HONG KONG — Helmar Franz takes inspiration from a wide range of sources.
From German carpenters' online pooling to nanomaterials research at the Massachusetts Institute of Technology, Franz takes ideas and turns them into insights applicable for the plastics machinery and processing industry.
The articulate executive director and chief strategy officer of Haitian International Holdings Ltd. recently spoke with Plastics News in Hong Kong.
Q: How is Haitian coping with today's challenging market conditions?
Franz: I think, the challenge nowadays is the speed of change.
The whole world [is] connected online, getting very fast and … staying in contact with each other. Since we all know, that most of the plastics parts are, or at least end up in, products that consumers use, there is an increasing competition to be the best and the first. We see consumer goods like cars or smartphones changing series much faster than before.
The result is, in my opinion, the challenge which we as the provider of machines, which should last at least eight to 10 years, are facing. Besides the required technical specification for the particular application, trouble-free work of the machine (quality and service), and the appropriate cost, we need to provide more and more flexibility.
Flexibility is the key additional challenge today. It applies for our customers as well as for ourselves. Of course on one side, time of delivery is an increasing competitive factor, and we are streamlining our processes to be the best in class. On the other side, we at Haitian see our strategy to cope with this new challenge, in designing and supplying series of flexible standard machines, which can be used for a respective scope of plastics parts and that can take a wide scope of molds without large changes, reprogramming and retrofits at the machine.
For many years we have been successfully introducing standard machines, not being specialized for instance for automotive or white goods. It is because we think that an automotive part from its plastics parts processing perspective is equal to a similar part in a washing machine or a TV set or for a building part. Of course such approach also requires that the customer considers the machine specification when ordering molds. See the close relationship between the two, more from the point of the machine.
In China I have learned that customers first decide on the machine and then give these machine parameters to the mold maker to design accordingly. The result is maybe not the perfect mold, which would require a special machine; but a cost-effective system and a dramatic increase in overall flexibility and fast reaction to changing requirements.
Furthermore, Haitian is on a very successful path shifting large machines to two platen, and small machines to electric. You may have heard this target for some time, and our recent figures for the first half of 2015 show it very impressively.
Especially for electric machines, there remains so much to do. For the desired full change to electric machines, we need to design a simple electric machine. In my opinion, there is no reason that an electric machine automatically needs to be a high-tech machine. We should be able to provide electric machines at the cost of standard hydraulic machines.
For more simple mass machines, for instance, there is no need for parallel functions. Lightweight and corresponding new drives will further reduce costs. And then, we can save one media — oil. Additionally, the soft factors, like less cooling needs, lower noise emissions and other will add to the success, which we foresee.
Q: Haitian is still expanding capacity while the market in general seems to be oversaturated. How do you do it in a way that manages fluctuating demand and shifting trends, and raise the bottom line?
Franz: We expand not only for increasing total capacity. Whenever we build a new factory, one of the key targets is always to improve processes. It's important not to lose profitability in a challenging business environment. Efficiency of processes secures sustainable profit. Of course if market demand increases sharply, like in 2010 for instance, we will be able to ramp up capacity very fast to capitalize on such developments. Further we heavily invest into the future of electric machines with the recent inauguration of the first stage of the new Zhafir factory in Chun Xiao and into the development of two-platen machines with the new large facility at Tong Tu Lu in Ningbo.
The key is always an improved process and flexibility at our end to cope with the needs for more flexibility at our customers' end. The new Zhafir factory has a lot of new processes introduced, which had never been used by Haitian before, such as integrated flexible manufacturing cells for fast manufacturing and improved parts quality, as well as a conveyor belt for final assembly, amongst many others. This goes along with the continuous work on flexible full utilization of our own capacities by a very advanced system of out- or in- Sourcing, intelligent work shift systems and others. This is to secure short delivery time. Along with this goes a fast speed in innovation. Our 450 engineers, structured to be focused in the three brands that we represent, are continuously improving the technology by using all available developments, especially in drives and controls, but also carefully analyzing the developments in plastics applications in order to provide the best technology to process them.
