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Articles from 2004 In November


Computer shipments statistics: What do they mean?

This is the last in our series of primers designed to help you make the best use of the wealth of business planning data available. The previous articles can be accessed online at www.modplas.com.

Home and office PC (personal computer) manufacturers compete very heavily for share-or should we say shares-of market. As the computer industry matures it becomes more and more segmented-PCs vs. laptops, for instance. Manufacturer shipment data is closely held and available in only a few places.

Unlike many industries where trade associations collect and report statistical data, computer shipment data is held in the hands of commercial enterprises that spend millions collecting the information and make even more millions selling it.

In researching this article, we identified hundreds of computer trade and technical associations and called several asking for market research-type data and, more specifically, product shipments data. Most were dumbfounded, as these organizations represent a specific sector of the computer industry and are involved in creating and maintaining standards for virtually every component that goes into the box.

That fact, however, doesn''t mean you can''t get your hands on meaningful information that can help you plan your business and gain some insight on what your computer-related business should have looked like over the last year, and perhaps more importantly, what it may look like next year.

The first place we went looking was the United States Census Bureau''s Manufacturers'' Shipments, Inventories, and Orders (M3) Survey. This survey includes statistics on manufacturers'' value of shipments, new orders (net of cancellations), end-of-month order backlog (unfilled orders), end-of-month total inventory, and inventory by stage of fabrication (materials and supplies, work-in-process, and finished goods).

The Census Bureau obtains this information from some 3500 reporting firms and it is reported in 89 separate categories. One of those categories is "computers," with subcategories for "computer storage devices," and "other peripheral equipment" (printers). The information is reported in value of U.S. dollars. Unfortunately, the Census Bureau does not report shipments in units, something we would like to see.

To access this information, go to www.commerce.gov. And while you''re there, don''t ignore the following links:

  • Economic Development Administration: (www.eda.gov), where you will find data on new investments and grants. The EDA announced four grants greater than $100,000 for the period July 23 to 29, totaling $4.35 million. These investments were part of projects that totaled $8.1 million. They will help create more than 2545 jobs and attract more than $313.3 million in private investment.

  • Minority Business Development: (www.mbda.gov) there is so much here it''s difficult to explain, but it''s a great place to find an associate or a partner.

  • Grant Opportunities: (www.commerce.gov/grants.html) How many times have you heard about someone who got free money to expand his or her business? This is the place to find it.

  • Contracts: (www.commerce.gov/contracts.html) No, you won''t find government contracts here, but you will find all of the information you need to know to bid on a government contract.

    You can find all kinds of data on the U.S. economy at the DoC site that will give you an idea of how your business is performing compared to other industries. Go to www.osec.doc.gov/obl/OBl-EconomicBrief.pdf for some great graphics and statistics on the performance of the U.S. economy. Another great place to find economic and monetary data is www.federalreserve.gov.

    Clearly, the information you can find at these government websites is macro in nature. There aren''t many details on specific industries or markets, but if you begin looking at this data and charting it on a regular basis, you will find it useful. Looking at it once a year won''t help you much, but looking at the pertinent data once a month will allow you to identify trends that can be very important to your business.

    If you want microeconomic data on the computer industry, you''ll have to pay for it. One of the best sources of this information is Gartner DataQuest at www4.gartner.com. This is serious market research data on the entire IT industry and most of it is available for the world, not just the U.S.

    We spoke to the folks at Gartner Dataquest and explained to them that we were writing an article for plastics professionals on statistical information for the computer industry. They were accommodating, first sending us global and then U.S. data. Following is a report based on the information they provided.

    As noted, historical data is always important because it establishes a benchmark for current data and for forecasting. The first report we received was entitled "Preliminary 2Q03 Results: Suggestions of a Recovery." If you follow the computer industry, you''ll know it sank in the recession along with many other industries-but looking at this report we do see evidence of a recovery in computer manufacturing. The report indicates that worldwide unit shipments of personal computers grew 10% during Q2 2003, better than expected and the first double-digit year-over-year increase since Q3 2000. The report also indicates that U.S. PC unit shipments increased 11.1% during the period, again ahead of expectations. The key U.S. growth segments were the consumer and education markets; laptop shipments remained strong.

    Moreover, the report provides "Preliminary Worldwide PC Vendor Unit Shipment Estimates for the Second Quarter of 2003," broken down by PC manufacturer and identifying share of market.

    In a separate table this same report provides data on "Preliminary Worldwide PC Unit Shipment Estimates by Region 2Q03."

    Also in that same report we received data on "Preliminary U.S. PC Shipment Estimates, 2Q03."

    The report also contains more detailed textural information on each region of the world, including North America, Asia, Latin America, and Europe.

    Now, let''s go back to that Q2 2003 report and compare the figures to the Q1 2004 report that we received from Gartner Dataquest. The Q1 2004 Report, the most recent one available, a non-paying customer, confirms that a trend did begin in Q2 2003 that continued into 2004, one we believe continues through today.

    According to Gartner Dataquest''s Q1 2004 report, worldwide PC unit shipments for the quarter increased 13.4% over the same period one year prior. All regions of the world showed double-digit growth except for Japan. But assuming that we are supplying parts to one or more of these computer manufacturers, we can get an idea of how they stack up against their competition.

    This report also reveals why PC shipments were increasing, stating that "replacement activity in business was an important growth driver." And it went on to forecast that strong replacement demand would continue throughout 2004.

    Following are some of the other points gleaned from the Gartner Dataquest research. Please note that some of it has been condensed:

  • Professional market sentiment improved. Gartner Dataquest''s IT Watch Index showed that March''s IT spending exceeded the budgeted level for the first time since the IT Watch survey was launched in March 2003.

  • Replacement demand continues to be a major factor in growth.

  • Stronger professional market buying was balanced by weaker U.S. retail demand in the early part of the quarter. Shipments into retail weakened as Hewlett-Packard scaled back its orders to clear inventory. Sony faced the same challenges.

  • Notebook growth continued to outpace desktop growth, with the professional notebook market showing solid growth as IT spending from U.S. corporate and small- and midsize business sectors improved. This counterbalanced retail-shipment weakness that resulted from oversupply.

  • Consumer-notebook and hard-drive oversupply in the first quarter led to a more competitive pricing environment.

  • Further consolidation in the U.S. market occurred with the acquisition of eMachines by Gateway at the end of the Q1 2004. This is a positive step for Gateway overall, but given the confusion that typically accompanies such an acquisition, Gateway''s Q1 2004 results will likely have been adversely affected. Gateway announced the closure of its direct-retail operation after the acquisition.

  • The first quarter is not a seasonally strong public-sector buying quarter. We forecast public-sector markets to show slight sequential growth. In the education market, the third consecutive year of government budget cuts has led to a highly competitive pricing environment.

    If you are a processor seeking to participate in this dynamic, rapidly changing market, this is the kind of market intelligence you need. While it comes at a price, it can go a long way in helping you manage your business and get the edge on competition.

    Agostino von Hassell [email protected],and Mark Bella [email protected], of the Repton Group LLC (New York).

    Contact information

    Economic Development Admin.   www.eda.gov
    Gartner DataQuest   www4.gartner.com/research/spr/asset_65447_1715.jsp
    Minority Business Development   www.mbda.gov
    U.S. Census Bureau   www.commerce.gov
    U.S. Commerce Dept.   www.commerce.gov
    www.osec.doc.gov/obl/OBL-EconomicBrief.pdf
    U.S. Federal Reserve   www.federalreserve.gov
  • Not just a little cheaper, faster, or better

    Adam Burke wants potential customers not to pigeonhole his firm''s patented melt-phase forming process as "a bit like thermoforming, or blowmolding, or injection molding," because then they also assume the process has the same limitations as these more common ones.

    This is a new plastics technology," explains the president of PBM Plastics. "This isn''t just about making things a little cheaper, or a little faster, or a little better." And though he says melt-phase forming is comparable in part cost to other plastics processes, his mission is not to simply snatch business from other processors. "We''re trying to work with customers to design and make brand-new products."

