Words of Wisdom: Automation vs. emigration

In 1973 the Organization of Petroleum Exporting Countries (OPEC) imposed its first oil embargo. That was a wake-up call for the plastics industry. The cost of oil went up and the price of plastic materials increased accordingly. Plastics processors passed these increases on to their original equipment manufacturing (OEM) customers in the usual manner. Much to everyone's surprise, some OEMs rebelled against these understandable increases. The entire plastics industry came under pressure to improve its productivity in order to offset higher material costs. Impressive productivity improvements were made, starting a trend that continues today.

In the 1980s there was a significant increase in the volume of imported products. American consumers were quick to accept these high-quality, low-cost products. This was a wake-up call for OEMs. Once again OEMs pressured the plastics industry to improve quality and reduce cost. Once again plastics processors responded with impressive improvements.

By the early 1990s many of the emerging nations of the world had learned how to produce commercially acceptable plastic products. All of these countries wanted to sell their products in the world's largest and richest consumer market, which was the U.S.

The low labor rates in these countries reduced costs to levels that were difficult, or impossible, for domestic manufacturers to match. The OEMs' answer to this dilemma was to move production to these low-labor-rate countries to reduce their costs. Many OEMs were hesitant to have their products manufactured so far away from their markets. The lure of increased profits was, however, too strong to be denied. The labor-intense toolmaking industry was first. Processing was next, followed by assembly, and now the whole product is being produced offshore.

A Buyer's Market
Sometime in the mid-1980s the plastics processing industry became so efficient that it could produce more than it could sell. This led to the change from a seller's to a buyer's market. This, in turn, led to mandatory annual cost reductions, give-backs, reverse auctions, and demands for additional free services.

The current trend appears to be to minimize the OEMs' costs by reducing processors' profit margins. This is a recipe for failure. The automobile industry pioneered the reduced supplier base, open-book costing, and mandatory cost reductions. In 1999 domestic automakers produced approximately 17 million cars while 13 of their top suppliers filed for bankruptcy. These reduced profits may also be one of the reasons why so many processing and moldmaking companies have not survived the current recession.

OEMs preach quality, but worship the lowest cost, which is a politically correct way of saying increased profits. As a result, the plastics industry is under continuing pressure to reduce costs. Quality, cost, and delivery have steadily improved, but not enough to placate OEMs. The plastics industry is justifiably proud of the improvements that have been made, and processors find it difficult to accept the fact that their OEM customers judge these improvements to be inadequate. These diverging opinions stem from very different images of the processing industry.

OEMs cherish the trade show image of an automated injection molding machine that drops 48 molded parts onto a conveyer every 10 seconds. Across the aisle there is an unattended extruder quietly producing a continuous, brightly colored profile that is cut to length and dropped into a box ready for shipping. Another image is of an inline thermoforming machine producing 83,000 yogurt cups per hour. The cups are automatically trimmed, stacked, and packaged, and the trimmed sheet is reground and pneumatically conveyed back into the hopper of the sheet extruder. These impressions of a fully automated industry are fortified by the plastics magazines that have a propensity for publishing glowing accounts of unattended, lights-out processing plants.

Most plastics processing techniques can be mechanized, but full automation is the exception, not the rule. The truth is that the U.S. plastics industry is more labor-intensive than manufacturing overall. The Contributions of Plastics to the U.S. Economy report issued by SPI in 1997 indicated that the plastics industry's productivity, based on the value of product shipped divided by the number of employees, was 28 percent lower than the average for all other types of manufacturing. The SPI 2000 report revealed that plastics productivity had declined to 33 percent less than manufacturing overall. Plastics are losing the productivity improvement race with other manufacturing industries. This does not paint a rosy picture for the future.

Missed Opportunities
This situation is hard to understand considering recent improvement in the industry. Plastic materials are of higher quality and more uniform in processing than at any time in the past. Toolmakers are now capable of quickly producing very sophisticated, automatic, high-cavitation molds. Processing machines are more energy efficient and dependable, with less cycle-to-cycle variation than ever before. This magazine is full of all kinds of auxiliary equipment that can help a processor reduce labor.

Today, most custom processors probably believe that they are operating efficiently and that any further reductions in profit will put them out of business. A tour of their plants often tells a different story. A shocking number of plastic parts are being produced on slow, obsolete, energy-guzzling machines. The new energy-efficient all-electric machines have not been widely accepted outside of the medical and electronic industries.

Automatic material storage, conveying, and hopper loading equipment have been available for more than 30 years. Yet plastic material is still put into the machine and finished parts removed manually in all too many cases.

Many molding plants have press operators whose only function is to trim gates and pack parts. Robots that perform these functions have been in widespread use for 15 years. One report indicated that robots have had a market penetration of only 30 percent in the injection molding industry.

Even in these enlightened times there are still molding plants that do not have a single runnerless mold, stack mold, or a mold with hot-half positive ejection. One of the problems in this regard is that too many custom molders don't have the courage to coerce their OEM customers into purchasing a faster but more costly automatic mold with efficient cooling. Very few molders are taking advantage of the benefits offered by scientific molding.

Many injection molders believe that their customer's demand for just-in-time delivery limits the length of production runs and requires so many mold changes that automation is impractical. Automatic mold changing equipment is used by less than 25 percent of the industry. Even fewer molders have adopted magnetic platens for mounting molds.

The plastics industry is now operating in a global economy. OEMs can purchase their plastic products from any processor in the world that has the lowest cost, highest quality, and shortest delivery. In spite of its image, plastics manufacturing is still too labor intensive. The high wages paid in the U.S. produced a high standard of living that is the envy of the rest of the world. The combination of high labor input and high wages is making it increasingly difficult for U.S. processors to compete in the global economy. Americans are not willing to even contemplate reducing their standard of living. If a processor cannot reduce wages the only alternative is to reduce labor.

Since the plastics industry is, on the average, more labor intensive than other manufacturing industries, there's room for improvement. The nature of the plastics industry is such that it should at least be as labor efficient as manufacturing overall. Just think what a 30 percent reduction in labor costs would do for your bottom line.

No one wants to reduce the number of good-paying American jobs, but the name of the game today is to automate before your customers emigrate.

Contact Information

Glenn Beall Plastics Ltd.
Libertyville, IL
Glenn Beall
(847) 549-9935
Fax (847) 549-9935