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September 1, 2003

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Crossroads: Crisis or Opportunity: Staying power: Carving niches using technology

Can a molding company choose to be solely a U.S. manufacturer and still be successful? The cost and risks of going global are daunting to many companies, but increasing competitive pressures are causing many to doubt their futures. Some molders however, are discovering that staying home and being successful don’t have to be mutually exclusive. Specific strategies must be employed, and those strategies can take a number of paths, but technology implementation, with the people to carry it out, is a leading candidate.

Almost everyone agrees that commodity molding is vulnerable to global price pressures, and value-added molding is where the security is. Finding a unique market or technology niche is increasingly where the focus lies for successful U.S. molders. Unfortunately, for the majority that’s not the norm.

Jeff Mengel, a partner with Plante & Moran LLP (Southfield, MI), provided insight into today’s molding world with some preliminary data from his 2002 Molders Survey at NPE 2003. “Novelty is the best place to be when it comes to molding,” said Mengel. “Still, very few companies have unique processes to set themselves apart.”

Finding a niche and serving it with unique capabilities doesn’t mean that a company has to be big. It does mean, however, that it has to be very, very good at what it does. IMM has written a number of articles on some unique niches and the success they breed: Donnelley Custom Mfg. is building a name for itself in short-run molding; Kelch Corp. has branded itself as the leader in molding nonautomotive fuel systems components; and M.R. Mold & Engineering has carved itself a niche by gaining expertise in building molds for liquid silicone rubber parts.

Still, the examples that follow show how a strategy specifically focused on technology can provide the defining difference.

Technology Innovations

Technology by itself is not a competitive advantage, because usually it’s available to anyone with sufficient funds to acquire it. Micromolding, inmold labeling, multimolding, and powder injection molding systems can be purchased as easily in Detroit as they can be in Shanghai.

The mere presence of a two-shot, fully automated molding cell in a facility does not immediately and automatically impart to the molder an overwhelming advantage unfound anywhere else in the world. That technology becomes an advantage only if the molder invests in the brainpower and engineering to support it and make it work.

There are several molders who follow this technology-integration pattern, and thrive with it. One such molder is MGS Mfg. Group (see “MGS, Part II: Multishot Molding and Machinery,” p. 89, and June 2003 IMM, p. 72). This company, based in Germantown, WI, not only invests in technology, but also develops proprietary systems to help it meet customer needs. Such systems include rotary platens, multishot stack molds, and micromultimolding injection systems.

In a similar boat is Maca Plastics, in Winchester, OH. Maca, led by CEO Andy Culbertson, comes from another technology angle. As we first reported in August 2002 IMM (p. 74), Maca has moved into the wireless, Web-based world of production monitoring to help it maintain quality parameters.

But, like MGS, Maca developed a proprietary system that makes its system unique. Maca wrote its own software and wrapped it around an off-the-shelf Syscon-PlantStar core. This enterprise planning and control system is integrated into Maca’s accounting module and offers real-time supervisory control and data acquisition (Scada). The goal is to generate data—data that help Maca identify waste and build new and better production efficiencies.

Although The Tech Group calls itself a global company, the company’s heart is its U.S. operations consisting of four plants, and a big concern is keeping these plants growing and employing people. For The Tech Group to sustain its U.S. operations, it takes innovation, creativity, marketing skills, sales strategies, and technical expertise. That means finding a new position in the supply chain that puts it on the leading—not the trailing—edge.

When management at The Tech Group began looking at technologies that could help them grow their U.S. molding operations, they sought something that would provide a lot of value to the customer and encompass engineering, design, and moldmaking expertise, explains Bill Gerard, vice president of engineering.

(Left to right) USI’s Todd Bennett, Tesha Briston, and Maria Hunnicutt examine an automotive part. The first shot is glass-filled nylon, which is then transferred by robot to the mold’s other side for a second shot of TPE. According to USI, the machine behind is the first inline, two-shot Hylectric press sold in North America by Husky.

Service: a non-tech strategy

If you choose not to be a global molder, then you’re probably a regional player, says Mary Scheibel, partner in Scheibel-Halaska, a marketing communications firm in Milwaukee. “Not going global means a company’s business model could be dictated by geography,” she says, adding that companies focused on being strong regional players “have to have niche expertise in either processes, products, or some unique services in order to differentiate themselves from other regional firms trying to serve the same customer base.”

United Southern Industries is a good example of a strongly focused, regional molder. Over the past few years, USI has invested in resources to make the company strong technologically and to improve its competitiveness, such as installing Husky Hylectric molding systems. But the name of the game for USI, says VP and general manager Todd Bennett, is performance. Performance means putting in place services and people to execute better than the competition. For example, USI has delivery trucks that will deliver components to any customer within a 250-mile radius of the plant in Forest City, NC.

Top performance means having top-notch employees. To that end, USI has invested heavily in its people, something that Bennett believes makes a competitive difference. “Our goal is to outperform the competition,” he says. “This requires a workforce that can execute best practices—from sales to manufacturing to customer service and delivery—with speed.” Unlike the Chinese competition that depends heavily on low-cost labor, Bennett and the USI team strive to maximize the intellectual contribution that an employee can make to the company’s success. They do this with a commitment to training.

