When Tom Duffey founded Plastic Components Inc. 20 years ago, his crystal ball was half cloudy and half clear.
Duffey got the part right about low labor costs by fashioning a highly automated injection molding factory. But back in 1989, he could not have predicted that several big, sturdy customers — Midwestern stalwarts West Bend Co., Motorola Inc. and Milwaukee Electric Tool Corp. — would move manufacturing to China, and leave a small custom molder in Germantown wondering how to cope.
Duffey tightened up operations by investing in a plantwide IQMS enterprise resource planning system. PCI itself cut costs by sourcing molds from China, reworking them, if necessary, at an in-house tool shop. Then in 2005, he hired a marketing manager, Teresa Schell, to help expand the molder's reputation.
“We thought we were a good molder, but no one beyond a 50-mile radius of Germantown, Wis., had any idea who we were,” Duffey said. “We had never done any marketing, any sales effort beyond the state line of Wisconsin at the Illinois border. We had to completely rethink our whole marketing and sales approach.”
Fast forward to late last year, as the recession started to bite. Many plastics factories felt the squeeze; some have even shut down. But PCI is busy. The company is running six days a week, 24 hours a day, instead of the usual five days. It didn't just happen.
“We've been working overtime every Saturday since around Thanksgiving,” Duffey said. “The reason we've been working flat-out, making as many parts as we can, is because of the effort that we started four years ago, with marketing and business development.”
With 50 employees and $12.3 million in 2008 sales, Plastic Components exploits the advantages that a small, tightly focused and owner-operated processor can have in these turbulent times: hands-on management that thinks long term, dedicated employees, and an ability to make changes — without a lot of bureaucracy.
The hard work has paid off. Sales have increased steadily, by double-digits in four out of the last five years. PCI is consistently profitable, and the molder boasts low debt. Employment has remained steady.
Now Plastic Components can count another achievement — winner of Plastics News' Processor of the Year Award. The other two finalists this year were Freelin-Wade Co., a tubing extruder in McMinnville, Ore., and PolyPipe Inc., an extruder of smooth-wall polyethylene pipe based in Gainesville, Texas.
PCI was a finalist for the award last year, which was won by Innovative Injection Technologies Inc. in West Des Moines, Iowa.
Plastics News honored all the finalists and presented Plastic Components with the award March 3 at its Executive Forum in Summerlin, Nev.
The judges — who are Plastics News reporters and editors — gave PCI strong grades for financial performance, employee relations, customer relations, quality, public service and technological innovation. PCI got a midrange score for its environmental record.
PCI leaders believe their company is one the most efficient molders in the United States. Some key numbers bear that out: 42 injection presses run by just seven employees per shift. Actually, “run” isn't the right word, since no direct labor is involved. Plant-floor employees are process engineers, quality personnel and materials handlers who bring resin to each press and take molded parts to the warehouse.
PCI uses Toyo and Nissei machines, ranging in clamping forces from 35-300 tons. That includes nine all-electric presses. Operations manager Bob Allcox said officials plan to buy only all-electric presses from now on.
PCI has invested $5.6 million since 2004, for a toolroom, 14 manufacturing cells and annual IQMS upgrades. That total includes capital spending in the past year to buy three Toyo presses and one Nissei, and paying $150,000 for two SmartScope Flash 302 metrology machines for the quality department.
Each injection molding press in Germantown is equipped with a Yushin robot. The parts go straight into a box and in a simple, straightforward process, the material handler checks the full boxes, tapes then shut, slaps a label on — with information tied back through IQMS — and takes the box back to the warehouse.
“Nothing good happens when human beings touch parts,” Duffey said.
“There's cost. There's the potential for error. There's disruption. What we try to do is minimize the touches, to eliminate all of the potential for stuff to go wrong at every step of the way.”
PCI does what used to be known as shoot-and-ship molding, a segment that, according to conventional wisdom, is losing out to China. “We call ourselves a fully automatic operation, but yeah, in layman's terms it's 'shoot-and-ship,'” Duffey said.
PCI practices a very refined version of shoot-and-ship. It doesn't add value from assembly (what little assembly work it accepts is outsourced to a local sheltered workshop). Instead, PCI offers strong technical support, an on-time delivery rate of 99.94 percent, and close connection with customers.
Automation from Day 1
When PCI was created, it had three presses ... and three employees.
“We started the business right from the start with the idea that we wanted to develop a manufacturing concept that took all of the direct human involvement out of the process,” said Duffey, an outgoing man who likes to talk about big-picture issues of U.S. manufacturing.
He graduated from the University of Notre Dame in 1979. He worked for a short time at Johnson & Johnson then, with his father, started a manufacturers' representative firm called Engineered Products in 1980. That gave him exposure to many different types of factories, including plastics.
The entrepreneur bug bit, so Duffey went to Northwestern University to get a master's degree in business administration. Fresh off his MBA, he picked custom molding — a decision that wasn't MBA-style sexy but looks good today, after the financial meltdown.