Q: Let's talk about global markets. Please share with us Haitian's overseas development especially with assembly plants in Germany, Brazil, Turkey, and Vietnam as well as strong interest in India, and perhaps other markets.
Franz: We at Haitian see the overseas markets and even more the international customers, which are operating globally including in China, as our largest challenge and at the same time as the largest potential.
We already generate 30 percent of our income overseas and our machines operate in about 130 countries. Our experience is, that — when it comes to the machinery — a successful business has to consider the local historical, social, cultural and industrial environment as well as the tradition in using plastics processing, and the qualification of the workforce.
To get all this input, we have decided long ago to have our fully owned assembly factories in large regions for plastics processing and work with local people. In Turkey, Brazil, Germany and Vietnam, those already work successfully.
Recently we made the decision to significantly increase the capacity at our Zhafir plant in Germany, adding Haitian products and making the company to be Haitian International Germany with its two brands — Haitian and Zhafir.
Besides this we have a successful technical center in Russia and we are currently evaluating opportunities in Thailand, Indonesia and Mexico and will open there new technical centers together with our local partners.
In India we are looking forward to exploit opportunities for an assembly factory.
This all serves one reason — to be close to our customers in their business environment, to better understand the local needs and challenges and to respond to them flexibly on the basis of standard machinery. It also considers the growing needs of our customers, due to a number of reasons — changing markets and costs or local restrictions — to change their manufacturing place in short times. We observe a growing competition of manufacturing places with their respective conditions all around the world. We should be flexible enough to support such moves fast.
Q: How does Haitian as a multinational manufacturer handle the currency volatilities observed in the global market, not just in China but all over the world?
Franz: I think it is never a good idea for a machine maker to define strategies on currency exchange rates. In my opinion, one can only try to minimize this influence. So, we have to expect a certain influence, when it is positive, we are happy, and if not, we shouldn't be badly hit.
For instance, during the time when the Chinese RMB appreciated against the U.S. dollar from approximately 9 to 6 RMB per dollar, we were able to nearly triple exports and had an even larger growth in net profit. Of course during that time, the RMB value we spent for the import of controls, inverters, spindle drives, pumps and hydraulics significantly decreased and offset this negative influence.
Nowadays the RMB has stabilized, and even depreciated, but the same happens, just in reverse. So, the impact is not as large as it may look like upfront.
By the way, this also applies for the Japanese yen depreciation, which would at the first glance put the Japanese companies into a favorable position. However, as I see it, our Japanese competitors would rather invest the better margins into more R&D and upgrading factories than giving it away in a price competition.
We also have to consider the worldwide locations. Many competitors from Japan and Europe already have significant operations in China and operate in the same environment like Haitian. So finally, I think the flexibility to manufacture across the world in different regions and the smart management of currency streams between importing components and exporting machines is a successful way to flexibly react to this challenges.
Q: You talked about your vision of offering leasing and services of injection molding machine. The role the Internet plays as a platform is also very interesting.
Franz: I think the new opportunities offered by the Internet have to be carefully analyzed by hardware and in particular machine makers. And I'm not talking about just leasing — this refers only to financing — but to a totally new business model.
To increase the flexibility for plastics molders, we could for instance think about operating pools of standard machines. Let me try to explain it with one example. In Germany we have a lot of small craft companies, for instance carpenters. And the woodworking machines are getting ever better and more sophisticated with lots of new applications, but none of the carpenters can afford to buy a machine on their own and fully load it. So I heard about them pooling together and subscribing to machine times via the Internet to share the use.
So hardware transfers into service. I also know about some approaches for large and efficient harvesting machinery for small farmers, also considering that harvesting takes place at different times of the year in different places. So it's much more than financing — it is providing and servicing technology to the point. Of course such approach requires standardization, so I think we are on the right way with our strategies.
