The View From the Top
Industry veterans share their views on global competition, keeping up with technology, the war and where the industry is heading.
In such turbulent times it is heartening to know that some mold shops not only are surviving, but they also are thriving. To find out how, MoldMaking Technology magazine consulted some of the most prosperous shops in North America, and while many of the head honchos were hesitant to give away the secrets to their collective successes, some of them shared their insights on a number of hot topics in the industry - including staying current with technological advances, how to combat foreign competition, what they see in the industry's future and what keeps their businesses hopping.
A number of moldmakers welcome competition and the resulting challenges it brings to the table. Richard Myers, president of M2M International Ltd. (Wallaceburg, Ontario) - a builder of plastic injection molds, die cast dies and trim dies for the automotive and consumer products industries - believes that all competition is good. "It has to be fair and I think sometimes that everybody needs to make sure they are comparing apples and apples," Myers notes. "We are in a business that has us produce the best possible product for the best possible price for our customers and that requires us to look at all opportunities - whether they be in Mexico or the Far East - or how we can do things cheaper internally. I liken it to sports: if you don't have the number one team, people don't come to see you. Change is good."
David Brown, CEO and president of StackTeck Systems (Brampton, Ontario) - a moldmaker specializing in thin-wall packaging, caps and closures, and ultraprecision medical and technical molds - notes that global competition is a fact of life. "StackTeck has been competing globally since the early 1980s and this exposure has made us aware that there are good moldmakers throughout the world," he states, "This awareness has pushed us out of our comfort zone - causing us to look at the true value-added services our customers want, focusing on them and making sure that we stay in the lead. It is a simple choice for us. Global competition is not going away so we need to utilize innovative thinking and products to not only stay in the game but also win it."
Echoing similar sentiments is Gordon Young, COO of Oldcastle, Ontario-based Reko International Group, Inc. - a designer and manufacturer of plastic injection molds, compression molds and dies. "The North American markets will push to the lowest total cost alternative," he says. "The difficult aspect is that the global competitors are not standing on the same footing the North American suppliers are competing from. China, Australia and Korea provide subsidies, which give a further advantage for exporting, which, when added to the extremely low labor costs, is a major concern. There is a need for some equalization of costs via a tariff when there is a considerable disadvantage caused by government subsidies that drive a noncompetitive situation."
Again, industry veteran Greg Balint, president and CEO of Hallmark Technologies, Inc. (Windsor, Ontario) - a plastic injection molder for the consumer goods, industrial products, automotive and traffic signage industries - expresses parallel thoughts. "Significant overcapacity exists in the global tooling market today, forcing prices to continue downward," Balint states. "OEM performance and pressure for better cash flow has prompted them to downward load financing requirements to the Tier 1 and subsequently the moldmakers and other suppliers. Worldwide competition affects the way we approach our company's strategic and technological advancements. With fierce global competition, we will continue to advance our services and capabilities in order to expand market share. We also will find ways to cut costs and improve our own cash flow. We will never be satisfied with our operational performance of the day. It must always get better through innovative improvements to control systems, machining methods, engineering concepts and volume throughput. The competition and need to improve our services to our customers leads us to continuous improvement."
According to Bill Muldoon, president of NyproMold, Inc. (Clinton, MA) - a manufacturer of precision injection molds for the consumer/industrial, electronics/ telecommunications and healthcare industries - global competition has been steadily increasing in the last ten years. "I see it as a fact of life and believe it will continue to escalate in the future," he says. "When planning your business strategy and focus, this is a major area of consideration."
For Geoff O'Brien, president of Proper Mold & Engineering (Warren, MI) - a manufacturer of plastic injection molds for the fastener and automotive industries - global competition is not as serious a challenge as our neighbor to the North is. In fact, a large percentage of the top moldmaking companies are based in Canada. "The Canadian government does a better job creating an infrastructure to develop additional talent for moldmakers - they have their own university called Sinclair College that has a moldmaking program in Windsor, and they have a very strong trade association," O'Brien notes. "They are more of a tightly knit organization than we are. The exchange rate also is an advantage for them, and they import into the U.S. $340 million per year." Robert Schad, president and CEO of Husky Injection Molding Systems, Ltd. (Bolton, Ontario) - a supplier of injection molding equipment and services for the plastics industry, including machines, PET preform molds, hot runners and robots - adds his opinion to the fray to battle this competition. "Ongoing capital investment in modern technology and equipment is crucial," he advises. "The best equipment - coupled with automation - will allow facilities to be competitive, no matter where they are located. Specialization is extremely important. Moldmakers need to develop specific expertise in a chosen market or application. Focus on what you do well and then capitalize on it in markets where this is valued. This is the key to sustainability.
