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North American plastics processors survey: Size and success not linked

Commenting this week on his company’s annual North American Plastics Industry Study, Jeff Mengel, who heads the Plastics Practice at the CPA/business consulting firm Plante & Moran, underlined how the study’s results show little to no correlation between success and size among plastics processing companies. And that’s not the only exception to conventional wisdom.

Rob Neilley

February 25, 2010

2 Min Read
North American plastics processors survey: Size and success not linked

The Plante & Moran 2009 Report, based on input from 179 North American plastics processors (60% injection molders) running 265 separate facilities, highlights the differences between successful and struggling businesses for such criteria as sales volume, customer and operating dynamics, employees, value-added, and more, and the statistics are but the tip of an analysis iceberg.

Mengel noted that Survey results confirm many of our general beliefs about the business, but contradict others, such as the thinking of many smaller processing companies that being larger is automatically better. The median annual revenue of all responding companies was $14.4 million. The average revenue of the 14 companies Plante & Moran terms successful is $9.5 million. 

What identifies success? The median pre-tax earnings of all respondents was 5.5%; successful firms averaged 13.4%. Return on assets? The median was 8.4%; successful firms reached 24.9%. And how they do it often isn’t  what we generally think.

One striking result in the report is the lack of correlation between the machine utilization rate and overall success. Among the injection molders surveyed (using 24/7 production as a standard) the median machine utilization rate was 38%, and among the successful molders utilization was only 34%—lower, not higher, as you probably expected. Similarly counterintuitive, the median average number of setups per machine per week was 1.7; successful companies did 1.9.

Not all results contradict expectations. Median employee turnover was 34.4%; in successful companies, 25.6%. Labor’s share of value-add: median 45.7%; successful 37.2%. In terms of markets served, the data is complex, but one slice jumps out of the pie charts: the average company had 35% of its business in the transportation sector; the successful company had 21%.

The full results of this survey, which is done annually, are free to the companies who participate and also are available at http://www.plantemoran.com/industries/plastics/Pages/home.aspx. Considering how informative the results are and that data of individual companies is kept confidential, there is little excuse for not participating.

CURRENT SURVEY CLOSES SOON. Plante & Moran’s Jeff Mengel is currently conducting a survey to determine what we in the industry think our "new normal" will be. Is our industry forever changed, and if so, what will it be? If you participate by March 1, 2010, you will receive the results at no cost. You can  do it anonymously if you wish. To complete the survey, click here: online survey by March 1.
While you're there, the 2010 North American Plastics Industry Study is now open for participation and all the information and how-to also is on Plante & Moran’s website, just click here. —Rob Neilley

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