Plastics Pipeline

Activity-Based Cost Accounting Reaps Benefits for Team 1 Plastics

Posted by Brenda Eubank on Tue. September 6, 2016

bad_hand.jpgEighteen years ago, Team 1 Plastics, a plastic injection molding company for the automotive industry, began using the Activity-Based Cost (ABC) Accounting model for quoting new jobs. The company is now in the fifth generation of the model, having updated it last year to reflect current systems and processes, and it remains one of the competitive advantages for Team 1 Plastics, according to Craig Carrel, President.

“It takes a lot of work to develop an ABC quote model, but once you have it set up, it pays huge dividends. It makes your quoting process easier and very consistent. You do not have to make any guesses or estimates in anything. You quote the part as you believe it will run. The only variable you adjust is your profit level. When negotiating with your customers to win parts, you know clearly, like Kenny Rodgers, ‘When to Walk Away’ from a bid because a part will not be profitable for you. You let your competitors win those unprofitable parts.”

The ABC model is different from traditional Cost Accounting because it calculates Indirect costs (overhead) differently, said John Daly, management consultant and author of Pricing for Profitability. Both accounting methods calculate direct material and direct labor the same, but the difference is how overhead is calculated. “Traditional costing methods fail in many pricing situations because they arbitrarily allocate the indirect costs. Today, indirect costs such as rent, depreciation, utilities, and supervision are often a significant portion of the company’s cost structure … Activity-based costing  provides the tools to understand indirect costs.”

With the ABC model, Daly said that a company identifies “buckets of costs, like supervisory cost, quality inspection costs, even things you do in the office, such as invoicing the customer and trying to figure out what it costs per invoice.”

Team 1 Plastics began by examining the cost to launch a new product. This included quoting, engineering, layout, PPAP, selling costs, and other activities that occur before the company produces the first saleable unit of a product. They discovered that the launch costs in 1998 typically ranged from $5,000 to $15,000. One of the advantages of ABC model, Daly said, is that it “helps us differentiate between high-volume and low-volume. For a high volume product, launch costs per piece may be trivial. However, for a low volume product, launch costs may be the most significant element of cost.”

Knowing your company’s buckets of costs, said Daly, gives you a competitive advantage over your company. “Traditional [cost accounting] thinks in terms in three categories of cost: material, labor and overhead. If you were to take time to learn five categories of cost, such as launch costs and set up costs, you would have a competitive advantage over a company that used only the three categories. If you took time to learn seven categories, you would have a competitive advantage over a company that had five. If you understood 12, you have a competitive advantage over a company that knows seven. But the law of diminishing returns applies. Once you’ve looked at about twelve categories of costs for your company’s major activities, then you’ve probably looked at over 95% of your company’s cost structure. So a company that looked at 20 categories would not have a competitive advantage over a company that looked at 12.”

According to Carrel, Team 1 Plastics has identified 12 categories of costs. “Our first model went from three categories to five categories. We’ve evolved, working with John Daly, and we’re up to about 12 variables. The key is to really identify your main cost drivers.”

Carrel admitted that he was skeptical at first when Team 1 Plastics begin using the ABC model. “In particular, I was worried that many of the parts quoted would be close to our breakeven point, and we would have to then negotiate around a loss to win any new work. In reality, our pricing is either competitive with a profit margin or we are 20+% high. Since we have a deep understanding of our costs we do not believe we are that far off (20+%) and we again let our competitors win those unprofitable parts.  It also has allowed us to have a deep understanding of all of our costs and be able to discuss with customers what areas are driving the pricing, such as launch, set up, material handling, etc. When customers have questions about our quotes and why certain areas are higher, we can have a very detailed conversation of why this is the case.”

Carrel said that Team 1 often gets questions about why their quotes look very different from their competitors. “Even though we have been using ABC for over 15 years, our competition is not. The vast majority of them use the traditional costing model of machine/labor rates with an overhead and profit markup. This is simpler for our customers to understand and makes our quotes look very different than our competitors which leads to lots of conversations explaining the differences. This is especially true with newer customers until they get a better understanding of our ABC quoting process.”

Using the ABC model does take a major commitment said Carrel. “It has to be updated every three to five years, because you are constantly improving and changing your systems and processes and the ABC model has to reflect these changes. The key is to have a high level of confidence that your ABC model is accurately reflecting your costs and what it takes to produce each part so that you can provide the customer with the most accurate and competitive quote every time.“

For Team 1 Plastics, the commitment to the ABC model is worth the effort. “I truly believe it has helped our profitability by winning parts that are profitable while avoiding parts that have no chance to be profitable and will be loss leaders."

Comparing True Cost of Injection Molds – Foreign vs. Domestic

Posted by Brenda Eubank on Tue. August 30, 2016

As a plastics injection molding company, why wouldn’t you buy your molds for the lowest possible cost? Instead of paying $100,000 for molding, why wouldn’t you just pay $40,000? At first glance, that would seem to be a “no brainer.” But remember the old adage, “You get what you pay for.”

