Joining Forces for Shop Survival
Get tax credits, share best practices and pool resources by joining a collaborative effort. It can be key to your shop’s longevity.
With tough times in the moldmaking industry, companies have to look for innovative strategies and methods if they want to survive and continue to thrive. Forming and/or joining a coalition can be a way to strengthen your shop’s position in the marketplace—offering a multitude of benefits like tax credit (if your shop qualifies), increased buying power, information and resource sharing between companies, and reduced operating costs.
While it is not an easy undertaking, it is achievable. This article will detail how two coalitions—the United Tooling Coalition (UTC) and the Eastern Michigan Tool & Die Collaborative (EMTD)—formed and began to work together when a majority of the automotive work in Michigan started to go overseas. Although the UTC has an independent facilitator that oversees operations and the EMTD’s activities are solely run by its members—both have realized success.
A Little History
Approximately five years ago a group of moldmakers in the Michigan area—frustrated with the amount of work that the Big Three automakers were sending overseas—got together and began strategizing on ways to keep the work into the United States. Realizing they needed formal guidance, they turned to the state of Michigan and the American Body Coalition (ABC) was born. Although that group disbanded, the UTC formed three years ago as a result of the original coalition’s efforts. The UTC is comprised of 16 shops (see UTC Members Sidebar) that banded together primarily to better compete in a global marketplace. The EMTD is comprised of 12 companies (see EMTD Members Sidebar) that also formed to increase competitiveness and pool resources.
Both groups received assistance at the state and local levels in the form of funding and consulting services; and each member company had to go through a qualification process before it could join its respective coalition. The steps each company had to take are outlined below.
The first step to forming a coalition is to seek state assistance. There are many resources available at the state level. President and CEO Jay Baron of Ann Arbor, MI-based Center for Automotive Research (CAR)—a nonprofit organization that focuses on a variety of important trends and changes related to the automobile industry and society at the international, federal, state and local levels—recommends seeking a consultant’s assistance to locate these resources if you can’t devote the time yourself. Baron facilitates coalition communications and serves as a liaison between the coalition and potential customers. CAR was awarded the head consulting job by the Michigan Economic Development Corporation (MEDC)—a group that promotes smart economic growth by developing strategies and providing services to create and retain good jobs and a high quality of life.
According to EMTD member Pat Williams, president of Lunar Industries, Inc.—a provider of lay-up and compression molds and progressive dies—companies have to meet certain qualifications before they can join the coalition. “Potential members got together at a meeting held by the Michigan Manufacturer’s Association,” she recalls. “We were told about a new program being offered by the state to encourage tooling companies to collaborate with each other. Prior to being accepted into the program, each company had to make a presentation to their local taxing authority/community requesting the approval of the tax savings proposed by the state. The companies that received their local communities’ approvals joined together to tentatively form the EMTD.”
Each potential EMTD member had to complete an application (including details on how they were going to collaborate with each other) to the state for approval of the collaborative, Williams adds. “State approval for the EMTD was received in December of 2005. We had begun meeting monthly as a group around April of 2005.”
John Burke, president of EMTD member Tri-Way Mold & Engineering—a prototype and production injection mold builder—adds that different trade groups operating in the state of Michigan also provided forums to aid in forming a collaborative; and that the Michigan Manufacturers Association (MMA) provided a consultant and legal team to lead potential members through he approval process.
For the UTC, Baron points out that each potential member had to embrace lean implementation. “They had to open up their shops to consultants from the Michigan Manufacturing Technology Center (MMTC)—another not-for-profit organization that supports small businesses in a number of areas, including lean implementation,” he says. “It took a year to complete this, and the members had to pay the organization.”
Make a Plan
Once the coalition members are in place, the next step is to draft by-laws or an operating agreement, elect officers and establish committees. Baron notes one of the first items on the UTC’s agenda was to conduct a survey to see what the primary topics of interest were. “We chose the top four initiatives and divided them into four subgroups,” Baron explains. “Coalition efficiencies (e.g. cost cutting, pooling healthcare plans, group supply purchasing for discounts, workload balancing); Lean (e.g. shop visits between members to observe best practices); Marketing/Sales (e.g. cultivating leads); and Quoting (e.g. standardizing quotes and quoting accurately).”
EMTD President Maggie Guaresimo, also president of Eurotech Industries—a builder of specialty tooling—notes that once the coalition’s Operating Agreement (see EMTD Operating Agreement Sidebar below) was established, three officers (president, secretary and treasurer) were elected that oversee the day-to-day operations of the collaborative. “We also have three committees—Sales and Marketing, Program Management, and Tooling and Quality Standards. Each committee has a committee chair and all members of the collaborative are required to participate on a committee. Each committee is responsible for setting annual goals that will help the companies in our collaborative to grow and making sure that we as a group reach those goals. The officer positions and committee chair positions are rotated every two years.” Each group meets face-to-face on a regular basis, with conference calls in between meetings. Committees and sub-committees also meet separately.
Members of both groups agree that it is important to get the word out. Both organizations have established Web sites to list member companies, services and capabilities; and the EMTD just completed a marketing plan. “The marketing committee plans on developing a brochure that can be mailed out or handed out at a trade show,” notes EMTD member Lori Gustavus, VP Administration of Mac-Mold Base—a mold base builder and provider of gundrilling and machining services. “We also intend on attending and displaying our product line at different shows.”