    To date PBM''s tactics seem to be on target, with the firm in the midst of an expansion from its current stable of three commercial lines plus a prototype unit. Burke, formerly with GE Plastics (now GE Advanced Materials, says PBM (Newport News, VA) has several new lines under design. "We''re actually looking to add a number of new machines. Plus we''ve worked with GE Fanuc to automate the ones we have," increasing productivity, "and we''ve gone from a five-day to a seven-day workweek." The firm is also on the search for a new business sales manager and a sales representative; so far most customers have approached PBM after the processor was recommended by other customers. "I cannot think of a product [where] we''ve had to bid against [another processor]," he says. "In fact, most of our discussions are not with purchasing [departments of customers], but with marketing and design people who have new ideas they want to realize."

    A bit like...

    PBM''s patented process and equipment (made in-house) most closely resemble thermoforming, which makes rigid parts. But melt-phase forming is different-enough so that PBM''s first commercial part, a baby bottle liner, was awarded one of the Flexible Packaging Assn.''s top awards in 2003 (PBM distributes the Pumpmate Breast Milk Storage and Feeding Kit with liners via www.pumpmate.com). Indeed, melt-phase forming is fine for rigid or flexible parts, or both rigid and flexible sections in a single part, says Burke.

    PBM''s process is similar to some developed in the past, such as the solid phase pressure forming (SPPF) process created by Shell Chemicals (November 1988 MP/MPI) and a billet forming process from Dow Plastics in the 1970s. At his website, www.foamandform.com, acknowledged thermoform expert Jim Throne writes that SPPF "was introduced in the 1970s as a way of pressure-forming thin-gauge homo-PP sheet into relatively simple shapes such as drink cups and unit dose cups." PBM''s process adds a greatly increased degree of flexibility and automation.

    PBM sources sheet from two extruders, one a specialist in engineering thermoplastics and one in standard materials. PBM uses the sheet to punch billets with a die punch. These billets, in nearly any shape, are automatically conveyed through a heater into a tool with 30 to 50 cavities. The plastic billets are heated to their melting point, which enables forming with no vacuum required-a plug assist and air pressure suffice.

    Burke highlights the billet punching step as key to the process''s advantages. "We can get scrap rates of only 15% to 18%," compared with much higher ones (30% or more) on standard thermoforming machines, "so the economics are a game changer." Thermoformers generally granulate and reprocess scrap, but Burke says PBM''s lower scrap levels as a percentage of virgin material enable it to form parts with much higher clarity since high scrap reuse can impact transparency. Also, PBM''s process can realize much thinner walls with less stress than either blowmolding or conventional thermoforming, producing material savings and more economical use of expensive plastics often too costly to use in thermoformed or blowmolded parts.

    Output on a PBM melt-phase forming line is in the "hundreds of millions of parts per year," much higher than extrusion blowmolding equipment, he notes. A typical part for melt-phase forming includes a thin-walled, flexible, disposable tube with an integrated rigid flange, formed in a single step.

    Even the parts themselves are special, with draw ratios of 1:8 possible. Since this spring, PBM''s website (www.pbmplastics.com) includes an E-engineer program that enables potential customers to determine in a few steps whether their parts can be made via melt phase forming. The program also lists the many options available in this process, including a near-endless choice of materials.

    "We''ve validated polyure-thane, PET, nylon, ABS, polycarbonate, EVOH, all of the polyolefins," says Burke. As an example of the novel parts that can be formed, he cites PBM''s processing of polyetherimide (GE''s Ultem) into containers 4 inches square with 1-mm wall thickness that could be placed on a range for boiling water. One of the companies supplying PBM can process sheet to 11 layers; such coextrusions pose no problems, he says.

    The very broad range of potential materials allows PBM to take advantage of high-end materials for parts that are pasteurizable, auto-clavable, retortable, or more. Burke says the firm''s E-development program and in-house prototyping capability are critical since designers have often written off some material combinations; or, a part design that might be considered too difficult, when, in fact, PBM can handle it.

    Other options for melt-phase formed parts include threaded caps and something called inmold welding. "One of our customers wanted to attach another part to the bottom of one we processed for him," explains Burke. Rather than take the melt-phase formed part and reheat part of it to its melt phase again to attach the two, PBM developed the means to insert the other parts into the melt-phase forming unit''s cavities. It then formed the billets onto the parts so that a bond was created inmold-analogous to overmolding in injection molding. Melt-phase forming also facilitates any type of embossing or decoration as well as use of lenticular and holographic labels.

    Beyond the milk bottle liners, Burke says he can offer few details on other commercial parts, other than to say that PBM is commercial in its five targeted markets of industrial, consumer, medical, food, and beverage.

    "Most customers insist on non-disclosure agreements. They see it [the process] as such a game-changer that we can''t talk much," even being turned down when he''s offered discounts to customers if they allow him to publicize a project. One market being pursued is forming of flexible liners for blowmolded bottles for mayonnaise, ketchup, shampoo, and window cleaner.

    Matthew Defosse

    [email protected]

    NAFTA revisited: Improving outlook for processors

    It''s never a good idea to ignore your best customers, especially when they''re also your two closest neighbors. The Canadian and Mexican markets continue to hold some of the best sales and investment opportunities for U.S. processors, remaining by far the two largest U.S. export markets, and accounting for more than 58% of U.S. plastics exports. Non-NAFTA manufacturers will also want to keep abreast of the opportunities in these two growing and increasingly open economies.

    After coming off a tough year in 2003, which included a SARS and mad-cow outbreak, the rapid appreciation of the Canadian dollar, as well as blackouts in Ontario-Canada''s largest plastics manufacturing region-the Canadian economy is expected to grow by around 2.5% in 2004, up from 1.6% in 2003. The Canadian plastics industry, which grew by only 3.7% in 2003, but which has on average has grown at 2.84 times the national GDP, is expected to continue this accelerated trend by recording growth of around 8% to 12%.

    The Mexican market is also gaining steam after suffering through a recession and the onslaught of cheap Chinese goods in the U.S. market, two factors that held Mexican growth to a meager 1.3% in 2003. As the U.S. economy rebounds and as Mexico''s more competitive and stable manufacturing industries continue to expand, the Mexican market should finish 2004 with an annual growth rate of around 4%.

    Add to these favorable forecasts the fact that NAFTA has virtually eliminated all trade barriers between these three markets and you create scenario that demands considerable attention from global processors.

    Mexico''s improving market

    U.S. and global processors will want to keep a close eye on Mexico''s increasingly wealthy consumer class, and especially on its increasingly voracious appetite for plastics. In 2003, the Mexican plastics industry continued to outpace the country''s otherwise lackluster economic performance, averaging growth rates well above 5%, a trend expected to accelerate to 7% through 2005. Industry experts see selected plastics industries, including packaging, construction, automotive, food and beverage, and engineered resins, growing at a substantially faster pace.

    Mexico''s domestic plastics manufacturing capabilities continue to fall short of its growing demand, clearly evident by its growing deficit. Currently, Mexican plastics processors must import 80% of the materials they use. The deficit is particularly pronounced for resins, where imports account for 52.3% of current consumption; and the imbalance is even more severe for engineered resins. There are currently no plans to develop domestic production capabilities for engineered materials.

    Experts also have been critical of the country''s unwillingness to reform its inefficient energy sector, still hindered by protection of the state-run oil monopoly, Petroleos Mexicanos (Pemex), and cite it as another cause of unfavorable trade balances.

    Whatever the cause, the Mexican market remains incapable of satisfying its growing domestic demand for plastics, particularly in areas like plastics molds, where the majority of its estimated $500 million/yr demand must be imported.

    To fully understand the implications of this situation, we need to better understand the dynamics of the larger Mexican economy. Much has been written about Mexico''s inability to compete with cheaper Asian/Chinese production, where the average assembly line worker makes $.59/hr compared to Mexico''s average hourly wage of $1.47; this has cost Mexico about 250,000 jobs since the end of 2000. However, what is important for plastics processors to understand is not what jobs have been lost but what industries have been able to survive, and in many cases prosper.