Over the past three years, despite a tough economic climate, each USI employee has participated in more than 100 hours of training each year; 90 percent of USI’s press operators have been certified as plastic injection molders through SPI’s national operator certification program. The company also taps into resources provided by local community colleges and state-sponsored programs to expose its workers to new learning. The result is a highly skilled, knowledgeable, and more highly paid workforce.

“This investment has had a significant impact on our ability to achieve extraordinary results during the most challenging economic period our country has faced in decades,” says Bennett. “It’s this combination of competence and speed that has enabled us to penetrate more deeply into customer organizations and to attract the attention of new customers as well. Our people are our single greatest competitive advantage.”

As the company, headquartered in Scottsdale, AZ, explored options, two-shot molding rose to the top as something that provides customers with a high level of value and reduced overall costs to manufacture. Not just any two-shot application would do, however. The Tech Group looked at a lot of applications and concluded that an ideal niche for two-shot molding would be existing or mature products where the OEM needed a fresh look, better aesthetics, and/or lower costs to manufacture to maintain profit margins. To provide value, it looked for products in which two components are currently being molded separately and then assembled by hand or in a secondary operation.

The Tech Group’s strategy is paying off. The company has built several spin-stack, two-shot molds, each one replacing older conventional molds that molded components individually, which required hand assembly.

“We’re not just combining two pieces into one, but we’re doing it faster than the two separate pieces were being molded prior to this, using good engineering and moldmaking techniques such as conformal cooling,” Gerard says.

In one instance, the company dramatically reduced the cycle of a combination compression molded/injection molded mating part from nearly 2 minutes (in two processes). Now, a two-shot, spin-stack mold runs a 10-second cycle for both parts in a 16x16 mold, molding the thermoplastic substrate first and the TPE over it, resulting in a new look to a mature product and reduced costs to the OEM.

Moldmaking: Beyond the Mold

Moldmakers have long sought to differentiate themselves by adding conventional molding services to add customer value. But many of those are now seeking even greater differentiation—and growth—by adding unique molding services. As reported in the August 2003 issue (p. 18), PM Mold Co. (Schaumburg, IL) recently added to its capabilities in the company’s molding services to build on what co-owner Olav Bradley sees as “growth niches.” The company installed an 1100-ton injection molding press from Van Dorn Demag, one of the largest presses in the Chicago area.

PM also sees a good future in two-shot molding, and has added capabilities in this area, including a Krauss-Maffei, 125-ton multimaterial molding press with 5-oz first shot and 2.7-oz second shot capability.

Making the investment in these presses was a big decision for Bradley, but PM’s customer base began demanding that business. “It’s a matter of meeting the customer requirements to keep the business, so that’s what we do,” says Bradley.

Turnkey Tactics

Perhaps Hollis Woolridge, VP of SimRidge Technologies (New Braunfels, TX), which has three molding facilities and has experienced firsthand the rise and fall of the U.S. computer business (one of SimRidge’s primary markets), says it best: “Every war fought demonstrates that technology is the big advantage in combat. However, much of our battle technology is rapidly becoming widespread in the world, which further undermines our loss of manufacturing capability.”

Here it’s pointed out again that achieving a solid bottom line isn’t just about technology, which is obviously necessary to be competitive, successful, and profitable. It’s also about the people who can use the technology—who can make it happen.

Dyna-Plast bills itself as a product development company. Although the Ramsey, MN company has 18 presses, the company’s emphasis is on product development, engineering, and process validation for OEMs and custom molders. This focus has given Dyna-Plast a unique competitive edge.

President Ray Schenk says the company’s strategy is to align with people who value this service. “We’re actively involved with the product design and have input at that level,” explains Schenk. “We can avoid the delays downstream that often occur as a result of poor design. Additionally, this familiarity [with the product] in the design phase carries over to moldbuilding, molding, pilot launch, assembly, and, finally, building production tooling.”

Production tooling is built by Dynamic Engineering, a sister company to Dyna-Plast. When production tooling is ready, Dyna-Plast performs the qualification runs and process validation, prepares the quality files and mold information, and then transfers this information and knowledge to a production molder that has robots, secondary operations, packaging, and whatever else is needed to meet that molder’s customer requirements.

Dyna-Plast brings the production molder onsite to share the process, review the quality files, go through the process history, and “make the transfer of knowledge from us as the product development people and moldmakers to the production molders to help them do their job better,” says Schenk.

Schenk notes that the product development cycle is a different animal. “The OEM generally doesn’t want to put development costs into the price of the parts,” he says. “Many times when dealing strictly with the custom molder, the customers think they should get [product development] for free, because they’re giving you the molding. We provide a good transfer package, and offer true collaboration with the production molder, not just cooperation.”

In one instance, the OEM insisted that the production molder use Dyna-Plast for its product development, moldbuilding, and process validation phases to ensure the successful launch of the product. The production molder was happy to do this.

Schenk points out that many custom molders don’t like the pace of the product development cycle because it can often delay payment on molds, particularly if the cost of the molds is tied into the production parts.