“Most of the guys I went to Northwestern with ended up heading off to Wall Street, and I came back and started a molding company, which, for 20 years seemed like a really bad idea. I'm feeling a little bit better about it now than I have for the last 20 years,” he said, and then added, with a bit of dark humor: “Our recession is better than their recession.”
PCI began in a 10,000-square-foot building on its current site. Today, after several expansions, the factory and headquarters measure 42,500 square feet.
Business grew steadily, based on the work from big customers nearby. Then the global economy hit home. West Bend, PCI's biggest customer, moved assembly of its popular bread makers, popcorn poppers and other small kitchen appliances to China in the late 1990s. The work was gone, Duffey said. He snapped his fingers for emphasis. Gone.
Other big customers followed suit. The most recent is Milwaukee Electric Tool, known for its signature red power tools. Hong Kong-based Techtronic Industries Co. Ltd. bought the company in 2005 and has steadily been moving production offshore. PCI still does a little bit of work for the tool company's last U.S. factory, but the drop-off has been dramatic.
Snap. Snap. Snap.
Molds from China, and a marketing push
For PCI, 2005 was a pivotal year.
First, PCI bought a former mold supplier and moved the entire operation into its plant. That was tied into a new strategy to buy molds from China. “We needed to have the ability in-house to make all of the adjustments and tweaks that are inevitably necessary when you bring a tool in from China,” Duffey said.
PCI also needed the 2,000-square-foot toolroom to do mold maintenance and control quality.
“You can't run a fully automated plant the way we run it, unless the tools are in prime operating condition,” he said.
Sourcing molds from China helped Plastic Components offer customers lower prices. But Duffey said the mold-making pendulum is swinging back to the United States. Local toolmakers have become more price-competitive with China, and most importantly, they improved their speed, he said.
Also in 2005, Duffey hired Schell as PCI marketing manager. She had run the office and did inside sales for his former rep firm.
It's unusual for a small plastics processor to have a person dedicated to marketing. But it paid off: Marketing strategies developed during the past three years have generated 17 brand-new customers in 14 new markets.
The result is that now PCI is much more diversified. Markets include automotive, industrial engines, faucets and plumbing, water filtration, appliances and power tools.
Duffey credits Schell's marketing and new business development, led by Rick Riesterer, as the reasons why PCI has kept up solid sales gains.
“It's very good growth considering the rate of attrition we've had,” Riesterer said.
“We've lost three or four of our biggest customers over the last 10 years — they have essentially evaporated. ... They've left the country,” Duffey said.
One of Schell's first tasks was organizing a customer advisory council to get feedback. Management learned that there wasn't a high level of awareness about some PCI strengths, such as engineering expertise and its use of Moldflow simulation software to help design parts and molds.
Marketing is even more important in today's tough economy — but it takes time.
“The sales cycle is 18-24 months long for a lot of these programs, so if you go out and you start trying to cultivate new customers now, in the middle of recession, you're not going to make it to 2011 when these parts are going into production,” he said. “If we were relying on the same base of business that we had here three or four years ago, before we started the marketing initiative, we'd be half the size we are now.”
Schell, Riesterer and other PCI leaders have worked hard to drive marketing throughout the organization, including quoting and product launch.
When quoting a job, PCI used to send back a standard, one-page form listing the price for the part and tooling. “But there's so much more to a program than just a price,” Riesterer said.
Schell and Riesterer had attended a seminar aimed at helping very large companies, like MasterCard, create a consistent, reliable message for customers. They applied those big principles to a small manufacturing operation, and last summer, launched a 14-page booklet bound together in a professional format. It includes the quote price, of course, but now PCI gives much more, including a complete Moldflow analysis and contact information for the PCI team assigned to the part, with photographs.
“It's maintaining that relationship, a connection,” Schell said. The quote sheet now becomes a marketing tool. It has generated new business, she added.
The beefed-up quoting was new. But it's tied back into PCI's product launch process, which is a few years old.
For each new part, PCI used to assign one engineer to coordinate everything, from quoting to scheduling. That worked OK back when the company took on 20-some new parts a year. But in 2006, the company launched about 75 new tools, and everything started backing up.
“It was like a big rat going through a snake,” Riesterer said. That's when PCI created its program launch coordinators, to free up engineers from that task. Tom Duffey's son, Ryan, works as PCI's launch coordinator.
A team started with a blank sheet of paper. They developed a detailed checklist that covers every single stage of the process in the correct order, from computer part models and tooling, to sampling and engineering reviews. For each part number, the checklist is stored in a common drive on the computer system.
“It's done in a time line so there's no gaps and waiting. Everything triggers the next operation to happen, which is the whole idea behind this,” Riesterer said.
Finally, PCI and the customer sit down to work through a commercial review process, analyzing how the original quote meets the final numbers. If the quote is off, it's a critical learning process, to improve next time.