    As the Mexican economy has lost complex labor-intensive industries, especially in textiles, the economy has remained competitive in other sectors that can effectively use advanced technology, a scenario that is all too familiar to our readers from more advanced economies. As such, Mexico''s manufacturing industries that produced precision midrange goods such as electronics and machinery, have been able to hold their numbers since mid-2001, while about half the country''s textile, shoe, and leather factories have closed.

    Highlighting this trend, production figures in the electronics and machinery sectors rose 28.9% from January 2002 to January 2004. A look at the employment figures paints the same picture; in a Business Mexico article published by the American Chamber of Commerce of Mexico, the Center for Mexican Maquila Information''s reported that employment in the 100 largest maquiladoras, which are mostly electronics and auto parts manufacturers, increased by 6.7% during Q1 2004, compared with just a 1.36% increase sector-wide through February.

    All this data implies that the Mexican market is perfectly suited for the more high-tech resins and molds produced in the U.S., Canada, Europe, and Japan.

    Canadian plastics continue to lead

    Similar to Mexico, the Canadian plastics and molding industries are again expected to grow at a significantly faster pace than the general economy in 2004, continuing a 12-year trend. The latest data on shipments of plastics and rubber products show a 13.1% jump from August 2003 to August 2004.

    Shipments of certain plastic products are doing especially well. In particular, sales of plastic plumbing fixtures is expected to continue the impressive double-digit growth rates witnessed in 2003, thanks to a strong housing market. Bob Dugan, chief economist with the Canada Mortgage and Housing Corporation Market Analysis Centre, explains that "low mortgage rates, an expanding labor market, and solid consumer confidence have pushed housing activity higher in 2004. Existing home sales are ahead of last year''s record-setting pace and housing starts are set to reach a 17-year high."

    Processors supplying the housing market or downstream industries like the household appliance market should be aware that as the Bank of Canada raises interest rates (the last hike was in September 2004 when the Bank raised its key policy rate by one-quarter of one percentage point to 2.25%), this impressive growth should ease a bit in 2005. Despite this general softening, experts still forecast that the total Canadian construction industry will see growth rates of around 5% in 2005.

    Feeding off this housing and construction bonanza, shipments for electrical equipment, appliances, and components surged 9.2% from August 2003 to August 2004. Furniture and related products also jumped 4.7% over the same period.

    Investors who establish production in Canada can expect to benefit from Canada''s low core inflation rate of less than 2%, and a Canadian dollar that despite recent advances remains around 18% weaker than its U.S. counterpart. These conditions help ensure lower manufacturing costs when compared to U.S. industries. One report produced by KPMG Canada says that operation costs in the U.S. are about 9% higher than in Canada.

    On the other hand, manufacturers in the U.S. generally have greater access to advanced technology, automated manufacturing systems, and capital investment, which can compensate for this higher production cost. These advantages are particularly important when competing in more developed industries like plastics packaging, where U.S. exports to Canada grew 25% annually from 1999 through 2003.

    Fortunately for the Canadian plastics industry, much of its domestic production has been designed to cost-effectively support domestic niche industries like the automotive, electronic, and telecommunication markets. Because this specialization requires more precision or value-added production methods, the industry has been able to expand sales to comparable U.S. industries while minimizing competition with low-tech Asian imports.

    Agostino von Hassell [email protected], and Mark Bella [email protected], of the Repton Group LLC (New York).

    A new spin on DVD packaging

    Packaging of optical media is a hotly contested, high-volume market. At the K show in late October, two industry leaders took time to announce initiatives for the application.

    It''s no surprise that the digital video disc (DVD) market inspired attention. The DVD has been a breakaway winner in the multibillion-dollar home entertainment industry. More than 60% of U.S. households now own a DVD player, and by 2007 so will more than 67% of European homes, according to industry research group Screen Digest (London).

    The group notes that money spent buying and renting DVDs overtook spending on VHS cassettes in 2002, and by 2008 will account for 93% of spending on video software. DVDs are purchased at much higher rates than videos, making packaging more important to consumers, since they must live with it. DVD packaging is almost exclusively produced in polypropylene (PP).

    New entrants

    Throwing their hat in the ring during the K show were officials at Husky Injection Molding Systems (Bolton, ON), who touted results of Husky''s work with Swiss moldmaker AWM (Muri) and German automation specialist Ilsemann Automation (Bremen).

    Material savings with the new system are significant. The trio have developed a demonstration system for molding eight 63g DVD boxes every six seconds. Many cases currently weigh as much as 75g. At 95% system efficiency, the economics of DVD box molding are improved by 10%, according to Husky officials.

    The firms also claim that mold maintenance and accessibility is improved. Husky''s machine-based stack mold carrier allows for full-stroke servicing. On the mold, water and air connections are easily reached and the number of hoses has been limited. The Husky back-to-back valve gate hot runner system allows for maintenance in the press, eliminating the need to remove the mold.

    During the K show, only the post-molding automation portion of the system was on display. The automation is designed to remove case halves from a mold, assemble them, and then stack them for cooling. After molding, DVD cases must sit for 8 to 10 hours cool entirely and avoid further shrinkage after the DVD is inserted.

    The complete system can be seen in operation during the next year at Husky''s Advanced Manufacturing Center in Bolton. Husky and its partners worked with polyolefins supplier Basell on the project to help it develop machinery and molds that account for regional differences in the grade of PP used for these cases.

    In Europe, a PP grade with a melt flow index of about 40 to 60 typically is used, whereas in North America one with an MFI of 100 is used, explains Anna Sgro, market manager, media, at Husky. In Asia, grades used have much lower MFIs. Husky says it already has placed several systems for these cases in North America and Europe.

    Additives supplier Milliken (Spartanburg, SC) used the event to promote its material for these packages. Milliken is keen to have processors see DVD packaging its way-that is, transparent. Pedro Van Hoecke, global business development director, says the advantage of transparent versus translucent packaging is primarily the improved aesthetic value, a big issue in this marketing-driven environment.

    Further, DVD cases now have an outside plastic sleeve with a paper graphic insert and a separate booklet inside to display more information. Transparent packaging allows for double-sided printing of a single insert, eliminating the need for an outer sleeve (like a CD jewel box).

    In Australia, about 95% of DVD cases are transparent, says Hoecke. He reckons it drops to 30% in Asia and 20% in Europe. In the U.S., transparent PP cases have been limited primarily to DVDs for television series and music.

    Milliken thinks enough of the market''s potential to throw some management muscle into it, recently shifting Michel-Georges Roussel, European marketing manager, to a newly created position focused on the marketing of Milliken''s additives into the optical media packaging market.

    Matthew Defosse [email protected]

    Contact information

    AWM   www.awm.ch
    Basell   www.basell.com
    Husky Injection Molding Systems   www.husky.ca
    Ilsemann Automation   www.ilsemann.com
    Milliken   www.milliken.com

    Copolyester city car putters along Paris byways

    A light-weight, electrically-powered urban two-seat vehicle, Osmose City Car, which is buzzing around the streets of Paris, takes advantage of Kelvx copolyester sheets to provide weight savings with good strength. Designed by Claude Yviquel, the car has a top speed of 49 km/hr and has a driving range of up to 97 km on standard lead-acid batteries.

    The bubble-shaped passenger compartment is made of thermoformed copolyester sheets, extruded by Belgian processor IPB, attached to an aluminum frame. The body features three single-piece copolyester moldings for the hood, side sills, wings, and bumper. It also has sliding doors that retract into the vehicle''s superstructure. A single transparent thermoformed sheet forms the windscreen, roof, and rear window.

