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Editorial: Costs are going...up

Article-Editorial: Costs are going...up

Iknow you turn to this page every month for clever, intelligent, insightful, and creative analysis about goings-on in the injection molding community, and I don’t aim to disappoint this time. Just look at that headline up there. Have you read anything so obviously insightful as this lately?

Of course you have. Or maybe you don’t need to.

More likely you live it. We are beset on all sides with tales of woe and misery about the detrimental effects of radical price increases. Resin prices are through the roof. Healthcare costs are ravaging automakers. Rising fuel prices were blamed in part for Delta’s and Northwest’s decisions to declare bankruptcy last month. The cost of doing business in the manufacturing world—or any world—appears to be headed in one direction: up.

Every week I get at least one phone call from an investment bank or marketing firm somewhere that’s doing “research on the plastics industry” (usually scoping it out for a client looking to join the fray). Inevitably the conversation turns to cost structures, and I describe the molder’s price paradox—the precarious position of molders in the supply chain, subjected to material price increases and unable (often) to pass them on to OEMs. (You might be somewhat comforted to know that this conundrum is usually greeted with disbelief and some indignation by my caller, who is confounded by the illogic of it all; it’s nice to know that we in the molding industry aren’t the only ones frustrated by this paradox.)

The point is that when you’re stuck in the middle of the supply chain and watching your margins die of starvation, there are two things you can do: increase revenue or cut costs. Of the two, the easiest to do is cut costs, and you know that any costs you save go directly to the bottom line. Instant gratification.

The challenge, of course, is to cut costs intelligently so as to enhance efficiencies and productivity without hampering or hindering operations. Easier said than done. This month, we’re tackling this issue and our coverage comes in two parts, starting with a report from senior editor Carl Kirkland. He looks at the relationship between the front office and the shop floor, offers tips on smart cost-cutting, and provides data on costs, revenue, and profitability.

One lesson: Sometimes you have to spend money to save money. Our second story, by senior editor Michelle Maniscalco, looks at the future of materials pricing and speculates about the prospect for biopolymers, the antifossil resin.

We hope these stories are of some help and get you thinking about how to intelligently manage your costs. And be sure to tune in next month for more hard-hitting analysis. The topic: How gravity makes things fall.

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