"Finally, companies need to ensure they have global reach," Schad continues. "Markets have no borders. You need to ensure that your product and your visibility in your chosen market(s) is global."
While the major battles of the war with Iraq have ended, there is no doubt that economic repercussions will be felt for a long time in many markets. As for its direct impact on the moldmaking industry, at this point it's anyone's guess. M2M International's Myers notes the slowdown is "unfortunate," but stresses the need to move forward. "We support and understand what is going on." NyproMold's Muldoon adds, "Our quoting activity level has been good but it appears many companies are delaying the release of new programs in the last several months."
Reko's Young is in agreement. "The war has some indirect effect," he notes, "mainly in delayed business launches by the OEMs, which is reducing the amount of awarded backlog. These delays are necessitating reductions in workforce and scaling back business plans for growth as the new business is just not available. It further compounds margins as a number of already weak competitors are forced to quote at a loss just to maintain a backlog of business."
Balint of Hallmark weighs in with a different perspective. "The Canadian political position has led to some negative thoughts with respect to the Canadian interaction with the American economy," he says. "We have not been directly affected at this time. There has been, however, a slight hesitation on mold starts during this time.
According to Brown of StackTeck, "We are obviously concerned about the uncertainty that a war brings. However, to date, we have not experienced a change in our business flow as a direct result."
Proper Mold's business is another that hasn't been impacted by the war. "Since we are automotive I think it makes it a little easier for us," O'Brien says. "The product development side is quite long, where in consumer products it may only be three to six weeks. So it's a completely different animal."
One very important way to stay competitive and keep your company in the black is to take a lesson from these top companies and continually invest in technology. "StackTeck puts a heavy emphasis on the development of new technology as it relates to tooling solutions that provide our customers with a true competitive edge," notes Brown. "This technology does not always take the form of a mold. We will continue to add to our portfolio of value-added productivity solutions for our customers. These products will be supported by the necessary investments in the proper capital in all areas."
Automation and speed are key at NyproMold. "Reducing engineering time with software developments and robotizing more machining processes are the goals for the coming year," notes Muldoon. Adds Husky's Schad, "We continue to invest significantly in specialized, automated equipment to perform critical operations. In fact, we have recently expanded our Vermont facility and will focus plate manufacturing there. We have a strong commitment to R&D and innovation."
Reko will invest in the next generation of mold design software and cutter path development in a joint effort with EDS (UG System), Young says. "This software will upgrade existing technology on tool design and provide improved cost and time to market by utilizing Reko's already in place 'lean manufacturing of tooling' process with enhanced computer design capability," he notes. Hallmark will continue to invest in high-speed machining, five-axis technology and more solid modeling product development capacities, according to Balint.
Over at Proper Mold, fine-tuning the equipment it has invested in is top priority. "We invest in new technology all of the time; we try to be on the leading edge in that respect," O'Brien says. "We spent so much money in the last year on technology - five-axis machining, high-speed cutting, robots - we are now trying to get 24/7 operation out of our machinery."
M2M will move into rapid prototyping with an added emphasis on product design and program management with the opening of a Tech Center in the Detroit area, Myers says. "The Tech Center will have English-, German- and Japanese-speaking engineers all at one site," he says. "We are hoping that the location will make it easier for our customers to access us and let us help them solve their problems. We also see a tremendous amount of growth in the Alabama area and we've had a proposal on the table for about three months to build a repair shop down there, which will probably be a twelve-man shop. It will help our customers who work for Nissan, Mercedes and General Motors."
Growing, Growing, or Gone?
The consensus amongst the company leaders is that the industry is still facing uncertain times - at least in the near future. Although optimism abounds, the majority acknowledges that it will be indeed be a challenge to thrive in such a challenging economic climate, but they are more than ready to rise to the occasion. Muldoon of NyproMold says, "I'd be happy and surprised to see growth in the U.S. and Canada. Worldwide moldmaking capacity is probably growing faster than demand and will continue to make for a tough marketplace."