    "We evaluated a number of alternative materials such as acrylic and polycarbonate [PC] but the combination of Kelvx properties, durability, and processing cost advantages lead us to select this material," says Yviquel. The copolyester is UV light and chemical resistant to oils and detergents. He says it can be thermoformed at lower temperatures than acrylics and PC. It also exhibits higher impact strength than impact-modified acrylics and thermoforming cycle times are 50% faster, with no predrying required. Sheets can be painted, printed, or vinyl decorated. Eastman Chemical, Kingsport, TN, USA; +1 423-229-6636; www.eastman.com

    RESINS/COMPOUNDS

    Grades provide good adhesion

    For blowmolding, blown film, and thermoforming sheet applications, Plexar tie-layer resins offer improved bonding. Based on anhydride-modified polypropylene, PX 6002 and 6006 have good heat resistance and high clarity. They can be used as tie layers with homo- or copolymer polypropylene grades, nylon, and EVOH. Processability is said to be good, with even layer distribution. High molecular weight grade 6002 is for blowmolding and film while 6006 can be used in deep-draw thermoforming containers and retortable applications. Equistar Chemicals LP, Houston, TX, USA; +1 713- 652-4518; www.equistarchem.com

    ADDITIVES

    ETP impact modifiers

    Impact modifiers with butadiene content exceeding 65% have no melting point and can be mixed with a large number of engineering polymers processed at temperatures of up to 250ºC.

    Abust and Mebust grade impact modifiers are intended for polycarbonate, nylon, and polybutadiene terephthalate. They show good low-temperature impact below -55ºC. These materials have a moisture content of less than .05% and are free flowing. They are intended for applications in industries like construction where high impact strength at sub-zero temperatures is a prerequisite. PolyChem Alloy, Lenoir, NC, USA; +1 828-754-7570; www.polychemalloy.com

    RESINS/COMPOUNDS

    Transparent resin endures high-heat punishment

    Claimed to be the first totally new sulfone-based polymer introduced commercially in the last 15 years, Supradel HTS targets high-temperature applications. This aromatic sulfone polymer has a glass-transition temperature of 265ºC and a heat-deflection temperature of 255ºC, which is reported by the manufacturer to make Supradel HTS the highest heat-resistant transparent thermoplastic commercially available.

    The material combines high heat resistance with dimensional stability to give good strength, stiffness, and dielectric properties over a wide temperature range, says Dough Brademeyer, global business manager for Solvay Advanced Polymers. It is also resistant to hydrolysis by hot water and steam, is inherently inflammable, and has good acid and base resistance.

    Unlike many high-heat-application polyimides, it reportedly can be melt processed using injection molding, extrusion, or thermoforming rather than more expensive solution casting or compression molding, according to Brademeyer.

    Supradel HTS'' creep resistance, good strength, and dimensional stability are also said to open the door to high-temperature injection molding applications that have traditionally been limited to filled, semicrystalline polymers such as glass-filled PEEK, he explains. The material is seen as a candidate for metal replacement in automotive, aerospace, electrical, and electronic applications, as well as some industrial applications. Solvay Advanced Polymers, Alpharetta, GA, USA; +1 770-772-8200; www.solvayadvancedpolymers.com

    RESINS/COMPOUNDS

    Compound meets recycling requirements at nice price

    Vehicle end-of-life recycling rules demand that use of recyclate in parts must increase. The challenge is to do so without compromising mechanical performance. European regulations requiring 80% reuse and recycling by weight of end-of-life vehicles are set to kick in starting January 2006. The rules that require vehicle producers to include recycled material in new cars have put the squeeze on auto parts vendors to come up with parts that offer comparable mechanical specifications as virgin but with recyclate that often falls short of the high standards needed.

    Some processors are finding a way to fulfill the requirements by using a compound blend, Schuladur PCR, on the market since late 2003, which combines virgin polybutadiene-terephthalate (PBT) with less expensive polyester (PET) recyclate from transparent beverage bottles. "There are no major new polymers coming up on the market in the mid term. Innovations and product improvements are coming from fine tuning, optimizing, or process technologies and the modification of additive packages and compounds," says Thomas Halcour, project director at compounder A. Schulman (Kerpen, Germany). He sees this reflected in the development of Schuladur PCR.

    The 30% glass-fiber-reinforced, 50:50 PBT/PET blend can be processed like PBT compounds at mold temperatures from 60ºC to 80ºC. Melt temperature is from 240ºC to 270ºC. The material needs to be predried for up to 4 hours at 120ºC. Impact resistance, performance under dynamic loads, and temperature resistance are at the same levels as virgin PBT compounds, says Halcour. Warpage is better than virgin material. Also molded parts have a better surface finish than virgin PBT. But for many automotive vendors, the real frosting on the cake is that use of Schuladur PCR helps them meet European Union End-of-Life Vehicle Directive EG53 requirements (June 2004 MP/MPI). Best of all for processors, the material is 10% lower in price than virgin PBT with 30% glass fiber, which can run about €3/kg.

    Halcour believes a continuing source of PET should be no problem since in Europe 200,000 tonnes of bottle scrap are produced annually. So far no other competitive product along these lines has come onto the market, he says. Since its introduction, the material has been processed into a number of automotive parts including a rear window wiper motor housing for the Peugeot 206 SW molded by Microplasticos in Portugal for OEM Robert Bosch (Buhl, Germany). This unit, which Halcour says has a cycle time 5 seconds longer than virgin PBT-GE30, received a 2003 SPE Automotive award in the chassis/interior category for innovation.

    German processor BERU (Ludwigsburg, Germany) has switched from virgin PBT to Schuladur PCR to produce its line of distributor plugs because it costs less than virgin PBT; the company also uses the selling point of meeting EU recycling guidelines. "This blend offers a good alternative to virgin because of its chemical resistance, excellent electrical insulation properties, and its resistance to heat in under-the-hood applications," says Wolfgang Schule, quality director at BERU.

    The neutral blend is said to be easy to color, is not susceptible to gels or bubble buildup that could cause electrical resistance and part failure, and requires lower injection pressure for the company''s 16-cavity mold, Schule says. What he would like to see, he says, is a flame retardant grade, which the processor says could help fill further gaps in its molded auto parts offering.

    The SPE award-winning motor housing for the Peugeot 206 SW rear-window wiper made of a blend of glass-filled PBT and recycled PET helps reduce tooling costs with fewer gates since the viscosity and flow are good. In addition to its good chemical resistance, this cover serves not only as a motor housing but also as structural support for the motor itself.

    Robert Colvin [email protected]

    E-Update News Briefs

    Shintech places big bet on PVC plant for U.S.

    Shintech Inc., the U.S. subsidiary of the world''s largest supplier of polyvinyl chloride, Shin-Etsu (Tokyo), plans to build a 600,000-tonne/yr PVC plant at one of its exiting sites near Plaquemine, LA and Freeport, TX. The plant would be back-integrated with new plants for chlorine (500,000 tonnes/yr), caustic soda (550,000 tonnes/yr) and vinyl chloride monomer (VCM; about 750,000 tonnes/yr).

    Plant startup is scheduled for late 2006 with full capacity reached within a year. The plant will boost Shintech''s output by 30%. Shin-Etsu says it may also eventually add ethylene production as part of the new plant, for which about $1 billion is being budgeted. To date, Shintech has not been back-integrated in the U.S. and has bought VCM, a PVC precursor, from Dow Chemical; its contract with Dow remains in place.

    In a statement, Shintech said the investment was based on its expectations for continued growth in PVC demand in the Americas as well as North America''s political stability.

    Honeywell opens new Asia-Pacific HQ

    Honeywell (Morris Township, NJ) has officially opened its new Asia-Pacific headquarters and technology/R&D Center in the Zhang Jiang High-Tech Park in the Pudong New Area of Shanghai, China. Encompassing more than 15,000 sq m (161,500 sq ft) of floor space, the new complex is home for a wide range of Honeywell operations, including its Asia-Pacific corporate headquarters, which is relocating from elsewhere in Shanghai. The facility incorporates a development laboratory for specialty materials.

    Milliken expands its materials lab

    Expanding upon an existing technical support laboratory built in Singapore in 1998, Milliken Chemical, a division of Milliken & Co. (Spartanburg, SC), now has a full-service applications lab, featuring a variety of testing equipment and a Netstal Synergy injection molding machine (see picture) for new material and application development, production trials, troubleshooting, and quality testing.

    Country recognizes Udo Kreyenborg

    On December 10, Germany awarded the Order of Merit of the Federal Republic of Germany to the cofounder of the eponymous firm. Kreyenborg GmbH (Munster, Germany) makes a wide range of auxiliary equipment.