Editor’s note: Next month the Crossroads series takes a look at strategies for staying put and staying competitive through lean manufacturing.

“Some molders dislike the phases of process validation, approvals, and preproduction quality issues because it delays their payment,” Schenk says. “It’s the best of both worlds; the production molder can provide the lowest piece part price because the cost of product development and the tooling is separate from production molding.”

Dyna-Plast employs all the cutting-edge technology including MoldFlow, 3-D solid modeling, CAM software, and new equipment found in most successful molding and moldmaking companies today. “The technology we’re employing is nothing special,” Schenk adds, “but the attitude and commitment of our people—that’s what’s special. It’s driving the stake in the ground and finding a way to get there.”

Suppliers are involved and helping

When IMM recently spoke with some of the larger machinery suppliers about the problem of work going offshore, every one of them described how his company was working with molders to help. Each has strategies to help molders either in home markets or abroad. Some common tactics: Elevate your technology to compete; make value-added products rather than simply mold parts; specialize in a market or specific technology; and above all, be efficient, and be lean.

Stay, Go, or Both

In his stand at NPE 2003, Arburg’s marketing director Christoph Schumacher was clear that the low-tech exodus is for the most part an accomplished fact. To counter that, his company has been busy sharing its high-tech expertise in multicomponent, IML, LSR, PIM, and a broad spectrum of other technologies with molders wanting to compete domestically.

Arburg also helps molders expand their knowledge of the high-tech markets such as medical and electronics. For those who choose to go global, Arburg has practical information on molding in virtually any region or country, Schumacher says. Arburg, via its regional specialists, has many contacts and resources, and will use them to help an expanding molder get connected and provide introductions, even on such sensitive subjects as acquisitions and mergers. This is not about selling machines, he says, but about supporting a customer, and it is the top priority at Arburg.

“To be competitive within North America, you must have high-tech production,” says Peter Neumann, CEO of Engel Holding. Molders, he adds, are aware of this and at NPE, for example, were actively seeking advanced technology. A central pillar of Engel’s strategy for helping molders upgrade their technology involves forming working partnerships to implement lean production, an approach he says is well received by molders. Whether a molder wants to add inmold decorating or hard/soft multicomponent molding, concentrating the manufacturing steps at the molding machine can be a competitive edge. Going lean will lower logistics costs. “Low logistics costs can offset low labor costs,” he says.

Automation is usually the most critical aspect of reducing internal logistics costs. The partnering is increasing, Neumann says, and now generally involves the moldmaker, machine supplier, automation specialist, and molder working together at the start of a project to build effective cost control. Another strategy Engel sees increasing, says Neumann, is exclusivity for a particular solution. In return for his development efforts, the molder can be assured that the solution will not be offered to a competitor.

Adding Performance, Not Capacity

“We packed our NPE display with high tech. There was sophisticated automation on every machine,” says Michael Santa, president of Battenfeld of America. He says it was clear before the show that molders would come looking for new ideas to help them succeed in the changing U.S. market, as well as new ways to improve existing jobs. Almost no one is simply adding capacity. “They are adding performance,” says Santa. Having more capability in specific markets or technologies effectively reduces the number of true competitors they have. Automation, assembly, decorating, and other value-adding technologies are on the menu and being ordered.

Battenfeld’s focus, says Santa, is on strategies that will make its customers more profitable or increase their market penetration. Molders are already convinced of this; they are now looking to improve their capabilities. Not only do they know that suppliers have the desired skills and market knowledge, they now expect the machine supplier to be involved in boosting productivity and profitability.

Follow the Market

Gerd Liebig, chief strategy officer of the Demag Plastics Group, says the loss of low-tech molding from North America and Europe has to be looked at alongside other molding megatrends. For instance, end products are becoming more complex; an excellent example is mobile phones. Components are increasing in number while simultaneously becoming smaller with more function. Life cycles for almost all products are shrinking and none faster than telectronics. Molders who a few years ago worked with many industries are now concentrating on two or three as clients expect in-depth market knowledge.

On the supply side, sales of molding machines of less than 100 tons have been decreasing for the last 10 years as more work goes to midsized machines with multicavity molds. The telectronics business is leaving the EU and U.S., says Liebig, most likely forever. Molders who want to keep working in telectronics should be following those markets abroad. Demag, says Liebig, is helping many molders to set up abroad and simultaneously add technology for the home markets.

Right after we talked with Robert Strickley, VP sales for Ferromatik Milacron North America, he was going to meet with two American molders. One is going global; the other has decided to compete domestically and is implementing lean systems and demand manufacturing. He says each choice is valid for the respective business. He says it is clear that molders have realized there is no choice but to follow the market. He cited several Milacron customers that have kept work in the U.S. with technology and efficiency. One saved a job with new inmold bar coding. Others are capitalizing on the consumer appeal of multicomponent soft-touch products.

He stresses that these are proven technologies a molder can get into quickly, as are lean thinking and demand manufacturing. Milacron recently packaged a blowmolding/injection combination so a company could be the single-source supplier the client wanted. Ferromatik says that with many capital budgets still frozen, molders are upgrading existing equipment to compete.—Robert Neilley

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