According to Young of Reko, "Given the current economic course of events and the OEM's continued delays in launching new products, the market outlook for many tool shops and special machining companies is extremely bleak," he says. "Reko is well positioned to grow despite the marketplace, mainly because of the investment in lean manufacturing and our diversified customer base." Brown of StackTeck predicts "tentative, moderate growth."
Hallmark's Balint points out a few positives. "The number of automotive vehicle launches over the next few years continues to be growing," he comments. "As the OEMs attempt to expand their own market shares worldwide, intense, very quick styling changes continue to be prevalent. This equates to expanded tooling requirements and much shorter tooling cycles. We are hopeful that the quicker tooling cycles will equate to faster PPAP (production part approval process) dates and result in quicker payment. However, we are not holding our breath.
"For many companies the investment required to maintain competitiveness is not available and the customers are pressuring that investment down the food chain," Balint continues. "Thus we see a number of mold companies going out of business or selling at a reduced rate and value."
"I think as far as sales dollars it [the market] will be the same," says Proper Mold's O'Brien. "The problem is that since technology and equipment keep getting better, shops will become more efficient and the result will be excess capacity," he explains. "So, even if all of the shops stay the same, there will be a lot more capacity out there just because of the advances in equipment. So, there has to be a shakeout where some of the weaker moldmakers will go out of business. The industry has to get right-sized."
M2M's Myers has similar thoughts. "Unfortunately, I think we are going to see more competitiveness - a continued drive to offer cheaper prices," he notes. "Those people that haven't invested in technology are going to fall farther behind. I think there will be some work in those shops that are poised to be competitive and have made adjustments to keep costs down. We all need to look at survival."
Husky's Schad offers these words of advice. "The key to overcoming these challenging times and to long-term success lies in automation, specialization and ensuring global reach for your products and services," he says. "Companies must integrate automated solutions into their operations. It's the only way to stay globally competitive."
Pearls of Wisdom
While it may be difficult to remain optimistic during difficult times, there are many ways your business can continue to grow, thrive and survive. The keys are keeping an open mind, investing in new technology and finding a niche. StackTeck's Brown advises to "look outside your normal business environment and get out of your comfort zone."
Passively waiting for the market to improve is a sure dead end, says Muldoon of NyproMold. "Worldwide moldmaking skills are improving quickly," he asserts. "More and more it's becoming what can you do for me today and are you competitive with the global market for like services and molds. Aggressively pursuing continuous improvement in technical strengths and operations is a must."
Adding to these thoughts is Reko's Young. "Those who believe the mold market will come back have not been watching the marketplace or our customers," he says. "If you do not have a lean manufacturing strategy and a technology plan that is in line with the industry, you will not be in business. If you cannot assume an integrator role, you should look at what you do really well and focus on that core capability."
O'Brien of Proper Mold emphasizes the importance of keeping an open mind. "Look for opportunities to stay in business and grow your business - whether it be partnering with Asia or collaborating with other companies to sell larger programs," he urges. "You have to invest in sales and have people out there penetrating the marketplace. There are still opportunities out there."
Hallmark's Balint relies on the following formula for success. "Being a larger tooling company and recently privatizing out of the public environment [Toronto Stock Exchange], we understand the need to insure our receivables, have strict policies with respect to purchase orders, and further download financing requirements to our own suppliers," he says. "We have a policy to competitively quote all material items as well as outsourcing requirements."
Husky's Schad cuts to the chase. "Automate or die," he states. "I said this back in 1969, and it is even more relevant today. The future lies in highly automated operations. You also need to develop specific expertise in a chosen market or application. Ensuring global reach and visibility also is very important. Build global relationships! For smaller operations, this might be done via local companies [customers] with global reach. In the early days of our PET molds, we kept following our large customers like Coke and Pepsi and providing them with local support. Today, this local support infrastructure - our Technical Centers - is the backbone of our marketing efforts."
Myers of M2M recalls some difficult times of years past to help the industry look toward a hopefully brighter future. "I think a lot of moldmakers remember back to the early '70s and '80s when there were slow periods, but there's a whole generation who hasn't experienced it," he states. "It's a lot harder for them to fathom what's really happening. But the senior people will make those adjustments that need to be made and move forward. I don't think there's going to be a quick turnaround by any means, but with every challenge comes opportunity. Moldmakers are a knowledgeable and aggressive group and I have faith in us."
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