    In 1953, Udo Kreyenborg founded the firm in the basement of his parent''s home with his brother Joachim, now deceased. Born in 1925 in Munster, he is still active in the firm with his son, Jan-Udo, who is also a leader within Germany''s plastics machinery manufacturing association (VDMA, in Frankfurt).

    The award takes into account not only Udo Kreyenborg''s entrepreneurial skills but also his efforts and work across a broad range of areas including his presence since 1984 on the Munster chamber of commerce, his political engagement since 1969, and his membership and work in a number of nonprofit activities.

    Money to be made in airbags

    Automotive suppliers rarely experience times when their market potential nearly doubles in a seven-year period. But analysts at J.D. Power & Assocs. (Troy, MI) are predicting just that. Between 2003 and 2011, North American airbag-module demand should increase by 33 million units, resulting in an additional $1.2 billion in potential revenue for processors.

    That is nearly twice as many airbag modules as are currently being installed in North American vehicles today, says J.D. Power-LMC Automotive Forecasting''s recently published Global Airbag Market Study. More information is available at [email protected].

    At Sterigenics, irradiated PE demand prompts expansion

    Sterigenics International Inc.''s Advanced Applications division expanded its Raprex irradiated polyethylene (PE) production facility in Gaithersburg, MD, as the materials, introduced on a test basis in mid-2003, enter commercial use. "Customer response and demand for Raprex irradiated PE resins has exceeded market expectations and proven to be a valuable addition to the plastics industry," commented Lewis Parks, VP, Sterigenics Advanced Applications.

    Long-chain branching, controlled crosslinking, and controlled oxidation of PE is achieved through the Raprex proprietary process established by Sterigenics, with patent pending. These modifications to the base resins result in the improvement of certain mechanical properties and allow the resins to be used in more demanding applications. The company currently has four grades of Raprex including Raprex 100 for extrusion and pipe applications; Raprex 200 for standard injection molding; Raprex 300 for blown film; and Raprex 400 for coating of steel, copper, and other ethylene based resins. The firm says it is working on other thermoplastics.

    Unlike the irradiation of finished parts, or the addition of chemical crosslinking additives, the Raprex process allows the PE to be fully recyclable due to the control of the irradiation process. The process will allow for lower waste and cost savings while being more environmentally friendly.

    Scholle''s big bags business adds to portfolio

    Injection molder Arena ZME (Hucknall, England) has sold its bagmaking assets to Scholle Corp. (Irvine, CA), a global supplier of bag-in-box packaging with 15 production facilities. The acquisition includes equipment to convert form-fit and pillow-shaped bags for intermediate bulk containers used for transporting liquids.

    Arena supplies Scholle and other converters with caps and spouts and will continue to do so.

    Scholle officials say the purchase lets them expand their big bag business in Europe, where the firm is headquartered in Breda, Netherlands.

    Dec. 7 proves infamous for Amcor''s Jones

    On December 7, the board of packaging supplier Amcor, which includes Amcor PET Packaging, the world''s leading PET preform molder and PET bottle blowmolder, accepted the resignations of Russell Jones, its managing director, as well as Peter Sutton, head of its Australasian corrugated packaging division. Both had become embroiled in a scandal involving potential collusion on cardboard pricing. Four other senior executives had resigned in late September, 2004.

    Amcor is also a European leader in flexible plastics packaging. As of early December, neither plastics division had been implicated in any way. The corrugated operations account for less than 10% of total sales.

    The firm''s stock took a pronounced drop at Jones'' resignation, as he has been credited with growing the Australian firm into a global power. In the last three years it has acquired Germany''s Schmalbach-Lubeca, plus Alcoa''s South American plastics container business.

    E-biz formed for plastics processing machinery sales

    Used machinery dealer Stopol Inc. (Solon, OH) has formed an online marketplace at www.stopolauctions.com for the buying and selling of plastics processing machinery and related assets.

    "www.stopolauctions.com makes buying and selling new and used plastics equipment simple and secure. If you can''t attend one of our auctions, this website will bring the auction to you," according to Neil Kruschke Jr., Stopol CEO, in a statement. Registration at the site is free, with fees charged only for equipment bought or sold on the site.

    When participating in Webcast or 24/7 Reserve auctions, bidders compete online by issuing proxy bids. Registered members submit a maximum proxy bid amount for a particular auction item and the Stopol auction system bids on their behalf, starting with the smallest amount required to take the lead. The system continues bidding until all bids are exhausted and a winner surfaces, or the top maximum bid amount is reached.

    In situations in which two maximum bids are equal, the bid submitted first wins. Buyers pay for their purchases with a company check, money order, certified check, wire transfer, or credit card.

    Siemens'' mobile phone woes could affect molders

    The world''s fourth-largest manufacturer of mobile phones, Germany''s Siemens, has put its money-losing mobile-phone business on notice that by the end of January it will be fixed. Siemens officials cited in German papers say all options are open, from closing the business, to selling it, or putting it through a complete housecleaning. Siemens has about a 7.6% market share for these phones, trailing Nokia, Samsung, and Motorola.

    Word of the problems in Siemen''s mobile-phone business caused German stock analysts to downgrade their rating on the publicly traded molder Balda (Bad Oeynhausen), which counts Siemens'' mobile-phone business among its five customers. Analysts at the Landesbank Baden-Wurttemberg shifted their recommendations for Balda stock from ''Buy'' to `Hold'' on the news.

    Masterbatch group not hot on new fairs

    Germany''s Masterbatch Assn. (Masterbatch Verband, Frankfurt) says it is concerned with the increasing number of plastics fairs, particularly in extrusion, that have popped up this year. "With extraordinary specialization, such small shows will have a tough time surviving against already established venues," says association chairman Walter Buhler from Gabriel-Chemie Deutschland.

    Two new trade fairs in Germany in the first half of the year will focus on the plastics extrusion market, while autumn''s Fakuma show in southern Germany-traditionally focused on injection molders-is adding an additional hall for manufacturers of extrusion equipment.

    Nypro adds paint line

    With an eye towards the automotive and portable electronics market, Nypro Inc. (Clinton, MA) has added a painting system housed in a 10,000-sq-ft white room at its 88,000-sq-ft Atlanta operation. The addition features three painting booths, three six-axis articulating robots, two paint kitchens, three infrared ovens, one convection oven, and it handles flat-pallet painting used in automotive and the spindle process applied for cell phones and PDAs.

    In addition, a 166-ton HEPA filter system and a screening-mask-removal area pull the operation in line with ISO 9000 and related quality and environmental standards. The multimillion-dollar automated paint line joins injection molding, insert molding, laser etching, pad printing, and assembly in Atlanta.

    Precise shifts production from its NJ facility

    Closing its Swedesboro, NJ facility, Precise Technology Inc. (North Versailles, PA) will shift production to its other locations in Delaware, Pennsylvania, and Ohio in accordance to its dedicated manufacturing model. The New Jersey plant was part of its Customer Aligned Production, where it designs plants to produce specific products for customers on a multiyear basis.

    Tool component manufacturer expands

    Hommer Tool & Mfg. Inc. (Arlington Heights, IL) has added 11,000 sq ft to its plant, nearly doubling it to 23,500 sq ft, to accommodate machinery acquired in the purchase of Romar Mold Inc. in June 2004. The custom tooling component manufacturer for injection molding and die-casting added the machinery to meet current and projected demand.

    Technology discovered at K

    Strolling around the exhibit halls we noted these technology tidbits, ranging from ever-increasing DVD storage, to a new nanomolding process and a fuel cell advance.

    Holographic data storage targets terabyte territory

    Next-generation high-capacity DVDs

    boasting capacities of up to 50 GB are set to debut in late 2005 (see November MP/MPI) but don''t expect storage volumes to stop increasing there. Bayer MaterialScience (Leverkusen, Germany) is working with partners to develop recording media that employ holographic techniques to realize capacities of 100 GB and more. The long-term road map could envision future-generation discs with capacities in the terabyte territory (1024 GB).

