primarily in its endoscopic surgery business.
Initially, the venture probably will focus on commodity items like bowls and basins, White said, but the group would like to take advantage of River City's design and engineering skills to move into more complicated products.
River City recently started a small product design and development arm by hiring two former managers from a large medical device maker. River City hopes to add six to eight engineers by the year's end, Lewis said. The design business is called Cision and is controlled by River City's parent, Newco Holding Co. Inc.
Cision is part of River City's push to have 30-40 percent of its business in medical products in five years, and another 15 percent in communications, Lewis said.
Lewis said the medical manufacturing community does not have as many minority suppliers as other industries, a point echoed by White, Gray and Lolita Welch, supplier diversity administrator at the Detroit Medical Center, a seven-hospital chain.
``It is harder to find these sorts of businesses in the medical manufacturing community,'' Welch said. Other plastics firms have talked with DMC about the minority-purchasing initiative, she said.
DMC spends about $100 million a year on locally purchased supplies, with 27 percent of that going to minority-owned firms, she said.
Hospitals, of course, remain very price-conscious. But Lewis said they hope the minority designation affords the new company some advantages.
``If you are not priced right and don't have the manufacturing controls and processes, you are not going to win business just because you can check a box that says you are a minority,'' he said. ``What we are seeing is, this offers a chance to have an advantage if you do business practices properly.''