Molds.jpgIt doesn’t take much online research to find cautions about the “true cost” of obtaining an overseas low-cost mold. Most of the articles center around molds built in China. “Product quality risks, supply chain risks, payments risks, and communication risks” is how The Rodon Group categorizes the “Hidden Risks of Offshore Sourcing” on its website.

A Canadian molder, Unique Tool and Gauge, which has chosen to work with Chinese mold makers, provides its perspective in the article, “What’s the True Cost of Buying A ‘Low-Cost’ Mold Overseas?” in Plastics Technology. Darcy King, President and CEO, shared challenges that they have with China. “To source a mold in China … involves managing and dealing with the potential compromises that are an everyday fact of life in the Chinese market. First, our experience suggests that mold design takes longer in China than it does here. When we source a mold in China, we always need to revise mold designs, sometimes several times until it’s correct. Second, while mold construction is significantly faster in the Chinese shops we work with, we just about always find that, upon inspection, we need at least some rework to be done … In both of these areas—design and build—we can trace the additional time needed due to manpower issues and practices.”

Acknowledging the challenges of buying in China, one of the Chinese mold makers, Aco Mold, offers “Buying Tips in China” on its website. “Many foreign injection mold buyers faced buying problems in China, different business culture and language make things complicated and sometime risky. This article will provide a basic guide for you to understand and identify the Chinese injection mold companies.”

Dave Seedorf, Engineering Manager for Team 1 Plastics, a plastic injection molding company for the automotive industry, shared his perspective about molds from China. He said that although Team 1 has never had tooling built in China, they have had a lot of Chinese tooling in the plant. “All of it has been transfer tooling obtained from our customers. We’ve had horrible experiences with it. It has cost us a lot of money by wasting a lot of effort, resources, and time.” In contrast, Seedorf acknowledged that he has talked with people in the plastics industry whose experience is totally different. “There’s a guy I know whose company builds all their tooling in China, and they absolutely love it.”

Seedorf added that low-cost overseas molds is not a new phenomenon. “There’s always a better, cheaper place. Back in the 1990’s, it was Japan. Then, it was China … then India … and now Mexico. It’s sort of like the whales – they travel around in the ocean to find out where the new, bigger, and better school of small fish are. For example, years ago, a mold built in Korea used to be to 30-40% cheaper in cost compared to domestic. I think now, it is very close to the same cost. In fact, sometimes Korea is more expensive than local U.S. toolmakers because Korea’s cost of living has gone up, their economy is stronger, and they are not as desperate for business.”

Seedorf said that the main factors which Team 1 Plastics uses to determine where to source a mold are costs, timing, and previous experience with a company. As Seedorf says, “The big elephant in the room is always cost – that’s going to be the driver from now to the end of time.” Timing is often driven by the customer. “If the customer wants first samples sooner than we can get them overseas, then the decision is domestic.” The final factor is previous experience with a company. “If we built a similar product in Korea, for example, and it was a good relationship and worked out well, then maybe that’s a good match for us. If a previous job did not go well sourced overseas, then we’re going to keep it in the U.S.” Speaking of relationships, Seedorf emphasized that he believes building relationships with your suppliers is vital. In fact, he sees it as a key to a business’ success.

Team 1 Plastics has learned that among different countries, you have different strengths. Seedorf said that what Korea continues to do well is timing. “They can turn around things quickly.” But there are still challenges. “When the mold leaves Korea, we want it to be 100%; so all the trials and the adjustments take place in Korea. When it arrives at our plant, it’s already been trued. However, when we put it on our machines, we haven’t yet established a process or set up automation, such as an end of arm tool, which creates delays for us. We lose some of the time saved in trying to get things automated and prepared for production here at Team 1.”

And, Team 1 Plastics has learned that among different countries, you have different quality. For example, Team 1 Plastics partners with Georges Pernoud, a French toolmaker, which has a very sophisticated operation that is highly engineered. Seedorf said, “They are very expensive, but they can really do some complex things. It depends on what you are looking for. When people say low-cost country (LCC), you’re probably talking about China where I think the tool quality and integrity is really hampered.”

Another factor to consider, Seedorf said, is the complexity and size of the part being produced. “If you are producing small, complex, precision, and tight-tolerance injection molded plastics parts, then LCC tooling is probably not ideal because of the criticality of the molds and parts. However, if the parts being produced are large – for example, door panels, bumpers, or dashboards, then the LCC tooling is more attractive due to the large size of the molds. The tolerances of these parts and molds themselves are usually more forgiving.”

Seedorf said that Team 1 Plastics is currently considering a company in India. “We recently had a meeting with a gentleman who has a source in India that he uses for Engineering tasks, like design work –not necessarily for mold building. I asked him about his knowledge and experience of the actual Indian tool builders. His thought was that they do a good job machining but not on the finishing touches – they lack the finesse.” Seedorf then described what he meant. “Mold building is not just simply cutting steel and putting it together, and you’ve got a great tool. There’s kind of a finesse to it – you’ve got to fit things, you’ve got to polish things, you’ve got to knock edges off, you’ve got to round corners – things like that. What really makes the difference between a machinist and a mold builder is the fitting, polishing, fine detail that has to take place.”

