North America's plastics processors need to step up their technological innovation, add value, boost productivity and adjust at warp speed to fast-changing markets and supply-chain dynamics. Those who fail to do so - no matter how successful they may be today - risk extinction.
That was the stark message from a recent panel of industry leaders from successful but vastly different processor companies - ranging from the modest to the mighty, and from precision molders to a bag maker.
Much of the debate focused on China and on strategies for remaining competitive. The panelists agreed that adding value and spurring technological innovation remains a key for future success, even as they individually wrestle with the dizzying speed of change and the impact of disruptive technologies.
Brian Jones, president of Nypro Inc. - by far the largest and most international of the firms represented - suggested that if the challenge from Chinese competitors was all that anybody had to worry about, then most firms would have the ingenuity and wherewithal to come up with a strategy to succeed.
But Jones contends that other factors are equally responsible for roiling the waters. Foremost among them is how outsourcing is disrupting the supply chain and traditional customer relationships. As an example, he cited one of his firm's major sectors, the electronics industry, but said the trend will spread to many other industries before all is said and done.
The electronics industry has been outsourcing production to third parties for a decade. But, even so, Jones asserts that roughly only a quarter of the likely outsourcing that will happen in that sector actually has taken place. The result is that your customer changes, and you have no say in the matter.
``If you supply IBM, and they outsource to a contract manufacturer in Taiwan, guess what - you have a new Taiwanese customer. You don't have IBM as a customer. It doesn't matter if you've done business with them for 25 years. And ... you think IBM is tough? IBM is sunshine and light when it comes to selling to the Taiwanese.''
In this world of outsourcing, Jones said, ``you need to increase your capabilities in order to make yourself an attractive solution to these [original equipment manufacturers], or you're going to get wiped out. That's a hard reality. And that cannot be cured by a plane ride from L.A. to Shanghai. This is a totally different business focus than being a plastics processor.''
Jones - who noted that this year Nypro will earn only half its sales from molding, down from 90 percent just a few years ago - suggests that those molders content to just knock out good molded parts are in for a tough future.
``I would say you're going to have one helluva lonely existence,'' he warned. ``Because a straight molded part is a lonely thing indeed.''
Nypro has responded to the challenge aggressively, starting 19 companies in the past 24 months, and adding 1,300 employees to its ranks this year alone. That gives the $808 million, Clinton, Mass.-based firm 60 sites in 16 countries, and nearly 11,300 employees. Nypro has bolstered its design, decorating, assembly and tooling capabilities. It now boasts some 630 mold makers worldwide - and was searching for still more tooling capacity at the time of the panel.
Of course, few plastics companies have the breadth or resources of a Nypro. But that doesn't mean they can't respond in an innovative fashion to today's challenges.
Selling to the world
Pacific Plastics & Engineering Inc., a precision injection molder based in Soquel, Calif., near Silicon Valley, currently employs 58 and is run by husband-and-wife team Jack and Stephanie Harkness, who jointly bought the tiny, then-struggling business 14 years ago.
Albeit admittedly from a small base, the company has experienced average annualized sales growth of 25 percent every year since the buyout, and in early 2003 formed a molding joint venture in Bangalore, in India's ``Silicon Valley.''
``I could get depressed and complain,'' said Stephanie Harkness, PPE's chairman and chief executive officer, ``or I could join the global party. That [latter option] seemed more productive than remaining with the buggy drivers. You don't see many of those these days.''
Harkness, who also serves as vice chair of policy on the board of the Small & Medium Manufacturers unit of the Washington-based National Association of Manufacturers, laments that many U.S. companies have ``a John Wayne mentality.'' Such firms don't like to collaborate with others as much as Europeans and others do. But she stressed, ``We must sell to the world, not just to ourselves.''
So when an Asian customer told PPE either to manufacture in Asia or lose its business, the Harknesses got busy. They did their research and chose India as a production site over China for a number of reasons, including India's use of the English language, its greater respect for intellectual property rights and its huge pool of highly qualified, low-cost workers. Additionally, they teamed up over there with the brother of PPE's Indian-born sales director, and now have their own facility on the site of the brother's own plastics molding factory.
PPE's Indian plant is building four molds now that it will use to make proprietary parts for transporting computer chips and packaging small medical devices. It plans to distribute those products globally, including in the United States, Harkness said, while continuing to mold other specialized medical and high-tech products at its California headquarters.