Small and medium-size film converters and extruders can improve their operations and compete against offshore manufacturers, consultants from McKinsey & Co. Inc. told a plastics trade group's technical seminar in Newport Beach.
``Transformation is possible with our own limited resources,'' Catherine Browne, general manager of Crown Poly Inc. in Huntington Park, Calif., said in a post-seminar interview.
``I believe transformation is within reach,'' agreed Albert Halimi, a partner and executive vice president of Command Packaging in Vernon, Calif. ``It is not fictitious. We can get there.''
Presenters from the Irvine, Calif., office of the McKinsey global consulting firm identified contemporaneous changes in operating systems, management infrastructures, mind-sets and behaviors as keys to manufacturers' successful transformations.
Eliminating waste and addressing variability and inflexibility are important, Ron Ritter, a McKinsey principal, told those attending the California Film Extruders and Converters Association's event Aug. 13.
During several months, McKinsey consultants talked with 15 California film processors and, at four plants in the state, spent significant time observing and probing proprietary operations for areas of improvement. The consultants visited Crown Poly, Command, Roplast Industries Inc. of Oroville and a large, unidentified manufacturer.
Robert Bateman, Roplast president, agreed via e-mail that change is feasible ``with the right product.'' To compete, a film converter or extruder must ``become as efficient as possible and specialize, particularly on products that are difficult to produce offshore,'' said Bateman.
The McKinsey visits to Roplast educated Bateman on ways to set up individual training programs for employees and chart their progress.
In film processing, ``lead time is incredibly long in comparison to how long it takes to manufacture,'' Ritter said, adding that processors have the potential to reduce response time, perhaps by 30-50 percent.
Ritter also said film processors can reduce costs 10-15 percent, in part through overcoming ``relatively low overall equipment efficiency.''
He underscored the importance of freeing ``talent to drive process improvement.''
In 2003, California manufacturers of plastics and rubber products employed 94,000, had sales of $14 billion and added value of $7 billion beyond product material costs, said Martin Riegger, a manufacturing practice expert with McKinsey.
Halimi said, ``Our industry is very fragmented'' and consists largely of firms with annual sales of $10 million to $50 million. ``A lot of the businesses in our industry have grown out of very small startups'' and typically lack the expertise to which the McKinsey consultants alluded.
``It would be wonderful to give our industry a leading edge and comfort in global competition and business, but it all comes under the discipline of the finances of being able to implement and the investment in the transformation, as they called it,'' Halimi said.
The session prompted Browne to consider modifying Crown's maintenance and production practices ``to reduce waste and improve our process.'' Rather than retaining an outside resource, she intends to continue a Crown practice of training an individual who in turn brings the lessons to others in a department.
``The key thing they touched upon was the senior management commitment to do this,'' Halimi said. ``It is critical that the players in our industry have the discipline to be able to look at that and say we want to be part of the global competition.''
Halimi is CFECA vice president.
The McKinsey presentation suggested domestic processors have multiple advantages to offset China's low direct-labor cost. Understanding a customer's cost options, creating shop-floor efficiency, establishing a highly responsive supply chain and constructively engaging the public sector are keys to building domestic demand.
Browne sees domestic processors as being capable of dealing with the China challenge. The McKinsey team identified some detriments of doing business in China including hidden costs, long customer lead times, remote responsiveness and stretched supply chains. ``All of that gives a benefit to the domestic manufacturer,'' Browne said. ``We should do a better job of emphasizing that to our customers.''
The McKinsey presentation looked at the import issue ``from a different point of view than any I had heard expressed before in discussions about importing and the cost of manufacturing globally,'' Browne said.
Command employs about 170, Crown 160 and Roplast 130.