Satisfied customers, inherited molds
Customers praise PCI for high quality and very competitive pricing. One customer purchasing official called PCI “a top-notch company. They do a very good job. I can give them any project and they make sure they can get it done.”
PCI's sweet spot is smaller parts. “If it can be run on a fully automatic basis in that range, our success rate is phenomenal,” Duffey said. And customers contacted by the Plastics News judges said they think of PCI first for those types of parts that do not require assembly.
Company officials are not afraid to change. One big change — an improved process to qualify tools that come to Plastic Components from other molders — came after working with IMI Cornelius Inc., which makes restaurant drink dispensers.
IMI Cornelius needed to find another plastics supplier when Iowa-based Victor Plastics Inc. announced in January 2008 that it had filed for Chapter 11 bankruptcy (and subsequently was acquired by Arkansas injection molder River Bend Industries LLC).
IMI sent people to Germantown to conduct a quality audit. “PCI scored the highest we ever had on an audit score. That opened some people's eyes around here,” said Dennis Tortorella, design manager of materials development at IMI Cornelius.
By measuring sample parts, PCI employees found some problems. One mold had a blocked water line — something IMI Cornelius was not even aware of — and PCI's tool shop took it apart and made some adjustments so production could continue.
Duffey personally delivered the parts, Tortorella said.
The tools were in “awful shape” when they arrived in Germantown, Duffey recalled. PCI repaired some molds and ended up building a series of new tools for IMI Cornelius, after the processor showed how that would improve quality and reduce part cost by cutting scrap.
Given the economic stress hitting the plastics industry, PCI leaders figure that most new business this year will come from these transfer tools, pulled out of molders in trouble. So Schell created a marketing plan, with its own PowerPoint presentation. PCI's sales force is laying the groundwork with potential customers. One key message: Plastic Components is a financially stable, competent supplier.
“The tool transfer process never happens at a leisurely pace. It's always in crisis mode. And so what we have developed is a documented process that says when the fire drill occurs, here's what we've got in place to respond,” Duffey said. “We have the experience, the toolroom and the processes to manage the whole cycle.”
Now, on inherited molds, weekly progress reports are e-mailed to the customer. “There are no secrets, no questions and they're completely informed,” said Riesterer.
PCI always did short-run sampling. But one new change is to run new the molds longer, for several hours. That's how technicians discovered the clogged water line on the IMI Cornelius mold, because when the tool heated up, part dimensions started drifting out of specifications.
Low staff turnover
Every employee counts when you have about the same number of injection presses and people.
“An organization of well-trained, talented employees throughout the company” is a critical part of the business strategy, PCI said in its submission for Processor of the Year.
PCI boasts a very low worker turnover — less than 3 percent in 2008. During Plastics News' visit to the factory in January, employees said they enjoy opportunities for training and the chance to get promoted. One veteran said in her 11 years at PCI, the molder has never had a layoff.
Management pitches in on the plant floor. That includes box-making duty every Monday for Tom and Ryan Duffey, and Paul Cento, accounting assistant. (PCI recently added some automation to that task by picking up a used box-making machine).
PCI offers solid benefits, and a 401(k) with matching funds — which PCI is maintaining this year. The firm also holds a “continuous improvement lunch” every month as a reward, as long as each shift submits at least one suggestion that gets implemented.
To promote scrap reduction, the company has posted a large bulletin board that reports the dollar value of scrap produced each day, and for the month. At each press, the job sheet lists the price per pound of resin and for each part; any parts that fall to the floor get scrapped. Employees get gift certificates if PCI stays under its scrap limit.
PCI earned high marks from Plastics News judges for public service and industry involvement. Duffey has become an industry spokesman, as president of MAPP, the Indianapolis-based Manufacturers Association for Plastics Processors trade group (formerly Mid-America Plastics Partners). MAPP has helped PCI exchange ideas with other processors. Duffey and Schell are frequent speakers at industry events, on topics such as sustainability and benchmarking.
Partnering with suppliers
Duffey said PCI could not be a highly automated, low-cost molder without strong links to suppliers, like PolyOne Corp. and IQMS Inc., plus equipment makers Nissei America Inc., Toyo/Maruka USA and Yushin America Inc.
“Every pound of resin we can buy from PolyOne, we buy from PolyOne,” he said. PolyOne delivers resin first thing each morning.
PolyOne and IQMS help PCI be a lean molder that turns inventory about 24 times a year, vs. the industry average of eight times. PCI can get resin in and be molding parts by 10 a.m., then ship product out a day or two later.
Duffey said molders typically pit two or more resin suppliers against each other to cut the price by a few cents a pound, and then they end up with a warehouse full of material and face the risk that resin prices will gyrate, as they did last year.
IQMS is tied through the entire company — accounts payable and receivable, accounting, payroll, machine scheduling, quality reporting, even profit and loss from each job.
“At the end of the day, what you need to drive your business is information, and you need it timely. You have to have it in a real-time basis,” Duffey said. “You know moment-to-moment, day-by-day, shift-to-shift and week-by-week exactly what it is you need.”