It is almost unanimous that the two reasons these companies joined a coalition are: (1) tax benefits and (2) to reach new customers. “Tri-Way Mold & Engineering joined the collaborative partly to obtain the financial benefits of the tax relief, but also to broaden our customer base and benefit from the technology and capability of the other members,” Burke affirms. “We hope to increase our buying power and through the Web site be able to quote on and be part of large projects we would not have been able to do by ourselves.”
Mac-Mold Base’s Gustavus expands on Burke’s thoughts. “Initially, we joined the collaborative for the tax savings,” she says. “But, after joining forces we have realized the importance of working together, developing new customers and vendors, and presenting our companies as a much larger organization from which we can all benefit. We recognize the need for growth and joining forces in this struggling economy was the key to developing our products in different markets.”
Richard Johnson, president of EMTD member Contour Tool & Machine—a provider of EDM services and manufacturer of cutting tools, drills, reamers and punches—adds that after one year the tax breaks have kicked in and he looks forward to realizing additional benefits like reduced costs and joint purchasing power.
Information sharing is another wonderful benefit of joining a collaborative effort. According to Lee DeClaire, president of EMTD member PDF Manufacturing Inc.—a small tool and die shop and wire EDM service provider—the greatest benefit to his company is being able to talk with the other members. “It is great to get 12 different inputs on any given topic,” he notes. “Some companies may have more experience with something you are just getting started with, and that can take a lot of the guesswork out—thus making us more profitable sooner.”
Hand-in-hand with more profit is the increased buying power and the capability for a coalition to take on bigger projects. “Together, we have the capability to take on large projects and divide the operations among those in the collaborative best suited,” Burke notes. “With the increased efficiency the collaborative should be able to offer customers high quality at reasonable cost and timing.
Dave Martin, president of UTC member Accu-Mold, Inc.—a full-service moldmaking shop—also weighs in on the job sharing benefit. “We balance our workload primarily through specialized processes that one shop has and all others use the service,” he explains. “An example is laser welding that is now done by three UTC shops in various geographies. This saves other members by keeping coalition investment down on a machine that would otherwise only be used at 5 percent or less capacity.”
Reduced operating costs helped Eurotech achieve ISO training. “Because of our participation in the collaborative, we went through the ISO training program with other collaborative members in 2006 and we are looking forward to getting our certification in the near future,” Guaresimo comments. “As a collaborative, we were able to go through the training as a larger group—which ended up costing us much less.”
Additionally, Martin notes coalition members working together can better manage workload fluctuations and keep investment in equipment focused on core needs. “We are seeing many customers who are finding that the offshore savings on tooling with the extra expense of project managers, flights, accommodations, and the recent increase in the exchange rates is keeping more tooling here!” Martin stresses. “It’s working!”
Although everyone agrees that belonging to a coalition has a myriad of benefits, they also acknowledge that issues are bound to arise. Here are a few potential concerns and how to address them.
Use state and local resources whenever possible for consulting and advising. Establish committees and subgroups to be responsible for specific areas, and hold regular meetings to ensure everyone is contributing to the coalition.
Again, use whatever resources are at your disposal. Establish yearly dues to support group expenses.
Once the coalition is formed, decide by vote what kinds of standards/certification your coalition will require. EMTD required ISO compliance. Similarly, the UTC deemed all member companies must embrace lean methodologies.
As with any venture, it also is important to recognize the limitations. Certainly, aligning with your competitors can seem a hard pill to swallow. David Muir, president of UTC member Paragon Die & Engineering—a producer of injection molds, compression molds and other specialty tools—acknowledges that initially, the most difficult thing about joining the collation was working with his competitors. “We wanted to give it a try,” Muir says. “Over time, we have put forth a united front to solve some of the challenges we all face. We continue to redefine ourselves. Like anything, it is what you put into it.”
PDF Manufacturing’s DeClaire notes it is not for everyone. “It took a year and a half for us to develop enough trust to be able to talk about hot topics with our competitors,” he recalls. “But, now we open up our shops, walk through each other’s shops and have open communications—sharing anything from detailed tax information to competitive comparisons and advantages.”
Williams of Lunar Industries remembers having similar misgivings. “Our first few meetings were somewhat awkward as some of us were direct competitors,” she says. “Over time and with formal operating agreements, we have learned to trust each other, share information and outsource work within the collaborative.”
Steve Artz, Quality Manager of EMTD member RTD Manufacturing—a full-service production and prototype machining shop, adds that you have to walk before you run. “Be open minded, willing to take a chance, and put you and your company out there,” he urges. “Trust is the hardest part.”
Additional issues are member companies that are located far from each other, companies that don’t play fair, and companies that are members of the coalition that don’t actively participate in furthering each coalition’s goals. Keeping open lines of communication to address these concerns is important. Accu-Mold’s Martin provides an example, noting that offshore tooling alliances have been a sore spot with the UTC. “Many member shops have offshore tooling alliances, but some are opposed to this,” he states. “So we decided that each shop will make that decision and there will be no group involvement as a whole.”
So, what’s in store for these two coalitions? Common goals are strengthening their market presences through the Internet, trade publications and trade shows, which will in turn attract new customers. The EMTD also hopes to add new members over the next year.
Guaresimo of Eurotech sums up her feeling on collaborating quite nicely. “We have found the collaborative to be a great group to work with,” she notes. “It is very helpful for small business owners to work with other small business owners within their industry to share best practices, discuss different options for tooling, insurance, etc., and obtain better pricing for things like training. I believe many manufacturers look at collaboration and think ‘I can’t possibly sit down with a potential competitor and work together to make my business better.’ But, with the globalization of today’s economy we have to join forces to make sure that we are doing all that we can to stay competitive and keep manufacturing here in the U.S.”
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