Effective cooperation can help spur an industrial sector's competitiveness. Just ask Austria.
Eleven years ago that small Western European nation created a Kunststoff-Cluster, or plastics cluster, that today could be considered a case study in how both industry and government, and companies within a specific industry sector, can work together toward common objectives.
First, consider that Austria now has about 8.2 million inhabitants, or roughly the same as New York City. Its plastics industry consists of 740 companies, 65,000 employees and total sales of $17.5 billion. Its modest size may have helped to drive the realization that it needed to do something different in order to compete on the world stage.
The plastics cluster, or “KC” as its operators refer to it, serves as an information platform and knowledge-transfer center, and offers marketing and public relations services for member companies, while supporting them as they enter new markets. In the past decade it has organized more than 170 events — symposiums, workshops, study trips and other networking meetings — that have involved more than 9,500 participants and 800 speakers.
The group's Web site at www.kunststoff-cluster.at (in both German and English) serves as an information portal. The KC also initiates and supports collaborative projects among member companies, while paying special attention to the needs of small and medium-sized companies.
In an interview at NPE2009, held June 22-26 in Chicago, Werner Pamminger, general manager of Clusterland Upper Austria Ltd., discussed the venture's background and objectives. In his role with Clusterland, a regional development agency for network management, Pamminger established and manages the Upper Austrian Plastics Cluster.
He explained that the state government provided some initial subsidies to help get the nonprofit project off the ground, but that the cluster — which has a staff of about 6 people — now derives 80 percent of its 800,000 euro ($1.12 million) annual operating budget from industry. The state of Upper Austria provides the balance of about $224,000.
Cluster power
The cluster's 410 member companies cut across the spectrum of the plastics industry, with 41 percent being processors, 14 percent machinery firms, 10 percent raw materials and recycling operations, 6 percent toolmakers, and roughly 11 percent suppliers of various services. Another 17 percent are technology-transfer bodies.
The network also includes 31 partners in southern Germany, plus a handful in Switzerland, Liechtenstein and the United States.
At its outset, the group's goal was to attract 120 partners, and it initially offered free membership. The number of members soared above 300, and then the cluster introduced a membership fee, which caused the numbers to decline for a while, before climbing up over 400 in the past couple of years.
“Our aim is not to exclude competition, but to be a driver of innovation,” said Pamminger. Noting its modest fee structure, which is based on company size, he stressed: “We don't want to be an elite club,” but rather one that fosters interaction among entities of all sizes.
Small and medium-sized companies (per the European Union's definition of 250 or fewer employees and annual sales of not more than 50 million euros, or about $70 million) pay an annual membership fee of 580 euros, or just $815. Very small firms, with fewer than 10 employees, pay half that, and large companies pay 1,160 euros ($1,630). The cluster's member companies jointly employ about 60,000.
Unemployment last year in the state of Upper Austria was 2.9 percent last year, Pamminger said. He added that companies in the region are eagerly looking for qualified toolmakers and plastics engineers.
To date, the plastics cluster has embarked on 91 cooperative projects, completing all but the 10 that remain in process. Here's a smattering of the types of projects involved:
* Conversion of aluminum exterior panels on a Rosenbauer Group firefighting truck to plastic, by combining the efforts of a blow molder and a mold maker. The plastic components initially were more expensive than their metal counterparts, but through the integration of electrical and other components, the truck maker was able to gain substantial savings via reduced assembly time, from 30 minutes to just four minutes.
* Six indirectly competitive pipe manufacturers cooperated on a patent inquiry and basic testing.
* Re-engineering and benchmarking in the areas of injection molding, tooling and design. This included, for example, a 35 percent time-to-market reduction in tool production by integrating various customer/supplier processes.
* Creation of 34 new products, product improvements or process optimizations that would not have been realized alone.
The network works well, Pamminger said, “because industry is in charge of our operations. Government helped us to start, but then they got out of the way.”
On the other hand, there's an advantage to government's continued involvement. “If we were totally privatized,” he explained, “we would become an ordinary consultant who would go for the big projects and big money. We would lose our macroeconomic focus and our aim to help companies of all sizes.”
So how does the cluster get past the competitive secrecy and paranoia that often accompanies such efforts to get supply-chain partners and even competitors to work together? For starters, it took three years of negotiation to form a cross-state cooperation initiative.
“It's all about personal trust,” said Pamminger. He and his team make, on average, 20 visits to member companies, in an effort to cultivate that trust. They start by suggesting cooperation on less-proprietary issues such as the purchasing of common items, managing waste or benchmarking performance. “We moderate the discussion.”
The KC has very sophisticated customer relationship management software that allows for text-based searches to help identify members with common interests.
He explained how the group once explored the feasibility of common resin purchasing. But 12 to 15 companies were buying 600 different grades of resin, and only 10 grades were a match across the group, and then from only a handful of common vendors. So that, in the end, less than 2 percent of the total resin purchased would have qualified for group-wide buying. It proved not to be practical.
But the plastics cluster, which is one of eight such Austrian industry clusters, has found plenty of other common grounds on which to cooperate. And it continues to look to broaden its base, to even include recruiting involvement from small- and medium-sized firms in North America — hence the KC's first-time exhibit at NPE.
Pamminger pointed out that Austria, from its location in central Europe, offers a convenient platform for serving the growing region of Eastern and central Europe.
“We are just 45 minutes from Linz [Austria] to the Czech Republic, and just 45 minutes from Vienna to Slovakia,” for example. He claims convenient market access to 70 million customers in central eastern and southeastern Europe.
The cluster measures its success not by its number of members but rather by its number of projects and level of activity. There is a formal process for submitting a new idea or suggesting a new project.
“The number of ideas is up 30 percent in the first half of 2009 vs. the first half of 2008,” Pamminger said. He also noted proudly, “I think we're a role model for this type of cooperative model.”
Copyright 2009 Crain Communications Inc. All Rights Reserved.