In response to your recent publications about competition, and specifically your recent column “To stay competitive, try customer service,” Grace Notes, Dec. 11, Page 6, I submit this reply.
Many injection molders are closing for a variety of reasons in the United States. Most will attribute it to “Chinese competition.” I beg to differ. I believe it is due to a two-fold problem. Since I am an injection molder near Los Angeles, I face this threat every day.
The first problem is price. Price, price, price. If you don't meet the price, you don't get a seat at the table. Customers today are looking at price as 90 percent of the equation, where in the past it seemed that “customer service” played a large role. That role is vastly diminished, driven by buyers from mega discount stores who will only buy your product if it is the lowest-cost item of its kind on the market. Many companies don't consider the extra costs associated with buying offshore. They are only looking at the part cost.
Let me give you a real-life example:
We have a potential customer here that is Taiwanese-owned, and it buys all its plastic parts from either China or Taiwan. We have priced their product twice and now are quoting it again. Why do we keep quoting it? Because they keep having delivery and quality problems.
We quoted their production, and they chose China for both cost of molds and piece part cost. That is understandable; we were not competitive on either. But we told them that we are right down the street so they wouldn't have delivery problems, and we are a competent U.S. molder so they wouldn't have quality problems.
Then, they began having delivery problems with their Chinese vendor, which was being blacked-out for three and four days per week during the power-shortage months of summer and couldn't produce enough parts. So, we requoted everything. We had made some major changes to be more competitive globally. But they decided to move their work to Taiwan. This time, it came down to only the cost of the molds. As I had explained to them earlier, for the prices they were being quoted, they would not own the tools. The buyer said, “Who cares?” I said, “You will, when you ask them to ship the molds elsewhere.”
Now they come to us because their Taiwan supplier can't supply white parts without black specks in the quantities that they need. Mind you, this is a company consuming $2 million to $2.5 million in parts per year! We re-quoted everything, again, and agreed to build their molds for free if they sign a term contract with us for the business. Finally, this deal looks like it will stick. But nowhere in this negotiation did they even consider our location and customer service to be a benefit until our price for both the molds and the parts were cheaper than offshore — and they personally went through the rigors of buying offshore.
I call this “China-izing.” WalMart is notorious for China-izing our buying habits. If a product is 1 cent less than somewhere else, we jump in our big SUV to drive over to that store and wait in line for an hour to save that penny. We purchase the cheap Chinese toy that breaks on Christmas day, just to consume the product. Sure, WalMart and other retail stores will take them back and give you credit, but is that why you bought the toy in the first place? Not enough of us bring them back, because that cost is not worth our time (but saving the penny is).
I also had this happen when I purchased a portable DVD player. It never worked, and I didn't get around to taking it back to Toys R Us for a few months. Well, it was 3 months and 15 days to be exact. The response I got was “we don't deal with that after 30 days and the manufacturer will only fix it for the first 90.” Therefore, I spent the $150 for a pile of electronic junk (incidentally, if I throw it away, I'm breaking the law about hazardous waste, too).
The second problem is that costs associated with buying products offshore are not incorporated into the part cost itself. Nobody I know accounts for their staff needed to manage an offshore import chain in the piece part cost.
There is also the voting angle. People vote to feel good, which puts people in power who raise the minimum wage (a huge increase in cost coming to California the next two years). Minimum-wage laws may be well-intentioned but can absolutely devastate one industry vs. all the others: manufacturing. When minimum wages go up, manufacturers must compete to make products using higher labor costs than products made in China, for example.
California just raised its minimum wage, and will hit us with a $0.75 per hour increase this January. Um, excuse me, a person in China only makes that amount in total. This increase doesn't affect McDonald's, because you can't make a cheeseburger in China and sell it in Los Angeles. All of their competitors also have to pay the increased wage, so all their competitors' costs go up.
We need to get back to sanity. One company (the cheapest one) cannot possibly supply all of the world's products. We as consumers and individuals need to vote with our pocketbooks and our ballots and make rational informed decisions that take into account more than the price tag.
Astro Custom Injection Molding Inc./Addicks Engineering and Prod¼uct Development Co.
Bell Gardens, Calif.