How Nypro will (and won't) change

Jabil Circuit's announcement last week that it plans to buy Nypro is one of the biggest plastics stories in years because it signals the sweeping changes taking place in global manufacturing.

Big chunks of the American plastics processing industry moved to Asia 10 or so years ago, and Nypro led the way, becoming a major supplier to the consumer electronics industry.

Much of the plastics processing industry in the United States remains small in scale, weak in business skills, and struggling to raise enough capital to invest in new technology. Nypro, one of the biggest independent injection molders in the world, decided to find a buyer because even it felt capital constrained.

Jabil--like other players in the global Electronic Manufacturing Services (EMS)--industry is well capitalized and very advanced in design and manufacturing technology. One example: Jabil is financing the $665 million tab for Nypro almost entirely through cash.

What Jabil decides to do with Nypro will be an indicator of how the rest of the American plastics industry may need to change in order to remain competitive on the global stage. There will be issues like becoming closer to very big customers--in fact virtually integrating into their operations. Another big issue will be development of world-class supply chain skills, developing expertise in areas like procurement and should costing that are virtually non existent in the plastics processing business today.

Here's is one reporter's opinions on what may be happening:

1.  There will be a careful review in the next two months of where the two companies have overlapping capabilities. The most focus will be on China where Nypro is taking a beating in the highly competitive mobile phone consumer electronic business. Jabil unit Green Point is in the molding business and has consumer electronics plants in some of the same cities in China where Nypro had plants. Green Pont has some sophisticated plastics technology (e.g., insert molding, overmolding). Look for consolidation favoring the Green Point assets. Nypro's plants in the United States are profitable, and focus on markets where Jabil wants to grow: rigid packaging and healthcare.

2.  Look for a careful review of the overall underperforming consumer electronics business. Jabil Circuit is a publicly held company and there is careful attention paid to margin performance on a quarterly basis. That kind of approach will be a culture shock to Nypro management, which is used to operating as a private company willing to take big bets for potential benefit.

3.  Look for investment, in some cases significant, in the rigid packaging and medical parts of Nypro's business. Emphasis will be on developing capabilities that better fit the trend toward customers who want global turnkey service. Anticipate in-depth meetings with target accounts to see how Nypro can develop additional downstream capabilities to meet customers' needs. That's the Jabil model. If a customer wants a focused plant in a new location in Eastern Europe or Indonesia, that plant will be built. Most likely Nypro will add molding capacity in plants Jabil already operates.

4.  Look for more key customer focus than is traditionally the

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