    Eckard Foltin, head of Bayer''s Creative Center in Leverkusen, says, "Initial applications will include backup for programming at television broadcasters [currently stored on tape], and mass markets such as computer data storage would eventually be developed."

    Bayer is working on two concepts for holographic data storage in what would most likely be a 3-mm-thick disc format: layer technology and molecular level storage techniques. In the first, data would be stored over multiple layers throughout the disc. The second would entail using "photo-addressable polymers," which are plastics whose molecular structures can be altered reversibly using lasers.

    Work on high-capacity storiage is also underway at the Imperial College London in England, the University of Neuchâtel in Switzerland, and Aristotle University of Thessaloniki in Greece. Researchers there has conjured a means of accommodating 1 TB of data on an optical disk the size of a DVD. The method records multiple bits of information in a single pit rather than one. Information is encoded in the angle of a pit, and the method can distinguish among 332 different angles. The storage method could be ready for practical application within 10 years, according to the researchers.

    Nanomolding technology bonds aluminum to plastics

    The latest processing development at Japanese processor Taisei Plas (Tokyo) is a wet bonding process for joining plastics such as PBT or PPS to aluminum. In the company''s Nano-Molding Technology (NMT), aluminum sheets are first pressed into their final shape and then treated with a series of chemicals (alkali, acid, and a proprietary solution) to remove rust and grease and to create tiny "dimples" with diameters of 20 to 30 nm on the surface. The aluminum components are then rinsed and dried.

    Upon insert molding, the injected resin penetrates these dimples and a very strong bond is thereby formed between the aluminum and plastic. Glass fiber or carbon fiber is compounded into the PBT and PPS to match their linear expansion coefficients with aluminum. In demonstrations at K 2004 in October, Taisei Plas demonstrated that the PBT or PPS material fails before the plastic-aluminum bond does.

    "In Japan, the first commercial application is in a Sony remote control unit," says Taisei Plas president Masanori Naritomi. Hybrid PPS/aluminum parts made using NMT are also currently being tested for use in automobile engine room applications. The required performance here is 3000 heat cycles in 1 hour at -55ºC followed by 5 minutes at 150ºC. Other target applications include plasma display housings, mobile electronic device casings, and auto electronic control unit (ECU) housings.

    Extensive plastics use slashes fuel cell cost

    Ticona (Kelsterbach, Germany) has unveiled a prototype plastics-based hydrogen fuel cell that, if mass-produced at a level of 20,000 2-kW units, would cost only €790kW (stack cost). The cost of the prototype itself was €3000/kW, which is also significantly less than existing fuel cells that extensively employ stainless steel components that typically cost €10,000/kW.

    Fuel cell technology should be available for commercial-scale production by 2010 at the latest; the EU has set a target of reducing stack production costs to e500/kW by then. "With &eur;790/kW, we are already very close to meeting the target," says Ticona President Lyndon Cole.

    The heart of the fuel cell is comprised of bipolar plates made from graphite-filled Vectra liquid crystal polymer (the graphite loading is around 85%), manufactured by SGL Carbon. These can either be stamped from rolls or injection molded. End plates and connection parts are molded from Fortron PPS.

    Ticona is working with German start-up Pemeas, based in Frankfurt, to incorporate the latter''s polybenzimidazole (PBI) membrane material in commercial fuel cells. This will enable operation at higher temperatures on the order of 120ºC to 200ºC.

    Carsten Henschel, director of communications at Pemeas, says, "Higher operating temperaturs enable simpler fuel cell design." For example, low-temperature cells require complex water management systems to humidify membranes, whereas PBI does noit require humidification. PBI membranes are more tolerant of CO contaminants in hydrogen reformed from natural gas, so gas purification is also simplified. Stainless steel-based fuel cells cannot operate at such high temperatures due to corrosion issues.

    "The first volume commercial applications for fuel cells will most likely be portable devices [such as mobile phones]," says Thomas Hensel, VP of marketing at Ticona. Usage should also spread rapidly to residential power and the automotive sector.

    Stephen Moore [email protected]

    Contact information

    Bayer MaterialScience   www.bayermaterialscience.com
    Taisei Plas   www.taiseiplas.com
    Ticona   www.ticona.com
    Pemeas   www.pemeas.com

    How P&G buys plastics

    Back to the future

    Big companies are putting much more effort and firepower into their supply management in an effort to boost corporate results. You will be affected. There''s a lesson to be learned.

    There are dramatic changestaking place in how major companies buy plastic products.

    They''re building leverage to reduce costs; they''re partnering with suppliers who can offer key services such as design; and they''re deploying sophisticated Web-based electronic procurement tools that drive down cycle times and costs. And no surprise here: They''re going global looking for low-cost sources.

    One of the leaders is Procter & Gamble, the giant consumer products company that spends close to $3 billion a year on injection molded, blowmolded, and other types of packaging for products that range from Tide and Downey to cosmetics and health care items.

    Chief buyer Richard A. Hughes has the ear of CEO A.G. Lafley because of the growing impact of external costs on corporate profitability and the increasing inability of consumer products'' manufacturers to increase prices. Reason: Continued focus by consumers on product innovation and value at what P&G calls the "First Moment of Truth" (when a consumer chooses its product from the shelf).

    The trend affects all parts of the plastics supply chain from polymer producers to processors. Expect the impact to increase significantly in the next two to three years as more Global 1000 manufacturers boost the role of supply-side management.

    What it means: Customers will demand annual cost reductions of 3% to 10%. The upside: The most efficient, highest-quality suppliers are in line to get a bigger share of business from the world''s biggest spenders. You''ll get an opportunity to determine bundling options and other parameters, such as shipment times, to optimize your own production. To be a player, you''ll have to dramatically improve your own supply-side management and be prepared to offer global reach.

    Is this all about electronic reverse auctions? Not at all, and if you think so, you will miss the boat on developments that could significantly boost your business or leave you on the corporate trash pile.

    Here''s what''s happening

    At most major companies, the business units are the kings. They have complete P&L responsibility and full authority from purchasing to distribution. Purchasing in that environment has often been sublimated under operations and given the tactical job of implementing contracts and making sure that products are delivered on time.

    That''s changing for a raft of reasons. One, Western companies traditionally were highly integrated, making their own injection molded parts or castings. Today, the typical Western company buys 50% to 70% of its total costs of goods sold.

    Two, companies are reorganizing globally and recognize the value of smarter buying. From 2001 to 2003, many companies moved from regional to global business units. Companies also began to build global purchasing leverage by identifying all of the like products they buy: personal computers, office supplies, steel, plastics, whatever.

    It''s a massive undertaking because no central database of purchased products previously existed, and almost no one even used common identification systems internally. P&G, for example, at one time had 20 different specifications for water. Even major consumer products companies such as General Mills could not agree on definitions for products such as boxes or film. So, identifying corporate spending for seemingly simple products such as corrugated containers or standard fasteners required an army of people.

    Adding to the problem has been the complete absence of effort to specify products according to common types used across the enterprise. For instance, a company such as John Deere had a plethora of polypropylene specifications and a multitude of suppliers. A cross-functional team at Deere determined that more than 90% of the company''s PP requirements could be consolidated in three grades, with focus on one or two suppliers.

    At the same time, resin companies tried to build margins and market share via constant and incremental development of polymer grades. Each enhancement in impact strength and melt flow was added to an increasingly complex slate of ABS, polycarbonate, or polyacetal.

    No one cared much about the impact on anyone''s supply chains. But when telecommunications and electronics markets crashed in 2001, companies such as Lucent Technologies were awash in billions of dollars of highly specified inventory that could not be re-used or even re-sold at anything approaching purchased prices.

    Born again

    At that time, many companies got purchasing religion. Lucent, for example, established a powerful operating unit called Supply Networks in which purchasing, manufacturing, and design were aligned under a president, Jose Mejia. Purchasing was not treated like a discrete function; it became an integrated strategic function. Supply chain goals were drilled into the minds of design engineers. Inventories at Lucent plunged. A turnaround at Motorola was built on a similar tactic under the leadership of Theresa Metty, who learned her supply-side skills at IBM.

