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Speaking of business operations

For decades the business of plastics has been about resins, applications, and the technology to turn pellets into products. If you could do that—and do it well—the business took care of itself. We live in a different world now.

Oh sure, the technology is still important, but more and more the front office is becoming the critical factor to operating a successful plastics business. Take the example of a large plastics processing business that seemingly had all of its equipment running, and product streaming out the back door, but went under anyway. Just having a busy production floor is no guarantee of profits or success.

As the plastics processing industry faced ever-increased competition, it became more obvious that how one conducts the business operations, which customers one conducts business with, and who is keeping an eye on the bottom line would make the difference between success or failure.

Consolidation is an ongoing event in the plastics processing industry. Large companies continue to seek out and purchase other large, well-run operations; for example, Berry Plastics Corp. and its recent acquisition of Landis. Holding companies, investment firms, and other financial groups are still searching for those processors that offer excellent capabilities, serve unique niches in creative ways, and add value to the firm and the industry as a whole. But these are difficult to find, and according to investment bankers who follow the industry, there is currently more money than opportunity to buy.

Unfortunately, there are far too many processors trying to do business the way they''ve always done it, losing not only the battle but the war as well. What''s needed is a new attitude about the business of processing. That might mean added staff in the front office who can answer the big questions: What is my cost-to-manufacture? What is my cost of sales? What is my value-add? What do my customers value about doing business with me?

I''ve found that many times processors are so focused on their backdoor operations that they fail to find out what the customer truly wants; or better yet, what they will pay for. Too often they add capabilities or implement systems without asking, "What is the value of this to both my customers'' and my business?"

Strategic marketing and sales planning is a downfall of many processors. At a time when competitive pressures have been greatest—and show no signs of letting up—this is one area in which a processor can''t afford to skimp.

Interestingly, when times are tough many processors fire the salesperson first. Sales, and in particular the marketing component, has generally been an expendable item in the grand scheme of business for many processors. It was noted to me recently by a plastics industry recruitment professional that demand for salespeople is up significantly. Perhaps the economic conditions of these past few years have helped many processors, even the smaller ones, recognize the value of having a good sales plan.

Building a strong business is about building value: Value for customers; value for employees; value for owners and investors. That doesn''t happen without strategic planning: knowing your business, from the front door to the back dock; knowing your customers; and knowing your competition.

Being affiliated with the plastics industry since 1982 has given me a pretty big perspective on this business. I''ve watched the changes: the ebbs and flows of work to Mexico, Taiwan, China, and some of it back again. Yet, I still see people longing for the good old days when any part was a good part and work came through the front door without effort.

My upcoming articles in Modern Plastics will speak to business operations, which have too long been neglected by too many. I''ll look at successful plastics processors and how they got that way. I''ll ask successful executives how they ensure a stable bottom line and address competitiveness. And I''ll impart their wisdom, along with my own 22-year perspective, to help plastics processing managers, owners, and executives become all they are capable of, in spite of the challenges. I look forward to it.

TAGS: Business
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