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Executive Roundtable: "Good enough" is not good enough

In March, PlasticsToday invited 15 industry insiders to discuss the state of the plastics industry.

In March, PlasticsToday invited 15 industry insiders to discuss the state of the plastics industry. Highlights of the wide-ranging conversations were presented in a webinar on June 22 (which will be available for download later today via the webinar box in the lower left-hand corner of our home page). In a follow-up series of articles, we're presenting in-depth accounts of the discussions that took place on various topics: partnering; jobs and skilled labor; onshoring; and the end of "good enough." You can also read our June article on the sessions here (which includes a list of concrete suggestions on what processors need to do to be world-class competitors in the post-recession environment) and our initial NewsFeed report here.

One of the themes that emerged out of our Roundtable discussions was the idea of “good enough,” as it relates to how processors judge their operations, versus aiming for “world class.” Clearly, in a ruthlessly competitive global environment, the good-old “good enough” standard is a risky way to approach one’s business.

Indeed, the theme that emerged in all the various topics discussed was the fact that to thrive in today’s environment, every processor should be aiming to have a world-class operation simply because the competition is, itself, worldwide. And to survive and thrive in a worldwide marketplace, by definition, you have to be world class.

Roundtable participants, from left to right—back row: Christof Heisser (Sigma Plastics); Bill Goldfarb (Universal Dynamics); Thomas Benson (Thermal Care); Miyuki Matsumine (Asaclean-Sun Plastech); Jeff Lewis (Slide Products); Eric Bullivant (Plastrac); Dave Lange (DME); Gregory Lewis (Matsui America); front row: Bruce Catoen (Mold-Masters); Mark Sankovitch (Engel North America); David Preusse (Wittmann Battenfeld); John Chalmers (Processing Technologies International); Mark Malloy (Progressive Components); Larry Doyle (The Conair Group). Not pictured: Tom Worcester (Günther Hot Runner Technologies).
John Clark (PlasticsToday): Is there a new manufacturing paradigm, and if so, did the recession force it or was it always happening?

Mark Sankovitch (Engel North America): Well, the one thing you look at in business, Business 101, is that business is dynamic. It’s always changing. If "good enough" is what your philosophy is you’re going to get bypassed, because in the purest sense of business, it doesn’t stand still. It’s a moving target and it’s always changing. So if your whole model said "I got it figured out," well it may be good for today, but it isn’t going to last as you move forward.

It wasn’t quite as difficult maybe years ago—back in the ’90s when life was really good and we didn’t have to go find business. It came to us. But it changed because the world got bigger, and we came into this global market, so now I’m not competing with my guy out in the suburbs in Naperville, I’m competing with a guy out in Shanghai or somebody in Vietnam. It’s a global market and therefore it makes it even that much more challenging and that much more dynamic for everyone.

Christof Heisser (Sigma Plastics): I think the paradigm shift that a lot of manufacturers recognize is in the past “I have a good facility, I have a good company, it’s good enough”: It’s not good enough anymore. If you don’t strive to be the best in the world at doing this, not maybe that you are but that you strive to be there, you look worldwide, what is the technology, what is the price, what is the profit on this, if you sit down and say it’s good enough, you won’t make it. There’s no way.

It’s getting away from the notion “it’s good enough.” Look at GM. They always said it’s good enough that carpet slides around in the trunk, it’s good enough that I have gaps of 6 mm or something in the dashboard. It’s good enough.

No, it’s not. People didn’t buy a car because of cost and say, “Hey I buy it because it’s the cheapest.” No. They buy the Camry. It is more expensive, it’s reliable, the gearbox is not falling out after two years or something like that—and Toyota is maybe a bad example right now—but those are things that happen. Ford and now GM, they have better customer satisfaction ratings than the Japanese or the Germans. Nobody knows it, but they changed, too.

"Good enough" used to be the rule of thumb, in North America especially, and it’s obviously not enough.

Tom Worcester (Günther Hot Runner Technology): Part of the situation in today’s market, if you really think about it, is that over the past 18-24 months, so many organizations have had to go back and literally reinvent themselves by reducing their headcount, reducing their skill, reducing the amount of people that they had in there and still maintain the efficiencies and actually increase their efficiency in order to become cost competitive out there in the marketplace.

With that in mind, I feel that the people that did reinvent themselves will make the capital investments to maintain that momentum going forward. Will they hire more people? Well, that’s questionable. Will they actually grow their business, dollar-wise? Yes, substantially, I feel. People-wise? I don’t know.

Sankovitch: You’re right. What we were doing in manufacturing 10 years ago—manufacturing output in the U.S. and where we are today—it’s increasing and we’re doing it with less people. And that’s what we have to do. And we have to, in a global market, if we’re going to challenge manufacturing around the globe, we’re not going to do it because we’re the low-cost producer in the labor content, so we have to do exactly what you’re saying.

