MAPP survey shows ‘struggling' plastics processing sector

For the Manufacturers Association for Plastics Processors, the yo-yo economy for manufacturers is producing a lot of uncertainty and volatility with inflation, rising wages and resin prices top of mind.

That's prompting a harder look at automation among its members, the Indianapolis-based group said in a Jan. 24 webinar unveiling its 2023 State of the Plastics Processing Industry report.

"What does all this mean from a bottom-line perspective? I think we're struggling, " said MAPP Executive Director Troy Nix.

He pointed to "wacky" data in the survey of 204 companies — 92 percent of them injection molders — such as 41 percent of respondents saying sales decreased from the third to fourth quarters.

"This is a 33-point jump from last year when we did this," Nix said. "In 18 years, it's the largest jump I've ever seen in a negative context."

He pointed to a similar 38-point drop in the percentage of companies reporting that their sales increased quarter to quarter, compared to last year, saying it was "the largest drop in the history of this survey."

"Wacky numbers happen as a precursor to something very interesting in our economic conditions," Nix said. "I go to the major downside in the housing crisis in 2006 that led to the Great Recession. In 2019, we had similar spikes that led into our pandemic.

"I don't know what this is telling us, I'm just saying it's odd," he said. "And I don't like it."

The results were nuanced at times. The survey still showed overall sales up about 14 percent year-over-year in 2022, which was higher than the average annual increase from 2017 to 2020.

But it also showed that 8 percent of companies said they were unprofitable in 2022, compared with 6 percent in 2021 and more importantly, 0 percent in both 2019 and 2020.

"When I have 8 percent of the population saying they're running unprofitable, that makes the hair on the back of my neck stand up," Nix said.

The survey is an anecdotal snapshot that MAPP has been conducting of its 475 member companies and others for nearly 20 years. It asks questions about a broad range of business topics, including the impact of inflation, wage pressures and supply chain problems in the pandemic's aftermath.

Survey respondents noted unusual problems as companies may have over ordered during the worst of the pandemic supply chain problems and are now correcting back to 2020 levels.

The largest category of companies responding were small to midsized plastics firms with between 100 to 200 employees.

Nix said the survey results show an increased interest among the companies and the association toward automation.

"Our board of directors has created an automation focus," he said. "What you're going to see over the next three years is … a ton on automation, because this is how we're going to address labor issues.

"It's not automation to replace employees; it's automation to maximize the utilization of your talent," he said.

Wages are clearly rising quickly in the survey. MAPP said companies reported that wages for machine operators rose between 21-24 percent from October 2019 to October 2022.

Nix said three of the top five concerns executives mentioned revolved around inflation: increasing employee wages, rising inflation and increasing resin prices. The other two were declining sales and recruiting employees, he said.

Nix said the results suggest continued reshoring of manufacturing to the United States, but he also said some responses indicate higher levels of sourcing of molds from China in 2022, even with the 25 percent U.S. tariffs on Chinese injection molds first enacted in 2018.

It said 2022 saw the reversal of a five-year trend away from buying molds from China. Companies that reported sourcing molds in China fell from 78 percent in 2017 to 64 percent in 2021, but that jumped back to 72 percent last year, MAPP said.

Nix he's not sure why that is, but other data collected shows that prices for U.S.-made tools may be increasing at a faster rate than overseas tooling.

The survey found 80 percent of respondents said their U.S.-made production tooling vendors were raising prices, compared with only 53 percent of non-U.S. vendors.

The survey also reported lead times for production tooling from U.S. vendors were rising faster than lead times for non-U.S. tools, which Nix said could be compounding a shift in tooling vending to outside the U.S.

"It's almost like the capacity of the tool and die industry is causing this shifting to occur," Nix said. "Based on what I just saw, it must be enough of a gap to go to sources like China."

A similar pattern played out in the data for reshoring of work that MAPP companies bid on.

Nix presented data showing a steady uptick since 2010 in MAPP company customers looking to source more of their manufacturing in the United States and less interest in exploring overseas sourcing.

But the survey showed that companies expect in 2023 that will move moderately in the opposite direction, from a high-water mark in 2022 to a lower level this year. That said, even with the drop in interest in reshoring, as reported in the survey, reshoring moves remained well above levels a decade ago.

"It's one of those things that I can't necessarily explain," Nix said. "I don't like the fact that it's decreased a little bit. I wasn't expecting to see this."