Like many businesses, American blow molder Lifetime Products Inc. sees innovation as vital to its future.
But Lifetime, which says it's the world's largest maker of blow molded polyethylene table tops, basketball sets and storage sheds, is also in the midst of a significant international expansion aimed at giving it better low-cost production capacity and factories closer to emerging markets.
It opened a new blow molding facility in China in September, replacing an older plant there, and plans a smaller blow molding factory in Mexico within the next year.
Lifetime President Richard Hendrickson, during a recent tour of the company's Xiamen factory, said both the international expansion and a continued focus on product development are keys to profitability at a time when the global recession has cut sales about 20 percent.
Innovation, for a home products manufacturer like Lifetime, means developing products like a recently introduced backyard composter with a blow molded high density PE tank. The design of the tank — elevated for more effective rotation and mixing of the compost — is proving popular and lets the company command a premium price, Hendrickson said.
“The competitors are [US]$39 and this one is $100, and they can't keep them in stock because it's cool and innovative,” Hendrickson said. “The composter uses our core strengths, in plastic and tubing, yet it takes us into a new market.”
The composter is designed and manufactured at the company's headquarters plant in Clearfield, Utah. But as with any product, as it faces more competition and needs to find ways to reduce manufacturing costs, production could be shifted to China, he said.
It's very important for Lifetime to have a mix of manufacturing locations, he said, because sometimes the firm needs speed to market, and other times it needs lower cost.
The company's 1.5 million-square-foot facility in Xiamen, on China's southeast coast, has more than 20 blow molding machines from Taiwan's Fong Kee Iron Works Co. Ltd., and significantly more automation than the leased facility it had been running since 2003.
The Xiamen factory employs about 400, compared with about 1,200 at its headquarters plant in the United States. The company has laid off workers in the slowdown, with employment down from 600 in Xiamen and 1,600 in Utah.
Lifetime claims the Utah factory is one of the largest single drop points for PE resin shipments in the western United States, and Hendrickson said Utah will likely remain the centerpiece of its manufacturing because it allows the firm to be much more responsive to sales trends in its key North American market.
Lifetime, for example, reviews daily data on cash register sales of its products from Wal-Mart Stores Inc., Costco Wholesale Corp. and other customers, and sometimes starts adjusting its plans even before those companies place their orders, he said.
“With our key retailers, we watch what goes through the cash register,” he said. “We don't run our manufacturing plan off of [retailer] orders. We run our manufacturing plan off of cash register sales of our accounts ... and react to it the day after it sells.
“If you're waiting to plan your production around orders arriving to you from your retail partners, you've missed it,” he said.
That speed-to-market issue also is partly why the company keeps mold-making operations in both Utah and China, he said.
Self-contained plant
China is not only a low-cost manufacturing operation for Lifetime.
Xiamen has a design and product development staff of 10, compared with about 25 people for similar functions in Utah. The two locations collaborate on many projects, with new designs and patents coming from engineers in both, Hendrickson said.
“This factory [in Xiamen] is really pretty self-contained,” he said. “It's really a company on its own, start to finish.”
The Xiamen operation is designed with more automation, in part for efficiency and partly a response to China's 2008 labor law. It includes an automated material-conveying system that can accept resin directly from sea bulk shipping containers, rather than hand-carried resin bags, Hendrickson said.
Lifetime also plans to add a metals fabrication factory in Xiamen, similar to what it has in Utah.
For now, however, the company has no significant sales in China, using Xiamen strictly as an export factory.
It has shipped some basketball backboard sets in China from the United States, but Hendrickson said the company is very cautious about China's domestic market. It is looking at a couple of products, but none currently sell domestically, he said.
“The China market really is a tough one,” he said. “It's everybody's dream to sell something to every Chinese person. It's not quite that easy. … We've been cautious about what to jump into that market with.”
The company's plant in Mexico, by contrast, will mainly serve the local Mexican market and others in Latin America.
The Monterrey facility, which is currently a distribution location, will start with no more than four blow molding machines, and will not have a fuller range of engineering, he said.
Hendrickson said the company has more than half of the market in Mexico for plastic tables, chairs and sheds, and wants to tighten up supply chains and strengthen distribution networks. At some point in the future, the company may look at another plant in South America.
For now, though, the company is like everyone else in the consumer product markets, closely watching the economy, as its sales have dropped 20 percent in the downturn.
“I don't know how much worse that's going to get,” he said, arguing that the housing market is starting to show some signs of picking up. “I do think working our way out of the economic crisis will take longer than people think. I think it will be mid-2010 before we show any sign of recovery.”
He said the Utah factory has also started to take on blow molding work for other companies, as the Xiamen expansion has freed up capacity. The company is putting a lot of effort into finding products to convert to blow molding, he said.
He said the privately held company has worked hard to keep its debt level low, giving it much greater flexibility now.
“Right now that is really making us a viable, strong, long-term company in the face of really tough economic times,” Hendrickson said. “It gives us the flexibility to spend time worrying about what the next new product needs to be in the new situation instead of worrying about how are we going to make the next debt payment.”