By the way, I want to share with you an eye-opener for me. I heard it from a professor who talked about the service models. He mentioned that normally in history, when a technology becomes mature, it changes to a service model for further development. I am not at all saying, injection molding technology is mature, and I've mentioned at many other occasions that I see deficiencies. But just think about water wells. Five hundred years ago, there were no houses built without a well. Everybody had to have their own well. Then wells became a very mature technology, you had water companies that built pipelines that delivered the water, so nobody needed their own well any longer. The water company became responsible for cleaning and delivering the water, which the average person could never do. And this probably is the way all hardware goes. It won't stop with cars either, or refrigerators, or injection molding machines in the future.
Q: We heard Haitian is conducting research on nanomaterials.
Franz: As you know, I see some critical points in injection molding, which in my opinion require basic developments. For instance, plastification, where the shearing method prevents us from processing sensitive filled plastics, or at least makes it a very special process.
I also had some very interesting and encouraging discussions at MIT in July, especially at the material processing center. For instance, at present we are filling plastics with up to 50 percent of glass fiber, to give the plastics a certain strength. Of course it also causes wear and tear. Today the materials and the chemical science people have already developed standard plastics, filled with less than 1 percent, using nanotubes. Such new materials will improve the properties, such as strength, by more 50 times! The nanotubes could be of glass or carbide, or maybe something else. But obviously a process of shearing for plasticizing involves the danger of destroying the sensitive nano fillings. So we need to think about a new way of plastification. The beginning is to separate the process of plasticizing from the process of injection, which nowadays is mainly done by the same component — the screw. Some companies already offer such solution. From here we can have a closer look to the process of plastification separately.
A second future development in injection molding, in my opinion, should involve lightweight constructions at our machines in order to be able to use smaller drives and really get to a new stage of energy savings.
Q: What's Haitian's latest strategy on meeting customers' needs for automation?
Franz: Of course automation is important, but in my opinion in order to have sustainable success it needs to provide more than just replacing a worker. It needs to do something that a worker cannot do. It can't just be profitable by just saving the salary of a worker.
A very simple example, if I take a plastic part, when it is already rigid but maybe 80 to 90 degrees [Celsius], so even a man with gloves can't remove it. But a robot can. So there the robot can reduce cycle time.
Or maybe a robot that can quality-check by comparing a part to a master template. Something that adds value. However, as you know, I'm not a big fan of integrating everything. Because it can become too complex and too difficult to change and — as mentioned earlier — not flexible enough.
So for automation we try to work with companies who provide standard automation cells integrated to the machine by standard interfaces.
Many machines have been specially designed with some special attachments and integration. They are perfect for what they have been provided. But oftentimes, when the customer needs to change the product he sells, but he is not qualified enough or has no money to let the system to be changed by specialists (especially in developing countries). Then he can still use the machine but he cannot use all these extra parts that he paid for and can't disconnect because they are integrated. Of course for some applications in mass productions, for instance for preforms, integration makes much sense.
Q: How would you summarize your career so far in the global plastics injection molding machinery industry?
Franz: I would summarize it as exiting.
I'm very grateful for the developments I've been able to take in our industry over the years and the opportunities the industry has offered to me. I always stay connected to the research of basics in plastics processing, and I enjoyed working with institutes and universities. I always try to connect the need of innovation with the challenges in operation, both at the machine manufacturers and on the customers' side.
On the way to become a successful entrepreneur, I have learned what the essentials for success are.
I've worked in different economic systems — first in a planned system in East Germany, then in developing countries, such as Iraq and Egypt, also working in a special environment in Russia after 1990, later in a social market economy in the unified Germany, and now for more than 10 years in China, which appears to have something of everything. These experiences have shown me that the spirit of entrepreneurship can produce results under different conditions and in different environments, if the correct strategies are applied.
I think an even better, encouraging example is Haitian Chairman Mr. Zhang Jingzhang. He founded the company back in 1966, during the Chinese Cultural Revolution. And he was able to keep it as much private as he could during rough times. Later he took all opportunities that came up, including involving me into the future strategies of Haitian, and so we were able to develop the company to a worldwide market leader. I admire and respect Mr. Zhang for that.