Competition from low-wage countries has, without question, taken a toll on U.S. manufacturing employment.
Gotham Consulting Partners, which helps manufacturers create sustainable, competitive advantages globally, has investigated U.S. manufacturing and its constituent segments. The research indicates there are opportunities to maintain and leverage domestic manufacturing strengths in a global economy.
The U.S. plastics industry, while relatively protected, has not escaped the impact of globalization. Until 2000, the plastics industry enjoyed a strong trade surplus ($2 billion) and healthy consumption growth (3.9 percent from 1995-2000), leading to positive output.
While imports account for a small percentage of U.S. plastics consumption, plastics import levels have been creeping up since the late 1990s. Import intensity (imports as a percent of consumption) grew from 6.7 percent in 1997 to 8.7 percent in 2002, resulting in an $834 million trade deficit in plastics by the end of 2003. Even with the 2002 plastics market rebound, the U.S. plastics industry has shed about 100,000 jobs since 2000.
Barriers that tend to protect U.S. manufacturing include cutting-edge or proprietary knowledge, low-volume/customized products, perishability/freight sensitivity, proximity to critical raw materials and/or regulatory requirements. Key enablers that open the door to imports are high labor content and low value added per worker.
Overall, the U.S. plastics industry is rated 61.3 on our import susceptibility index, placing it in the low-to-medium range. Of the seven factors that protect a sector from import competition, two factors — freight sensitivity and low-volume/customized products — are favorable for a significant portion of domestic plastics products.
Select subsegments of the U.S. plastics industry, such as injection molding, continue to face significant competitive threats from low-labor-cost countries.
For U.S. plastics companies playing in relatively protected segments, steps to lock in customers are key. This means staying on top of the capabilities and economics of the low-cost players, while recognizing dynamics can shift quickly.
For U.S. plastics companies participating in less-protected segments, the key to survival is innovation. This means leveraging engineering capabilities and customer relationships to create new applications for existing plastics and taking advantage of the capabilities of resin suppliers to introduce new plastics for more cutting-edge and higher-value-added products.
Finally, all domestic players must focus on staying cost-competitive by improving processing techniques to decrease labor content and seek opportunities for lower-cost outsourcing.
By keeping a good grasp on the import susceptibility factors of the overall industry, the specific company and the company's key customers, business resources can be focused on areas of strength to carve out a substantive and sustainable role in the global environment.
Gotham Consulting Partners LLC