Get ready for the upturn

Control operating costs to be consistent with volume.  

Sell harder.  

Improve business information systems.  

Cut lead times. "You have to have faith that the economy will recover. But you also have to scale your business to appropriate levels, not losing sight of the fact that you have to be ready to come back up on the other side," says Hess.

Control Costs
"You have to watch assets and cash flow," says Hess. "You have to watch more than just P&L, because at the end of the day, cash is king."

Paragon is a $21.5 million manufacturer of about 100 molds each year for automotive, truck, office furniture, and consumer products markets. It upgraded its operations through strategic equipment purchases, even when times were getting tougher last year.

"We intend to become more competitive in smaller tools so we purchased state-of-the-art CNC machine systems from bankruptcy sales to help us in that effort. We paid for the equipment in cash at a considerable discount. We were also able to secure a training grant from the State of Michigan."

Hess believes a permanent shift in the moldmaking business has occurred, particularly in customers' perception of price vs. cost. Like many others, Paragon once relied heavily on selling its reputation for building high-quality molds. But Hess says quality is a given, and cost is the driver today. Paragon intends to build Hyundai-priced tools where appropriate, not Cadillacs.

Sell Harder
Hess says, "You've got to sell harder when the business goes down. You can't sell from behind the desk anymore. You have to get out there, help your customers win business, and make sure they choose you when they win it. Ask yourself, ÔWhat else can we sell with the resources we have?'"

Paragon is now selling machine time. Among the equipment it recently purchased was a 3000-ton compression molding press. It jobs out time on this machine to its customers, as well as on its 3000-ton HPM sampling press.

Paragon is also selling services like contract CNC machining, CAD data translation, mold repair, and refurbs. And it has begun to actively promote RP. The company's own Prototype Express process generated $1 million in sales last year.

Flow Information
"We had reached a maximum point in the usefulness of our business information systems, so we hired a consultant to develop something for us that is entirely new," Hess says. "It is comprehensive and fully integrated, covering everything from quoting to shipping. The new system also is more Internet and e-commerce friendly, making e-bidding easier and faster."

Paragon now uses Epicor software from E-Mfg. Co. (Milwaukee, WI). Hess says the new system will allow Paragon to double in size when business improves without adding costs by keeping its administrative head count lean.

There have also been relocations of job functions. Paragon's CAD and CAM engineers now work in the same cubicle to improve flow. Its direct sales business unit managers share cubicles with project managers.

Cut Lead Times
"When it comes to sales these days, price is the driver, but lead time is often the tiebreaker," says Hess, adding that Paragon has maintained 95 percent or better on-time deliveries.

Lead time has been a double-edged sword. Many U.S. moldmakers run three-shift operations to keep up with lead times, which have shrunk by a third. But in doing so, one-third more capacity was made available. Increasing foreign competition also built the available capacity. This sword struck at the same time as the downturn, Hess says.

"We've got to control the interface with our customers by being more creative at the design engineering phase. Where the manufacturing goes is up to them, but by making your way upstream, you increase the odds of becoming their tooling partner by providing potential cost and lead time reductions."

Hess says he has started talks for possible offshore manufacturing ventures in Eastern Europe and the Far East. He hopes to present customers with a blended rate for the whole package where price would otherwise prevent his company from developing the opportunity.