Rubbermaid Home Products of Fairlawn, Ohio, has entered into a product development agreement with materials firm Xyleco Inc. of Woburn, Mass.
Under the agreement, Xyleco is making its Xylecon composite material to produce Rubbermaid sample products, and the companies will share technical information, said Mike Orroth, vice president of research and development at Rubbermaid Home Products.
Orroth said in an Oct. 25 e-mail that the Xylecon material offers an opportunity to strengthen plastic while significantly reducing its price. Like other producers of home storage products made of plastic, parent company Newell Rubbermaid Inc. has experienced significant price increases in raw materials.
Marshall Medoff started Xyleco in 1994 to find material solutions that are cheaper and stronger than conventional materials. Xyleco holds several U.S. patents that cover composites made from long cellulose fiber from sources such as waste milk cartons and other paper, and wood fiber.
``The product development that has been selected, with its agreed-upon technical data and testing, applies to a wide range of product applications,'' Orroth wrote in the e-mail.
Medoff, Xyleco's president, said his company is working on similar agreements with other firms.
``The big push is that now that oil is taking off the way it's taking off, it becomes an extremely attractive option,'' Medoff said in a recent telephone interview. ``We feel that it's good, as a company, to hook up and get that visibility for us. Product group by product group, we'll be working with [Rubbermaid] on the technology inputs. Product by product, they will be making an assessment on how that works.''
In its third-quarter conference call Oct. 28, Newell Rubbermaid Chief Executive Officer Joe Galli said his company has projected $105 million inflation in raw material pricing in 2004 alone. That figure includes other materials besides plastics.
Officials said they are offsetting raw material prices by a blend of productivity and pricing actions in the marketplace, including exiting low-margin product lines.
For instance, in the third quarter, Rubbermaid Home Products discontinued $60 million worth of products.
``Given the reality of resin, we're taking a hard look at capital-intensive, resin-intensive products and there may well be more for us to do here,'' Galli said in the conference call. ``We haven't finalized our plans for 2005, but we're certainly open-minded about continuing to improve the product line so that we can end up with the right kind of yield.''
In other news from Newell Rubbermaid, officials also discussed the firm's move in manufacturing to an outsourcing model. Galli said the goal is to outsource 50 percent of the cost of goods sold to low-cost countries such as China and India.
Even after the company reaches that goal within the next three years, the number could inch up from 50 percent.
``This has been a major thrust for the corporation the last two years,'' Galli said. ``As I mentioned, we've closed 84 facilities in Western Europe and the [United States], with the vast majority of that output shipping mostly to China, a little bit to Mexico, India and central Europe.
``We would expect by year-end that about 45 percent of cost of goods sold would come out of low-cost countries. That's still not enough,'' Galli said, ``but it's way over where we were two years ago and it reflects pretty solid progress in this company.
``With that said, though, we still have, over the next three years, a lot of work to do to continue to lower our manufacturing cost base to go more toward an outsourcing model, to ship more production into places like China and India. We're hard at work on that.''