And it is amazing from the standpoint of what we can squeeze out of these companies when you said what we were doing when we thought we needed three or four people that we’re now doing with one person, and they’re saying, “That’ll never work, we’ll never get there,” and we have. We’ve been creative, and it has been difficult at times, but we’ve reinvented ourselves in order to compete in the global market.

Worcester: But, the people that have made these investments also have to look at a different type of skillset on their own floor. All of a sudden your employee has literally changed, because you have to remember in the machining side of the business you’re going to have a person responsible for a machine that costs a million dollars plus. And so I’m going to pay this guy $5 an hour? Who’s going to run this piece of equipment? So you’re going to have to have that type of technician, or responsible individual, or team inside of your organization.

That goes back to what I said before, the part that’s scary is there’s a skillset we still have around but we’re gonna lose that, and then who do you draw from, who do you go to when someone buys that million-dollar piece of equipment? That’s the part that bothers me, as we move this forward, is we’re doing okay now, but this group, this 40-50-year-old group is going to move on and where are those 20- and 30-year-olds that are coming along?

Dave Preusse (Wittmann Battenfeld): I think the college grad who paid $200,000 for his five-year degree in a particular major and it doesn’t pay? And we need somebody and we’ll pay? He’ll come. We’ll have to hire him, we’ll have to pay him, and we’ll have to retrain him. I saw two things that have also been happening maybe somewhat prior to the recession when he automotive squeeze was happening, I saw auto molders start to diversify into other segmentations if you will.

So they started moving, changing their colors a little bit, leveraging themselves so they’re not at that whim—tough move for an automotive molder. I take my hat off to some of those guys changing their colors. And the other thing I think ties in with the concept of integration is that I think molders that have continued to reinvent themselves or go back to their roots of adding value in the value proposition, not just doing “I’ve injection molded these parts, I put them in a box, I sent them to a warehouse, call me when you need them.”

But they continue, and this has been happening for years, some of this isn’t so pronounced, but they’re getting it. I want to do more than just injection mold a part. They talk to their customers, “What other value-added steps are you doing?” they’re trying to add that into the value stream. We’re seeing automation take place in the work cell, more specialties in the injection molding process, more specialities in all the parameters, multicomponent molding and all that, so there are these things that are going to continue as well, and I think that’s what molders who will succeed will continue to do.

Yeah I think the job market’s going to be tough for a while, but we’re hiring, we’re definitely hiring because this upsurge is big and we’re hiring certain niches like automation. It’s huge. Some would say there’s been a lot more automation happening in Europe for a while, but we need more highly trained, skilled electrical engineers, integration programming, field technicians who can install equipment because customers are asking us for more. We have to fill in where they can’t do it.

Sankovitch: The other thing, if you look at the ’90s we were living a life that wasn’t really true. You can’t grow 15-20% a year. Since 2000 we’ve been trying to figure out this, you know, we had our own monster we had to deal with, and trying to get it right-sized for what we have, so that’s been a challenge just to get it to where do we contract to? We blew our bubble up a little in the ’90s as well.

 I think now we have gotten to that point where we talk about maybe we are bending that curve back up, we have finally got plant utilizations now that we can start to get back into that 80% utilization, we’re not sitting back at that 60% utilization. But I was at a customer yesterday, their plant utilization is at 50%, and they’re making money. They went back to their core biz, they got a little out of control for a while, they have 50%, but they are surviving.

And the good thing about recessions is, recessions do trim the bushes, they do get rid of all those dead branches that have a tendency to starve us because we’re making some wrong decisions, so now as we’ve trimmed it back we learn from recessions, because this isn’t the first recession this country has ever been in, we’ve been in a lot of them, and recessions aren’t always bad, there are some good aspects to it, and that’s the part where we have trimmed it back now. The people that are left out there should hopefully be able to survive. We’ll still lose a few more, but not at the amount we have over the last one to two years. So I think the companies that as we go forward they’re going to be stronger companies because they have survived. They’ve got their balance sheets, their income statements in place.

Larry Doyle (The Conair Group): To your point, John, I think the ones that stand out today as the strong processors are the ones that saw, not necessarily recession coming, but really took a holistic approach to how to manage their business.

Yes you can do value add. Yes you can invest in new technology. But it was investing in their human capital, investing in training their people, and truly understanding what competencies they had, and truly understanding how they can serve specific markets. They were able to understand that at an earlier phase and establish a strong foothold versus somebody today that’s coming out of a recession or teetering on the edge saying, “Okay, I need to get into medical now, or I need to get into this,” but they had no idea how they were going to do that. That’s what I hope processors learn out of the whole process—not just processors, but us, too. John Clark

TAGS: Business
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