As a dinner conversation turned to the information age and its effect on manufacturing in general and molding in particular, one thought struck Peter Mooney, an economic analyst who prepares customized reports for the plastics industry. He realized that the days of molding-as-an-art were long gone. He noted that in the not-so-distant past, the craftsmanship of molding was a closely guarded commodity confined to one or two highly skilled individuals at a molding facility. These operators took this art of creating good-quality parts and turned it into a highly repeatable science. But now, as presses are delivered with more minutely tuned controls, and as software packages track and react to every variable within the molding process, the human element has been essentially eliminated. In its stead is technology that is readily available to anyone with the capital to buy it.
"Throughout the '90s you had the information technology revolution," Mooney explains, "so there was a tremendous dissemination of information across all industries. If I was an injection molder today, I'd say to myself, 'To what extent can I obtain and hold onto some competitive advantage? Where is there a significant barrier of entry to someone else coming along and doing what I do?'"
According to Mooney, there really isn't one. The unique or specialized technologies or applications that once provided a safeguard to molding shops are quickly losing their novelty and becoming widespread. Over the second half of the 1990s many companies traded a niche for a rut.
"Information technology processes have made it far more difficult to hold onto competitive advantages like we used to have in the past," Mooney explains. "The expertise to simply injection mold a part, or insert mold a part, or structural foam mold a part, or even coinject a partâmore and more of that technology has been spread out. So it has become harder and harder to create niches and to sustain and hold onto those niches."
In the early or mid '90s, adding insert molding or coinjection could make a shop stand out in the crowd and serve as a means of attracting and retaining business. Now, Mooney says, the widespread availability of these processes is making many specialty areas that were once sparsely populated now overcrowded.
"We talk glibly about leading-edge technologies," Mooney says, "but it's not difficult today in many areas of plastics to learn and implement these technologies and compete with people who've been in that field for five or 10 years."
Mooney says the short-term effect has been
"[Molders] need to try to restore profitability," Mooney says. "Even the growth they achieved in the good period from 1995 to 1999 was what I call immiserizing growth. You grew your revenues, but there wasn't a corresponding growth in profitability. I think the five years overall were a tough period."
Tough Row To Hoe
This period, during which business grew and
Mooney says the recent rash of mergers and acquisitions represents a market where smaller molders can choose between getting bigger or getting acquired. In the meantime, the few advantages these companies once enjoyed, like proximity to customers, are quickly losing value.
"[Small molders] really have a tough row to hoe," Mooney says. "If transportation costs were either to stay constant or to go down, these big, national or even global guys could compete against the local guys."
When everything is taken into account, Mooney explains, a smaller shop's only chance to compete is to work faster, leaner, and more efficiently than its bankrolled competition.
Mooney says if the small molders don't operate their business "very, very well and very, very cost effectively, they can't compete."
For Mooney, some processes he's studied like thermoset molding or rotational molding remain somewhat insulated because the work requires artisans who are cultivated and trained rather than software packages available to the masses. These fields allow processors to differentiate themselves.
"[Specialty processors] can survive because a lot of those areas are still very much art formsâthere is no science," Mooney explains. "You don't go to a software package and start cranking out these things tomorrow, so they can survive because what they do tends to be very individualistic, very unique. But that's not true of thermoplastic injection molding."
Mooney admits that the last five to six years have brought sweeping changes that have dramatically altered the molding landscape. In some ways the playing field has been leveled, but for many molders, it's become vastly uneven.
"[Technological parity] is kind of the downside of the information technology revolution," Mooney says. "Yes, we've all become more efficient, or have the potential to become more efficient, but it's harder to differentiate ourselves."