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August 1, 2003

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IMM's 10th Anniversary series: Built to order

Switching from captive to custom and back again brings opportunities and challenges to an engineering-rich facility.

It was more than eight years ago when IMM first set foot in Pitney Bowes’ Plastic Components Operations. Today, one of the only things that hasn’t changed at PCO is its exterior. From a stint as a hybrid captive/custom molder serving external customers as well as the needs of its parent, PCO is again solely a captive molder for Pitney Bowes, providing increasingly sophisticated subassemblies that consist of molded parts and assorted purchased components.

Robert Lamb, an 18-year veteran of PCO and its general manager for the past two years, is presiding over the facility’s evolution with a clear-eyed approach that takes in all of the opportunity and challenge inherent in the switch. “To give you an idea of the magnitude of change,” he says, “at the time of the original IMM plant tour, we had 28 injection molding machines. By the end of this year, we’ll have 14 presses. While most observers will assume we are getting out of the custom business due to the tough economy, the actual driver was an inability to fairly charge external customers for our considerable engineering talent.”

Back to Captive

Engineering has always been a major asset for this group, according to Lamb. “It was one of our strongest selling points. We spent a lot of engineering time taking external customers’ designs and optimizing them for moldability, cycle time, and quality. But it was difficult to pass these costs along to the customer in the competitive custom molding environment. It was not particularly cost effective.”

An experienced and in-depth technical staff familiar with plastic part design and mold design came with the territory at PCO. These resources were necessitated by the needs of Pitney Bowes, and as a captive molding operation for its first 30 years, the costs were justifiable. On a custom level, however, it became clear that engineering services were not built into every competitor’s pricing. Some, for example, offered this at a la carte rates.

But for PCO, the process set up as a captive operation required input from engineers and designers. Using the same process on a custom molding level demanded the same input, so allowing customers to pick and choose which engineering services they’d purchase just wasn’t an option. Reducing the amount of talent applied to a specific project did not solve the problem either, but rather, created additional challenges.

“Obviously, we aren’t coming from a low-cost-labor position,” says Lamb. “It not only became impossible to remain competitive with offshore molders who had none of these services, it also became difficult to compete in the U.S. market.”

In the third quarter of last year, the decision was made to transition back to a captive operation. Gradually, PCO began working with external customers to help them find new molding suppliers. Lamb estimates that the process will be complete by the end of this year.

With most engineering efforts now directed toward Pitney Bowes products, the transition to captive-only status should be relatively simple. Change, however, never comes easy. It is not a case of back to business as usual, because Pitney Bowes itself has also changed.

So Long Lead Times

Not unlike the automotive industry, which shifted most responsibility for subassemblies to Tier One integrators in the past five years, Pitney Bowes now wants its molding operations to shoulder more of the manufacturing burden. According to Lamb, PCO’s parent corporation made a strategic decision to buy subassemblies at the highest possible level for its high-end products. Speed is of the utmost importance in the market, so slowing down assembly lines with subassembly work is out of the question.

Also, on a corporate-wide level, there is a major effort to reduce inventory. Instead, the new mantra is BTO—build to order. PCO receives a long-term forecast from Pitney Bowes, and then more precise orders one to three times a week. PCO buyer/planners are in daily communication with the main assembly lines, including daily e-mails to make daily quantity adjustments.

As a result, says Lamb, PCO in turn must use suppliers that can provide the highest order of subassembly possible. “To remain a player, we’ve dramatically expanded our subassembly area. At one time, it was called secondary operations, and included activities such as pad printing, sonic welding, inserts, gluing, and other byproducts of the molding floor. Now, we build subassemblies. We are positioning ourselves to be the type of supplier that the assembly line wants. By running the molding operations this way, we can mold parts and build subassemblies, thanks to the domino effect of not building inventory.”

The key to managing a BTO system (also known as kanban or just-in-time) is found in supply chain management. PCO’s buyer/planners are getting more materials than the plant received traditionally, so receiving inspections are on the rise. Managing the contracts with suppliers is another major area of change.

“We can’t get trapped into minimum orders with our suppliers,” Lamb explains. “High quantities mean huge warehousing, and we want to avoid that. Our customer wants us to provide X number of parts on a daily basis with minor adjustments, so we have to be able to do the same thing with our suppliers.” For example, PCO’s material suppliers hold material on consignment, rather than ship in huge amounts.

Shop Floor Shift

Changing to a BTO system means more setups and shorter runs for the shop floor, a shift that has brought challenges. “If you look at the cost of setups compared to running long lots and carrying inventory, it is a bit of a wash,” he says. “But the bottom line is that being a cost-effective division of Pitney Bowes requires us to react quickly.” Subassemblies, such as motors, are typically molded and assembled today, and on the main assembly line tomorrow.

Fortunately, there has been no downsizing as a result of the change back to captive. PCO always maintained a buffer with temporary workers, and through attrition and reducing temps over the last year, the employee level is now stable. Regular workers not on the molding floor are now working on subassembly lines. “Most of this is bench assembly, and our people have gotten up to speed quickly,” he adds.

Transitions on the automation side have been more difficult. “It’s tough to automate when you are dealing mainly with shorter runs and rapid changes,” Lamb says. “Theoretically, you can change EOAT on a robot quickly, but it isn’t really that fast, and we don’t have the option to dedicate equipment to specific projects.”

Perhaps the biggest change has occurred in the toolroom. Molds must be set up and run as quickly as possible, and with shorter runs, there is more of a revolving door here. During mold trials, the engineering group sets up process parameters, and they are then set in stone. The toolroom must make sure molds are maintained for fast turnaround.

Contact information
Pitney Bowes Plastic Components
Operations, Danbury, CT
Robert Lamb; (203) 739-3889
www.pb.com; [email protected]

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