CHICAGO (July 7, 2:40 p.m. EDT) — Despite margin pressure, foreign sourcing and increased competition, processor company executives are optimistic, and their companies are adopting a variety of cost-saving strategies, according to the results of a survey at NPE.
“Everyone has margin pressure. Whether it is foreign sourcing or just competition, there is a catalyst to keep the margin pressure strong,” said Jeffrey F. Mengel, a partner with Plante & Moran PLC, the Auburn Hills, Mich., firm that sponsored the poll.
Companies are responding with a variety of plant improvements, like adopting lean manufacturing techniques or adding new equipment or automation.
“They look at a changing strategy based on an internal focus,” said Mengel.
The survey was not scientific, but the pollers sought out company owners and chief executive officers. Some 146 responded on the first two days of the show.
The questions varied by day. Overall, 62 percent said margin pressure was the greatest challenge facing processors, while 53 percent cited foreign sourcing and competition.
One participant, Bruce Welz, sales and engineering manager at Sun Plastics Inc., a custom injection molder from Elk Grove, Ill., said his company responded by downsizing its mold-building business and outsourcing some work to other U.S. and Canadian companies.
“Obtaining new customers and keeping the customers are a key challenge,” Welz said. Sun Plastics operates a 60,000-square-foot manufacturing plant with 75 employees.
Philip C. Gilbert of P&M Corporate Finance LLC in Southfield, Mich., who helped with the tabulations, said processors are looking for help.
“Historically, midlevel companies have relied on themselves, but more are willing to look outside at associations, advisers and a more diversified board so they have a fresh perspective and fresh ideas,” Gilbert said.
Only 5 percent of those polled said they want to sell their business. Mengel said his impression is that processors are still bullish on the industry.
The two-day survey corroborates the findings of Plante & Moran's most recent biannual survey of 200 companies.
“Companies that have a good focus on where they are going and a customer focus tend to have a better alignment of resources internally to support new strategies,” Mengel said.
He added that his company's regular survey shows about 25 percent of companies at risk, but at NPE the number was much smaller.
“I don't think the 25 percent show up [at the show]. They are too busy putting out the fires and don't have the capability to do a major turnaround,” Mengel said.
Some 71 percent of those surveyed pointed to customer relations as a company strength, but that number may be deceptive, according to Gilbert. He said that it “makes it clear that price is driving the decision making.”
Tim Erdmann, president of Pine River Plastics Inc. of St. Clair, Mich., an injection molder and mold maker with about 500 employees, agreed.
Erdmann, who became president June 9, said his company has used lean manufacturing and Six Sigma techniques to cut costs, and the company remains very optimistic about the future.