Is offshore profit adding up?
Congratulations on an excellent special report on toolmaking. I just read a few of the articles highlighted in your March 17, 2003, issue. I think you should take it a step further and help to close a gap in the relationship between tool shops and their customers.
One possibility is to ask your readers to pass along success stories from the customer side. As good as your articles are, stories about how shops have become more efficient are only part of the story. The other side is how shops market themselves. Ask any of the shops how their customers calculate the cost of doing business here compared to overseas and they will say ``quality, service and delivery.'' This is what they say because this is what they know. However, there is always more to the calculation. Shops don't have marketing departments to develop fine-tuned presentations that will resonate with the customer. They can't afford them and don't think it's their job to do the customers' homework for them. And customers don't always do their homework. Often, as insane as it sounds, a purchasing person who wouldn't know an ejector pin from a hot tip is making the decision on where to go for tooling.
The fact is, many small and medium-size companies don't have the staff or expertise to sharpen their pencil to determine if it is an advantage to go to China for tooling or molding. They can see the difference on paper between a tool that costs $125,000 and a tool that costs $250,000. Many tool shops' marketing efforts consist of calling their customers and letting them know they are slow and could use some work. So how does the advantage of staying in the United States for tooling ever get on the table?
I was motivated to write to you because there are calculations being done by customers, they just don't make their work available for you and me. If you could ask your readers to send you copies of their story (of course without proprietary information) it may cause other customers to stop and think before assuming offshore is cheaper.
Your success-stories article made me think of a story passed along to me by a salesperson for a Chicago-area tool shop. He said one customer had recently done a study on the tooling costs in the U.S. vs. China. They had China quote a large project. The price from China came in far below the U.S. tool shops that had quoted the project. When the customer reviewed what went into the tooling, they discovered the Chinese had strayed from their specifications. When the Chinese requoted the tooling, the difference between their tools and the United States was considerably less. The customer concluded the savings were not there to justify going offshore.
If you could get stories like this in your publication, my guess is those articles will get cut out, copied and passed out to customers by shops across the country. You might even find a few buyers showing them to their bosses.
Sage Products Inc.
Loss of work to Asia will affect pubs, too
I just finished reading the Mailbag comments of Robert J. Grosse, titled ``Shift to Asia reveals short-sighted goals'' [March 24, Page 6]. What comes to mind after the past few years of hearing the slow breakdown of the plastics manufacturing industry is this: Where will our trade magazines be when plastics leave?
What will become of Plastics News and the other fine publications of our trade? Will the other countries care to patronize once the shift in manufacturing is complete? Who in this country will be left to read the articles or care?
My goal is to do all I can to keep this trade alive and to see the swing back to American craftsmanship and quality over low-priced labor. For those companies that are using the Asian countries for tool building, I have one questions for you: If you like doing business there so much, why haven't you relocated?
Let's stem the tide of losing the toolmaking in this country and show the world that we have the best craftsmen in this trade.
Chino Hills, Calif.
Dear Mr. President: Don't give away store
The author recently sent the following letter to President George W. Bush:
I have worked in manufacturing for 44 years now, and this is the first time in my career that I have had to substantially downsize my company. I have had to lay off 38 percent of my employees, cut the hours of those still employed, implement a wage freeze now going on 21/2 years, and cut benefits that include vital hospitalization insurance.
The lack of profitability in our industry has kept us from keeping up with technology through automation and capital equipment purchases that could keep us somewhat closer to offshore competitors.
Business has fallen off by 27 percent over the past three years, and we know some of that is due to the recession. However, the fact is that my customers are purchasing their tools offshore and also moving their entire production lines there due to cheap labor rates.
My family and my employees and their families are having a very difficult time paying our bills, purchasing goods and trying to figure out how we are going to fund our children's college education and our retirements.
Mr. President, does our government have any recollection of what has made this country the superpower that it is today? If something is not done to keep manufacturing here in the United States, our economy, our homeland security and our reputation as a world power will certainly suffer.
I believe that we can still be compassionate to Third World countries by helping them to have a democratic government to raise their standard of living, but we cannot give away the store. I hate to think of the day when China is the world power and we have a conflict with them. Will they sell us the necessary weapons to fight against them when we may no longer be manufacturing anything?
If our government has a logical explanation of why this does not appear to be a serious issue and that I am wrong with my concerns, please answer this letter stating why my thinking is incorrect. Then I can begin sleeping again.
I am an American, and I know my vote counts. President Bush, I voted for you and support you 100 percent in this war effort. Please keep this country strong. God Bless America!
James R. Glatczak
Creative Die Mold Corp.
Glendale Heights, Ill.
No way to bring work back to United States
In my 30 years of active involvement in the plastics industry, I have seen many changes, but none so severe as the rapid transfer of existing work from U.S. shores to Asia.
With utilization rates at 60-65 percent and an installed base of close to 96,000 machines, it means we have 35,000 injection molding machines installed, plumbed, wired, wired and ready for work. With an average machine capable of doing $250,000-$500,000 annually, this means we would need billions of dollars in new work just to fill up this existing capacity, let alone create demand for new equipment.
It's not going to happen.
The only way to get utilization up is to get the installed base down. The only way to accomplish this is through attrition. When the field population gets down to 65,000-70,000 units we should have proper utilization rates, which once again will create demand for new machines.
As the pre-1990 machines go to auction and go unsold, they sit in dealers' warehouses or go to the scrap heap. This will continue to be the case. There are simply too many front doors in America with molding machines behind them.
Injection molding is no longer a stand-alone process, but simply a component in the supply chain. Actually, when a part can be molded and it is complete, as a stand-alone part, we are as competitive as anyone anywhere in the world. Optimum cycles have been reached worldwide, current technology is available everywhere, building rents and utilities in China are similar to U.S. rates, so what is the attraction? You guessed it, labor. If labor is involved on a large-scale project it is going to Asia or India.
The assembly location determines the component manufacturing location.
This is the reality of net shape manufacturing in 2003.
Understanding what is going on will help us all better deal with how to survive in the coming period of transition in our industry. Plant closings are occurring weekly and my experience tells me it will be five years before the plastics processing industry settles into a plateau where once again we can enjoy slow, steady progress by working with what's available at the time. There is no answer to this dilemma, nor is there a magic bullet to bring work back to the United States.
For those of us still standing, a clear understanding of why this is happening can help us proceed in the positive direction needed to improve the bottom line, not the top line.
Robert S. Risbridger
Plastics One Inc.