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May 15, 2020 10:27 AM

Molders see growth as medical customers look to reshore product

Sarah Kominek
Plastics News Staff
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    Sussex IM
    Sussex IM is converting one of its plants to a Class 8 clean room to increase its medical molding business.

    Some U.S.-based injection molders say they are expanding to handle work from medical customers looking to reshore production to the North America.

    Miami Lakes, Fla.-based injection molder National Molding LLC is getting new inquiries from customers looking to reshore "all different types of medical devices from China," Sue Milo, health care business manager, said.

    "I think a large part of it is uncertainty with respect to supply chain," Milo said. "That has been an ongoing concern for quite some time and I think this crisis escalated those thoughts within board rooms. I think there's a strong focus, especially for a lot of medical devices, to focus on federal military contracts, those are required to be U.S. made."

    Rising demand for the same medical products in Asia "has also dominated this conversation," she said. "Previously, say 20 years ago, if you were a U.S. company manufacturing medical devices in China, you were an important contender. You got a lot of key attention from Chinese suppliers.

    "Now there's such a burgeoning need for medical devices within China and Asia, I think companies are feeling a little bit uncertain about where they fit into that supply chain environment," Milo added.

    Chief Financial Officer Scott Mueller said about 10 percent of National Molding's new customer inquiries are those looking to reshore product from Asia, "with an outlook to 25 percent longer term, given new opportunities under consideration." Medical production at the company has grown from about 15 percent of the company's capacity to 25 to 30 percent or more, Mueller said.

    The opportunity to ramp up the company's production of face shields, nasal swabs, tamper-proof shields for injectable drugs, and other items used to fight the spread of the virus "filled a gap" of lowered demand in other sectors, CEO Pat Cavanagh said. He doesn't expect that medical growth to be "a flash in the pan."

    "I think in this environment, longer term [face shields] are going to be a product that's going to be almost like safety glasses," Cavanagh said.

    Arlington Vt.-based Mack Group Inc. has also seen increased demand from medical customers "driven by products being used in the COVID-19 response, but also in general," said President Jeff Somple.

    "We are seeing some signs of longer-lasting activity related to supply chain concerns as customers look to reshore not only tooling but component production as well," Somple said.

    "Over the years supply chains have become somewhat far-flung," said Greg Alonso, management principal at consulting firm Plante Moran. "In a situation like we have now, all of the risk factors start to come into play."

    As conditions have improved for manufacturers to bring production back to the U.S., "reshoring makes a lot more sense," Alonso said. "We had the [Donald] Trump administration come in and over the last four years, the corporate tax rate was cut, regulations cut.

    "With the events of the last couple of months … I've had conversations with some executives and heard they're getting calls from customers about bringing some of their business back into the U.S. or North America to reduce the risk of having a supplier or several suppliers in Asia … because of the costs of the incremental working capital required to maintain a supply chain that's several thousand miles long," Alonso said.

    "It just seems like COVID might be the final straw to incentivize companies to take a look at their supply chains and assess risk … bring things closer so there's more control and potentially more flexibility than when you have the supply chains across the ocean," Alonso said.

    Sussex, Wis.-based injection molder Sussex IM Inc. is converting one of its five plants into an ISO clean room to produce nebulizer parts, atomizers, testosterone packaging products, and other componentry. About 50 percent of the new business for the clean room "is coming from companies that would have gone to Asia and now want it made in the USA," CEO Keith Everson told Plastics News.

    "We know there's a shortage right now in clean room capacity in the United States and that's only going to increase with people reshoring medical devices and pharmaceutical packaging," he said. "We're trying to be ahead of the curve here.

    "Even before the pandemic we were looking to get into [medical], but we got to our tipping point and now we're fully committed," Everson said. "It's a small percentage of our business but this gives us an opportunity to expand in that market because we see the need in that area."

    Before the pandemic hit, Everson said about 4-5 percent of Sussex IM's production was medical. He expects about 10-20 percent of the company's production to be focused on medical products "in the years going forward."

    Sussex IM's first ISO 8 clean room is expected to be finished by the end of 2020 and the company will continue to add clean rooms as that business sector expands, he added.

    "Even people having things made in Mexico were having issues getting product out," Everson said.

    "We need to be more reliant on ourselves now," he said. "It will be harder to get product shipped from overseas. … What happens when we have the next pandemic?"

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