    Around the same time, information technology companies developed software that allowed aggregation of spend items through use of artificial intelligence and other semi-automated methods. Some claim success rates of 90% or better. They often use standard classifications systems, such as United Nations-supported product numbering.

    Smart CEOs are now telling their staffs to develop spend-leverage of optimized pools. P&G, for example, has cross-business unit commodity teams in more than eight major areas. There are three in packaging: injection molding, blowmolding, and fiber packaging. Other groups are chemical raw materials; third-party manufacturing; absorbents, substrates, and components; edible ingredients; and marketing. Like most companies, P&G does not force business units to participate in the spend pools. Instead, they create such advantages in cost, service, and quality that the business units want to participate.

    As a result, suppliers are offered a much larger potential share of business. For example, the P&G spend pool for injection molded services is now about $800 million. It''s headed by Dr. Attila A. Tamer, a German national who recently moved to P&G''s corporate base in Cincinnati, OH. In addition to leading the injection molding spend pool team, Tamer is also director of purchases in P&G''s Global Beauty Care business. All spend pool leaders are also senior purchasing managers within businesses units at P&G.

    "The team leaders are chosen partly based on the size of their buy for that product, and also on the complexity of the buy," comments Hughes. The Global Beauty Care business places high demands for quality and innovation on its molding suppliers. Suppliers are required to participate in design.

    One other important part of the process is that corporate giants began speaking with one voice when addressing the supply base. Previously, technical professionals and purchasing professionals discussed issues separately with suppliers, often with conflicting goals. That changed at P&G when technology and purchasing reorganized along global lines about two years ago.

    "We have a totally seamless R&D and purchasing organization with one agenda: the best value to the company, to our customers," comments Ghobad Rahrooh, director of R&D for the Global Baby Care business. Teams are organized by material group, such as plastics, with each co-led by a technical and purchasing, or commercial, person. "They have joint responsibility for the material globally across the board," adds Rahrooh. "The Material Leadership Team is a single point of accountability across the globe. This is a tremendous contrast to what we did when each region had a contact person. We were getting a worse deal then because suppliers were playing purchasing and R&D people against each other."

    David Zint, the North American purchasing manager for resins and associate director of packaging in Global Fabric and Health Care business unit, adds: "Typically, a buyer will talk to an R&D person several times a week if not several times a day." Buyers are deeply involved in new product development.

    There are two related goals here: supplier development and specifications management. Procter & Gamble''s chief technology officer about 18 months ago started pushing for greater use of suppliers to advance technical development. "Previously it was very erratic," comments Hughes. "The CTO explained that we don''t have enough R&D people in the world to drive the level of innovation that we need."

    In many cases, suppliers'' technical staff work directly at P&G sites, and some P&G staff work at supplier sites. Technical problems, including those related to polymers, are even published on a P&G website for suppliers, seeking input. Terms of how each party benefits are spelled out in detail in Master Collaboration Agreements.

    The other major initiative in best-in-class companies such as P&G, is a drive to manage specifications more effectively. "We have about 300,000 to 400,000 specifications at Procter & Gamble," says Dennis Begg, associate director for innovation in Corporate Purchases. "We have begun to think about how we can rationalize our spend pools through specifications." A corporate team was launched to determine the critical steps and work processes, with the initial focus on packaging, paper, and plastic. "The idea here is how can we move from proprietary P&G specs to broader industry standard performance-based specs. This is a collaborative effort with our suppliers." Previously, P&G had more than 15 global specifications for low-density polyethylene (LDPE) shrink wrap. Now it has three.

    Once spend pools are built and specifications optimized, huge savings can be earned through new Internet-based procurement tools. The newest and hottest idea is called combinatorial expressive bidding. P&G uses a technology developed by Pittsburgh-based CombineNet, which uses mathematical algorithms to let suppliers bid on a huge chunk of business and then offer variations that allow savings for both parties. Typically, purchasing departments organize bids into predetermined lots and bundles based on their needs. A supplier might, for instance, say, "Give me at least 80% of lot X and at least 20% of lot Y and I can offer you savings of 30%." A molder, for example. may have significant unused capacity on 500-ton presses and wants to use its assets more efficiently. So it pushes the work in that direction with a huge benefit for the buyer. The Internet makes the process immediate and gives other suppliers the opportunity to offer similar deals. P&G saved more than $120 million with the new tool in the 2003 fiscal year. In the fiscal year that ended last June, the savings total more than doubled. The tool is used for about one-tenth of P&G''s total spend of $28 billion.

    Three major plastics events have been held using the expressive bidding tool from CombineNet: two for labels and one for closures. In some cases the events help build enterprise spend pools where they previously did not exist, says Tamer. The tool could be useful in materials of a global and complex nature like resins, says Sergio Hernandez, who is the Global Resins Group Manager. P&G''s direct buy is about $750 million for high-density polyethylene and polypropylene, as well as low-density polyethylene and linear low and other resins. In many cases resins are bought directly by the processor. Hughes says that the purchase is made by the party that can get the best terms. The expressive bidding tool is so powerful that it could tip the balance more to corporate buying.

    So far, however, P&G has not been anxious to re-negotiate plastics contracts because most deals were struck more than a year ago when markets were softer. The company has no comment on how its negotiating strategy is changing in the midst of rapid resin price escalation this year. Nor would it comment on strategies to mitigate risk against volatile price swings. Hernandez did say that P&G prefers long-term relationships and buys very little on spot markets.

    "There is no specific strategy on producers versus distributors, adds David Zint. "We use a mix of producers and distributors depending on who we have the relationships with and who has the best value," says Zint. The global P&G resin buying team has members in the United States, Venezuela, Japan, and Europe.

    Overseas

    As a result of these trends, P&G is using fewer suppliers than it did even three years ago, and is using more suppliers from low-cost countries, such as China. About three years ago, P&G had some 55 molding suppliers in North America. Now it has about 30. Global presence is a plus, but not mandatory for molders, which has traditionally been a regional and highly fragmented business. P&G focuses on a special class of molders who are specialists in packaging. Procter & Gamble was one of the leaders in using Chinese sources, starting with "Project Goldmine" in the early 1990s. P&G''s presence in China was driven by marketing of its consumer products in China.

    "Almost every important supplier has some type of presence in China today," comments Alfredo (Jet) Antonio, director of innovation in Corporate Purchases and former head of Chinese buying for P&G. Molded brushes for a new Crest toothbrush are all made in China. A Chinese molder even helped design a new replaceable head for the Spin Brush. Tamer says the Chinese molders supply very consistent quality and probably will play a bigger role in the company''s plans. P&G now has 100 buyers based in China and about a dozen in India.

    Molds are bought through a specialized purchasing team based in Switzerland. Established three years ago, the team cut mold development leadtimes by 30% while also achieving a significant quality improvement. P&G focuses on about 10 to 15 moldmakers around the world. Most are specialists in high-cavitation (24, 36, or 48 cavities). Further reduction of mold development time remains a major goal. One of the largest factors in a new product rollout is the mold development time. The cost is also an issue. Another mold team based in Cincinnati is scouting new technologies that could reduce cost and time.

    "We have an active program between R&D and the mold buying group to determine the right mold fabrication technology," comments Hughes. "Can we get lower-cost molds from places like India and China?"

    Another technology effort affecting plastics is research on polymer compounds that can offer more strength, even when light-weighted for heavy containers, such as detergent bottles. There are also a lot of neat developments in holographic films and other decorating capabilities for labels," says Hughes.

    P&G is not alone in efforts to better manage its spend leverage and its supply base. It''s among about three dozen companies that are leaders. The rest will soon follow with improved strategic sourcing, electronic sourcing, and specifications management.

    This will certainly be one of the biggest trends facing the plastics industry in the next two or three years, in addition to energy economics.

    P&G''s top plastics buyers

    SERGIO HERNANDEZ,

    Group Manager, global resins purchasing

    Responsbility: Supervises $150 million direct resin buy, primarily HDPE, polypropylene, and linear and linear low-density polyethylenes from 20-plus suppliers.

