Is interior work for the depressed automotive world a dead end? An injection molder in suburban Chicago says no.
Elgin Die Mold Co. proves competitive cost is attainable in the United States. The 40-year-old firm exports small auto parts across the world, including to China and other low-cost countries.
President John Sapiente said he vetoed a customer's suggestion to move to Mexico because it's more expensive there. Based on his market study, production costs would rise if he relocated.
``Plastic materials are more expensive there,'' he said.
The reason is, Elgin's factory in Pingree Grove, where it is based, has minimum labor, so Mexico's lower labor costs don't translate into an advantage.
Automation has replaced manual work at Elgin. The plant is modeled after Japanese manufacturing philosophies focused on efficiency and advanced information systems. All of the 26 Van Dorn HT presses, with less than 200 tons of clamping force, are fully automated with self-check correcting sensors. Closed-cell automation checks 100 percent of the production with customer specifications. A central computer monitors production of all presses, moves scrap and controls the materials mix.
He said the number of defects, measured by parts per million, was 50 in the early 1990s and near zero today.
The second-generation family business made distributor caps and rotors for Chrysler for 26 years until 2001, when the business vanished.
``The industry was going to a distributor ignition from the conventional caps and rotors that we were making with manual labor processes,'' he said. That forced Elgin to reinvent its production and implement automation.
With 85 percent of its business coming from the auto industry, Elgin's products are functional precision parts such as electrical connectors and switch components, housings and covers, bearings, terminals, bobbins, gears and ratchets, knobs and threaded parts.
The rest of its sales come from household products and appliances.
Sapiente said Elgin also has been able to do assembly work cheaper than hand assembly in low-cost countries. The quality is better too, he claims.
``In many cases we have been able to offer our customers cost reductions from assemblies they were doing in their own plants located in low-cost countries,'' he said.
The assembly lines now are operated by six workers, down from 30. The entire company employs 57. As computers control the presses and conveyors all through the 55,000-square-foot plant, workers instead concentrate on developing problem resolutions and preventive fixes.
Elgin uses a single supplier for each type of raw material, such as nylon, polyester, polypropylene, and an ABS/polycarbonate blend. Sapiente said he never has increased prices due to resin cost. The majority of his customers are Tier 1 suppliers.
To keep the overall cost low, Elgin purchases its molds in Portugal and Asia.
``Asia builds the most efficient tools,'' and Elgin designs the mold and controls the whole process, he said.
Elgin's in-house tool maintenance and repair department uses computerized statistical analysis to track tool history. ``We took man out of keeping track of how tools wear out.''
The company also installed an IQMS software system in 2001 to take the labor out of order desks. ``Everything is paperless now,'' Sapiente said.
The next step is to reduce labor in quality control, he said.
``Quality should be a culture, not QC's job. We need to catch problems as early as possible during the process,'' he said.
Even though Elgin's parts defect rate is near zero, Sapiente is determined to reduce the internal reject rate, which currently stands around 63 ppm.
The future of supplying to the auto industry looks bright to him.
``Automotive provides volume, longevity and new opportunities,'' he said. Volume is what's needed to justify automation. ``[American] automakers' sales are down, but total production is stable.''
Elgin also is making products for German and Japanese transplants. European transplants are using more parts made in the United States because of the weaker dollar, he said.
The future will require the company to be leaner and more efficient. ``You have to have low cost,'' he said. ``You are not getting orders [just] because you are better or preferred.''
To compete with low-cost global production, North American molders need to reduce labor and implement a robust system to empower people and free management to focus on strategic tasks, Sapiente advised. It is also important to continuously secure new, profitable work to be able to absorb price pressure. That requires constant reinvestment.
Sapiente, who would not provide sales figures, is considering his next moves, including adding presses. He aims to diversify the company's customer base further. Right now, no one customer is more than 20 percent of the firm's total sales. He also hopes to increase the share of Elgin's sales outside North America.