Going global is not a new idea for U.S. injection molders. Many have been doing it as they attempt to develop new markets or take advantage of low labor costs overseas. But these generally have been large companies with virtually unlimited resources and the ability to afford the best accountants, lawyers, and other professional resources to smooth the way.
Over the last decade, however, this trend has moved down the supply chain. As many OEMs establish and grow their offshore businesses, it is often incumbent upon their suppliers to move with them, especially if the parts or components they supply are technical in nature. Automotive firms are particularly demanding in wanting their parts suppliers close by.
What appears to have been happening over the last decade, and which we will believe will continue, is that U.S. injection molders will more and more evolve into a "headquarters" economy. Molders will become primarily technology providers or exporters as well as marketing firms, often importing their own products. We see a growing number of injection molders performing their own product development, designing, refining manufacturing steps for maximum efficiency, and performing product marketing. The foreign partner will do the actual molding along with subassembly, decorating, and other post-molding requirements.
What Are Partnerships?
In very simple terms, an international partnership is where a U.S. molder works with a foreign molder, setting up or enhancing molding operations abroad. In most cases, the U.S. molder supplies expertise, technical know-how, clients, and often investment capital. The local molder runs the operation, providing labor and machinery.
Is it simple? No. It's actually quite complex. There are probably more examples of failed partnerships than successful ones, although for years we have heard success stories of U.S. molders that established plants in Thailand, Ireland, the Czech Republic, China, Mexico, Malaysia, and Hungary.
Apart from OEM and customer demand, the most important reason injection molders have moved offshore is to cut labor costs and in some cases find a labor pool. Modern molding and assembly machines along with system monitoring software have reduced the amount of labor required in a molding shop and altered the types of skills needed to run a molding plant.
A molder faced with producing high-volume parts in a commodity resin often finds that the economics of producing the parts is more favorable offshore than in the U.S. Unemployment in the U.S. has been so low for periods over the last decade that many molders have found it difficult getting employees willing to work in their shops.
Examples of partnerships are plentiful. Probably the most successful molder in terms of partnerships is Nypro Inc. Today that firm has partnership operations in 12 countries, accounting for about one-fourth of the firm's revenue.
Recently Nypro entered into a partnership with Sealaska Corp., an Alaskan firm formed to help Native American businesses, to operate a joint venture in Guadalajara, Mexico. Nypro purchased a share of TriQuest SA de CV, a molding operation that had been wholly owned by Sealaska. Under the agreement, Nypro will operate the facility. Because of Sealaska's status as a for-profit corporation formed under the federal Alaska Native Claims Settlement Act, Nypro expects to gain access to markets that do business with minority-owned businesses.
Recently, American Plastic Molding Corp. (Scottsburg, IN), set up a partnership with a Chinese molding and toolmaking firm. This is a prime example of a small firm going the partnership route: The company has less than $10 million in sales.
How To Do It?
If you are even considering a move offshore, we recommend that you take one important step right away. Don't try to do it yourself. Create a team made up of members of your company who can share the work and bring manufacturing, quality, financial, and organizational experience to the team. The due-diligence process alone can be an arduous task and requires care in its execution.
Once the team has decided that it needs offshore capacity, there are two key questions that need to be answered very carefully. The first, of course, is where. The second is how.
The "where" question is usually answered more easily. A company that wishes to move operations to a foreign country for the reasons outlined previously has only to look at where the customer is headed or go where the labor is cheap.
The second question is a bit more difficult. There are obviously two options: establish a greenfield plant or either acquire or merge with another company in the foreign land.
Without a doubt, the latter is easier. An ideal scenario would include finding a partner whose business you can help grow and who at the same time has an established operation and understands the culture, legal and regulatory requirements, the language, and all of the other barriers that a business faces in a new environment. Many foreign business owners are anxious to partner with an American firm because they understand that can mean an infusion of new technology or an opportunity to open up new markets.
The financial benefits can be considerable. If you find a solid partner, you can split startup costs and often take better advantage of local subsidies and tax incentives. Some countries such as Malaysia, China, India, and even many former Eastern Bloc countries reserve subsidies for locally owned firms, with the goal of boosting domestic industry.
Finding the Right Partner
Locating a potential partner in many regions of the world has gotten a lot easier, too. The Web and the profusion of international trade shows are good sources of leads. In addition, there are numerous brokers who can help find the right firm in the right locale.
Your end customerâbe it a car company or a computer assemblerâcan often point you in the right direction. And resin and machinery suppliers are superb sources; they know the local markets and quality standards of local injection molding firms. There are several examples of machinery suppliers joining a partnership as a third party, supplying the injection machines.
Another avenue is through foreign governments. Economic policy makers from Singapore, Malaysia, Italy, and Poland, among others, frequently send trade missions to the U.S. Why? Often the express purpose is not to sell goods but to find companies eager to invest in their home countries. For instance, in 2000 a delegation of businesses from Singapore visited New Hampshire to establish strategic alliances, joint ventures, distributorships, contract and license agreements, and technology exchange partnerships. The New Hampshire International Trade Resource Center organized the meetings. Now, two years later, eight partnerships were formed, two of them in injection molded electronic components in Singapore.
When looking for a partner, ask yourself these questions:
Solid legal work and due diligence is the essential next step after you locate a possible partner and open negotiations. It is the lack of these that often causes a partnership to fail. Here are some other important tips:
The Repton Group, New York, NY
Agostino von Hassell