    Strategies: Drive technology innovation through long-term relationships with strategic partners. Coordinate buy through business unit-based resin purchasing managers located in Europe, Japan, Venezuela, and the U.S. Work with central buying experts to develop innovative tools such as expressive bidding.

    Education: Industrial Engineer-Universidad Iberoamericana (IBERO), Mexico City; MBA-Instituto Tecnologico y de Estudios Superiores de Monterrey (ITESM)

    DR. ATTILA A. TAMER,

    Group Manager, injection molding purchases

    Responsibility: Coordinate buying of all injection molded products and services. Total buy for injection and blowmolded and other packaging at P&G is close to $3 billion. Tamer has direct responsibility for the injection molded buy in the Global Beauty Care business.

    Strategy: Focus on long-term partners who can provide design services in addition to required quality and value. Employ innovative market-making technologies such as combinatorial expressive bidding. P&G wants to develop as much spend leverage across business units as possible while also developing sources in low-cost countries such as China.

    Education: PhD, University of Goettingen, Germany

    Doug Smock [email protected]

    Collaboration yields life-saving cones

    Acquiring potable water is a daily struggle for about 20% of humanity. This story details how a group of German companies is trying to make a difference with a (pretty outstanding) thermoformed part.

    Watercone is the name of the simple, unbreakable product patented by Munich-based industrial designer Stephan Augustin. Each is essentially a portable solar still that empowers people to generate their own drinking water. Under arid conditions, each unit has a five- to seven-year usable life span and can supply from 1 to 1.7 liters of potable water a day.

    Watercones are formed from sheets of polycarbonate (PC) supplied by Bayer (Leverkusen, Germany). The principle is simple: Sunlight shining through the transparent PC walls of a cone evaporates "clean" water out of brackish, contaminated, or salt water that a user has poured into a black PC pan under the cone. The black color of the pan facilitates absorption of the sun''s rays. A Watercone can also be placed on still waters, such as a puddle or calm pond, with no need for the tray. Evaporated water condenses on the inner walls of a Watercone, runs down its sides and collects in a trough at the base. Inverting a cone allows water to be poured from a screw cap at its center.

    The principle is simple; the design and thermoforming aspects are very complex. Augustin took his prototype to toolmaker and short-run processor Zeltec Engineering, based in Cologne, Germany, which developed the necessary tooling. "The tool is something else," says Hans Dieter Holsken, technical director at Wisser Verpackungen, the industrial packaging thermoformer chosen to process the parts. Holsken reveals no details.

    Mirco Richardson, a former Zeltec employee but now marketing director at Disc-O-Bed GmbH (Lorrach), the firm with exclusive manufacturing and marketing rights for the product, says of the thermoforming process used to form the edges, "It''s like a magician''s trick."

    Of special note are the part''s edges at the base, which form a peripheral trough on the inside rim for collecting the potable water. A second, small downward trough prevents salty or dirty water from dripping back into the pure condensed water when it''s poured out. Bayer supplies a special Makrolon sheet with extremely thick (about 105-µm before forming) UV protection on the outside to prevent yellowing for five to seven years.

    Disc-O-Bed markets equipment for use in harsh conditions, such as areas hit by natural disasters. Richardson is the point man for the Watercone, making the case for it at non-governmental organizations (NGOs) such as Unicef and the Red Cross. The work can be frustrating, and he identifies three stumbling blocks: the frustratingly intricate bureaucracy of NGOs, the perceived high cost per Watercone (€99 boxed, with pan), and the relatively low yield per unit. "But these are `perceived'' blocks," he insists. He notes that mechanical or electrically powered desalinating equipment is often complex and, once broken, usually stays that way.

    "We are pushing the cost/performance aspects of the Watercone" to NGOs, says Richardson. Assuming a reliable seawater supply, over five years the cost per liter of potable water produced by the Watercone drops from €.27/liter the first year to €.05/liter after five years. Regarding yields, he says larger units would require special sheet and forming equipment, driving costs higher. Also, droplets gain a critical mass as they trickle down a Watercone''s inner walls; any longer a trip, and the drops would fall back into the non-potable water.

    Beyond product

    Richardson says the project has brought out the best in others, including Bayer executives, such as Global Brand Manager Hans-Dieter Reifenrad, "who were willing to look beyond the business aspects to see the humanistic side of this." The €99/unit pricing ensures that profits will be very slim, but all parties insist they are trying to make a positive difference in peoples'' lives. Holsken says, "It''s not yet something we make very often. We hope that feedback from the field will prove positive. If it does, then our orders book will fill up."

    Following testing this year in India and Yemen, Richardson''s faith in the Watercone''s value remains strong. "It changes the lives of the people who have used it, overnight," he says.

    Matthew Defosse [email protected]

    Contact information

    Augustin Product Development   www.augustin.biz
    Bayer MaterialsScience   www.bayer.com
    Disc-O-Bed    www.discobed.de
    Wisser Verpackungen GmbH   www.wisser-verpackungen.de
    Zeltec Engineering   www.zeltec.de

    Auckland, New Zealand with Murray Fenton

    Globalization has come a long way in the past 35 years, and Murray Fenton has proved adept at growing his injection molding business in parallel.

    When Fenton started his backyard custom molding business in Auckland, New Zealand in 1970, he had to build his own injection machine as the country''s then-draconian foreign exchange controls precluded importing one. The upside was that markets were sealed from outside competition, and although production runs often numbered as little as 1000, business was readily available to mold the likes of car radio fascias and TV components.

    Since then, New Zealand has radically liberalized and deregulated its domestic market and Fenton''s firm, Adept Ltd., has proved its ability to adapt. Case in point: its transformation from a customer molder into a turnkey solutions provider with full-fledged design house, tooling shop, and production capabilities.

    "Come the 1990s, it was already apparent that custom molding was never going to generate the margins for growth," recalls Fenton. "We quickly realized the need to establish comprehensive product design and tooling capabilities in order to leverage our expertise with the injection molding process."

    This all-encompassing strategy is already bearing fruit. With high-end design programs, machine tools, and highly qualified personnel in place, Adept was able, for example, to take a 2-D conceptual drawing for a taxi EFTPOS terminal enclosure and holder to volume production in 12 weeks for local client Cadmus. Adept has also worked for clients further afield on low-volume products, including a device for a U.S. firm that plugs into computers to program special chips.

    While such low-volume work forms an integral part of Adept''s operations, "If anything, we don''t want to proactively grow our molding shop but rather concentrate more on product design, tooling, and pre-production,'' says Fenton. "Once production starts to ramp up, the product could be transferred to Asia."

    Adept hopes this strategy will allow it to globalize further. "A key strength we have here is that we speak English and have the same business culture," says Fenton. "New Zealand''s time zone is also in sync with the U.S. and costs are much lower."

    New Zealand is an agricultural powerhouse and a business that has proved a cash cow for Adept is specialist clip, plug, and rod products for the meat industry. The business started off years ago as a custom job for a local abattoir, but only really took off after Adept redesigned the products and Fenton himself hit the road in Australia to develop the market. "After a lot of spilled blood and guts, we now have 95% of the Australian market and a strong position in the U.S.," says Fenton. Production is 85 million parts annually.

    Despite a dominant global share in the meat market, Fenton nevertheless feels vulnerable to "me-too" products and price pressures, hence the decision to diversify into medical. "The medical sector has major regulatory and cost entry barriers, but once you surmount these you find yourself in a good position," he says.

    The first step was to acquire a grommet business from a local pharmaceutical player in March 2004. Adept also subcontracts for NASDAQ-listed Fisher & Paykel Healthcare.

    Adept also invested in a 2000-sq-ft cleanroom facility for cleaning and packaging medical devices that was recently inaugurated by New Zealand Prime Minister Helen Clark.

    "We plan to use this facility to develop an implantable business," says Fenton. Adept has already worked with a leading Auckland-based heart surgeon to develop an injection-moldable "variable resistor," a device that regulates blood flow in patients after open-heart surgery. And the firm has also joined forces with a local dentist to engineer a device to facilitate realistic composite tooth-colored restorations. Yet another success story to smile about for Fenton and his team at Adept.

    Stephen Moore [email protected]