(May 31, 2004) — Writing these anniversary columns has been a lot of fun. We've looked backward, forward and — in a twisted sort of way that comes after writing about plastics for 15 years — sideways. This is your brain. This is your brain on polyetheretherketone. Understand?
During the planning meeting, we did rack our brains trying to come up with 15 straight weeks of column ideas. Then the ideas just all came flowing out. It was kind of like how, when Plastics News began, some of you readers wondered how we could get enough news to fill a paper every week. Well, next time you're in Akron, stop by and see my to-do story pile.
This week's subject is about my beat, machinery. Now, this is not another one of those trade-mag staples predicting changes in plastics technology. No. Injection molding machines, the largest sector, are plenty fast, precise and computer-controlled. They work great.
The real action in the U.S. market during the next few years will be changes in marketing and sales channels. Some of the changes will be painful to old-line plastics machinery people. But with the U.S. market for injection presses half the size it was in the late 1990s, and people saying it probably will never return to that lofty level, well, something's gotta give.
* The rise of the “super-rep.” You know how some car dealerships sell, say, both Toyotas and Fords? This could happen in plastics machinery, where several direct-competitor press makers may sign up with the same manufacturers' representative firm.
In the announcement, they'll use euphemisms such as “one-stop shopping.” In reality, what would drive this is simple economics and supply and demand. First, machinery companies have been weakened by the devastating downturn the past few years. No news there.
Second, there is a growing shortage of good reps. Sales veterans tell me young people just are not getting into commission-paid machinery sales, in part because of the downturn. Who can blame them? The small molders, the type you can build a relationship with, are hurting or closing down. The big customers are doing reverse auctions to buy their next press. Everyone is beating down the price, which slashes commissions. So instead of stealing the remaining good reps from each other, some machinery companies will opt to share.
* Auxiliary equipment makers will lighten up and name their suppliers in China. Granulators seem to be the first type of Chinese-made auxiliary equipment being sold in the United States. ACS Group is sourcing its EconoGrind brand from a multinational company that runs a plant in China, although it won't identify the source.
Likewise, Universal Dynamics Inc. is selling a low-priced line called AutoGrind that is made in China by an as-yet-unidentified supplier.
EconoGrind and AutoGrind are good names to market. The companies say the quality is still great, and the fact that the machines are cheaper is going to appeal to some customers.
Still, some pro-cessors naturally are going to be nervous about buying Chinese-made equipment. That may explain the unusual secrecy about the manufacturers.
In both cases, as customers get more comfortable with the idea, the suppliers will break the taboo and say exactly who is making these machines. After all, they're already saying that they're coming from China.
* Pay-per-shot. I've been hearing about this for a few months. Sources are telling me that at least one automotive company has floated this. If it actually happens, it could get ugly for machinery manufacturers.
Here's the concept: You put an injection molding machine into a customer's factory and get it started up. The customer makes periodic payments based on how much the machine actually produces. For example, every time the clamp opens and a part comes out, Molder A sends the machinery supplier a check for $5, until the machine is paid off.
That sounds too radical. Normally, molders get their own financing, or arrange it through the press supplier.
But basically, the full brunt of the financing would fall on the machinery company. Who bears all the risks? The machinery company! What if the machine sits idle because business slows or the company goes out of business? No check that month!
It's no surprise that the automotive market is trying the idea first. It sounds like the practice of mold amortization — a term that sparks bitterness in tooling circles.
However, let's not hyperventilate here. Rod Groleau, one of the deans of injection molding, is pitching an idea he calls “total variable cost.” It works like a rental car, or a vending machine.
Groleau said the concept could work for machinery, resins or even molds. “It's a complete partnering relationship between all the parties,” he said.
The machinery company keeps ownership of the press. The molder makes payments based on the output. When the job is over, the machinery maker takes back the machine, then can resell it, refurbish it, ship it to Mexico or, in times of high steel prices, sell it for scrap.
Or after negotiations, the supplier can leave the press with the molder, maybe giving a better deal for the next job.
Groleau, who founded RJG Inc. in Traverse City, Mich., said total variable cost gives both sides the ultimate flexibility — an important factor in today's world, when short runs and jobs moving around are the norm.
“If you look at it from the molder's point of view, why do you want to buy a machine?” he asked.
From the press maker's perspective, the idea might be attractive in times when the plastics business slows down and processors have too much capacity.
The cash keeps flowing, not like the feast-or-famine world of new-press sales. Another benefit to retaining ownership: That's one machine kept out of the auction yard. (Wow, Rod — this sounds pretty timely.)
A lot of this new thinking stems from molders who now know — up front — what part price they have to meet to win a job. The molder works with all suppliers to get that price. Everything is transparent.
“I think it's the wave of the future, because it allows the people who own the hard assets to be the ones that can reclaim and reuse them,” Groleau said.
In a perfect world, we have just-in-time production, where demand for a part kicks off production of that part and no others. The “pull system” has replaced the antiquated “push system,” in which you would try to predict demand, then run, run, run the machines.
Follow the logic: The molder should just pay for its “inputs” on a just-in-time basis. There you have it, pay-per-shot!
Still, I think the concept places too much risk on the machinery company. On the other hand, some sort of third-party financing probably would be used, plus the molder might pay some cash up front. Pay-per-shot just sounds like somebody taking advantage of machinery makers. But maybe I just have problems “thinking outside the box.”
Rod Groleau, leave my cheese alone. Don't move it!
Bregar is a Plastics News senior reporter based in Akron, Ohio, and one of the newspaper's original staffers.