When [PM&A Editor] Merle Snyder invited me to write this column, he said, ?I believe equipment manufacturers are entitled to make a profit.? I could almost not believe what I heard. It sounded like a voice from the distant past.
To put my remarks in perspective, let me identify the company and the industry that I serve. SIG Kautex is a manufacturer of industrial blowmolding machines. It is headquartered in Bonn, Germany, with offices in the United States and elsewhere around the world. The company focuses on certain market niches for industrial blowmolding machines and is a leading supplier for coextrusion plastic fuel tank machines as well as 3-D blowmolding equipment for complex tubular shapes with practically no flash.
A look at today?s machinery and equipment manufacturing sector can be very sobering. Since the year 2000, machinery and equipment manufacturers have seen a continuous, substantial decline of their U.S. markets, which stabilized somewhat in 2003. The market volume for industrial blowmolding machines declined from approximately $65 million in 2000 to only $24 million in 2002 and recovered slightly to $27 million in 2003 due to revived activity in automotive blowmolding.
Most plastics-machinery business projections for the near-term future reflect a cautious optimism. Few are convinced that significant overall growth in the U.S. is likely in the short term. Once-successful leaders of our industry are struggling to survive. Those that are surviving are significantly different companies than they were five years ago.
The decreasing market for plastics machinery and equipment in general has forced manufacturers to adjust. Manufacturers have closed facilities, laid off large percentages of their work force, eliminated middle management levels, trimmed product portfolios, developed external sources for components and assemblies?sometimes in lower labor cost regions?and taken other steps as well.
Having downsized operations in accordance with expectations for a decrease in future business, we nevertheless depend on a core of competent and experienced employees to maintain our knowledge base and competitive position. Outsourcing this critical ingredient of our manufacturing operation could potentially drive prices down a little, but it could also threaten the quality of our product and is therefore not an acceptable alternative for many of us.
A satisfied customer is the single most important element leading to repeat equipment business. Satisfied customers often remain loyal to their suppliers.
At least that used to be true.
In the current business environment, it seems that this old principle has only limited validity. Buyers are driven to save money for their employers, and as a result, they tend to look only at equipment prices. Price versus performance and the availability of important support services (which processors increasingly depend on) appear to be left out of the equation when making a purchase decision.
Nowadays, a customer will remind the equipment manufacturer that it must work as a ?partner,? that it must be competitive, that it must eliminate all nonvalue-added cost, and that the business relationship must be a ?win-win? situation. Unfortunately, as most equipment suppliers know all too well from experience, there is seldom more than one ?winner.? Having said this, we certainly understand what is driving our customers. They are also under pressure from their customers to offer the lowest possible price and the highest level of performance.
At the end of the day, meeting or exceeding their customer?s expectations will provide them with the opportunity to secure more business, which in turn may mean additional business for us. We certainly recognize this critical relationship. We acknowledge that working with our customers? drive towards continuous cost improvements is also a recipe for a more successful equipment business.
We also know that current new equipment business is less frequently the result of increased production requirements. More often it develops because jobs are lost by one processor and awarded to another, more competitive, processor. In order to compete more effectively, processors have slimmed down, too. Their resources are much more limited than in the past. To make up for the missing capabilities and capacities, they turn to the equipment manufacturers to provide more and faster services than ever before.
Every so often a new name shows up in the arena of equipment suppliers, trying to draw the attention of processors through attractive price and payment arrangements. No question, competition is healthy and reminds us to stay ahead of the game. However, buyers, beware of promises that sound too good to be true. Ask the critical questions before you make a decision. Find out what is behind the attractive pricing. Does the supplier have a substantial parts inventory on hand that you can order from 24 hours every day and is it perhaps willing to consign an inventory to your facility? Are service technicians stationed within driving distance from your facility and do they answer their cell phones around the clock? Where do you have to send your employees for training? Does the supplier operate a lab with equipment to sample your mold or run preproduction parts prior to the delivery of your new machine? Will a process engineer be available to assist you with processing problems and optimizing a new mold? The availability of these services is important to many of you.
I would like to appeal to buyers who may be inclined to undervalue the savings of many years of reliable equipment performance. Buyers need to know that the highest uptime availability is the result of many years of accumulated expertise and of continuous development. The processor should be reasonable in taking into account the equipment supplier?s cost for these services. In summary, I would like to ask for fairness when comparing your existing equipment supplier with a new entry offering only minimum backup but an attractive price. Industrial blowmolding is a highly sophisticated area of plastics processing, and there are others as well.
If you buy on price alone, most often you and your new supplier are heading for a costly aftermath. Nobody will be a winner. Consider the long-term implications of your purchase. Your decision will be easier, and the outcome will be better for everyone involved.
SIG Kautex Inc.
North Branch, NJ