When exploring a new mold builder, Seedorf describes the steps as the “dating process before you get married.” He said that Team 1 Plastics has “visited with several new companies over the last six months. We’ve had a lot of companies visit us, and we talk with them and tell them how we operate, and they tell us how they operate. We send them a lot of RFQs (Request for Quotations), have a lot of conversations, maybe visit their shop, things like that, trying to get a good comfort level. That is really what you’re looking for – a good comfort level.  If somebody’s willing to stay close to us through this dating process, and ultimately, we use their numbers to quote to our customers and win the job, and we have no reason to not source them, then we give them a job and see how it works out. If they do a great job, then we’re moving forward together. “

Finally, if all the decision factors -- costs, timing, and previous experience with a company -- are equal or close to it, Seedorf said that his recommendation of where to source the mold would always be local.  “What a great opportunity to employ people in your local community and help them out. That to me is not a driver – that’s just a consequence. You make whatever business decision that you have to make, but what a great result if you can source it locally.”

Topics: Team 1 Plastics, precision plastic injection molded components, quality, value, Dave Seedorf, molds

Achieving Zero Defects and 100% Delivery

Posted by Brenda Eubank on Tue. August 2, 2016

Zero_Defects.jpgZero Defects and 100% delivery. Sounds great, right? Two goals to which every business should aspire. But are they achievable goals? And how do you get there?

In his article, “The Quest for Zero Defects,” in Quality Digest Magazine, Mike Richman wrote this about defects:

“Defects. They’re the bane of our existence ... After all, if manufacturing and service processes were immaculate in their natural states, there wouldn’t be much call for ISO standards, Black Belts, metrology equipment, Baldrige awards or statistical process control. That being said, the quest for zero defects can still be considered quality’s Holy Grail. In all industries, defects cost money, waste time and frustrate managers. In some (think pharmaceuticals or medical devices), production errors can cost lives. Everyone can agree that reducing defects is good for business, whatever your business may be.”

So, we’re all in agreement that defects are bad and should be eliminated. But, how does a business achieve zero defects? MindTools.com offered some tips in its article, “Zero Defects: Getting It Right First Time.”

  • Management must commit to zero defects
  • Zero defects require a proactive approach – if you wait for flaws to emerge you are too late
  • Create quality improvement teams
  • Monitor your progress
  • Measure your quality efforts

Team 1 Plastics, a plastic injection molding company for the automotive industry, has implemented these tips in its pursuit of zero defects. According to Craig Carrel, President, “Zero defects is just like it says – ZERO defects. It is perfection. Since zero is a very tough number to achieve in plastics injection molding at our size – running millions of parts each month – our focus is on continuous improvement to move forward towards zero defects. This means developing robust processes during the development process and launch of each part and finding root causes when we do encounter rejects.”

Carrel explained that Team 1’s proactive approach is to prevent defects at the planning stage, believing that this is the best way to eliminate defects. “Inspection cannot lead to zero defects,” Carrel said. “You need to develop processes and systems that do not make a bad part.” Team 1 Plastics has “… spent a tremendous amount of time and money in developing a robust launch process. This is a multi-function team that works together to identify problems early on and works to eliminate them before the parts go into production.”

The launch team isn’t the only one involved at Team 1 Plastics in achieving zero defects. “Everyone is responsible for quality, and our internal quality team has to play an active role in helping us solve problems with everyone at Team 1. Our quality team and metrology lab play a key role in monitoring our quality and giving us feedback on our progress. A corrective action team, made up of team members from the molding, quality, and engineering departments, identifies the major rejects and focuses our resources on finding root causes and eliminating reoccurrences.”

Carrel said that the corrective action team focuses on the “Dirty Dozen” – the top 12 rejects over the last one-to-three months. “These rejects have top priority. We have several examples of our team finding root cause for the rejects and completely eliminating them from the Dirty Dozen list.”

According to Richman, achieving Zero Defects is also about repeatability. He wrote, “Performing tasks right the first time only works if you can do them right the next time, too … A process cannot succeed enterprise wide if it can’t be repeated time and time again, exactly the same way on each and every occasion.”

Team 1 Plastics agrees. Carrel said that a key to zero defects is to “… develop repeatable processes. Also, conformance to standards is critical.” That is one reason why being certified to ISO/TS 16949:2009 standard is so important to Team 1. “TS 16949 helps us develop systems and processes that are repeatable. It also focuses on understanding customer requirements and making sure our systems and processes are meeting them,” Carrel said. In addition, “Automation has helped us move towards zero defects by making our processes more repeatable and consistent. It also allows us to utilize our human talent more on set-up, packaging, trouble shooting, and problem solving.”

Another tool that Team 1 Plastics utilizes to ensure that its processes are consistent is to invest in training of its team members. Focused on continuous improvement in this area, the company recently added a new position, Training Coordinator. Carrel said, “Danielle Sheldon, our new training coordinator, is currently developing an enhanced on-board training program for all our new team members as well as a very detailed training for all new production and assembly assistants. Once completed, she will work on detailed training for other key positions.”

Do these tips work? For Team 1 Plastics, the answer is “Yes!” Carrel said that since 2009, Team 1 has seen a "fivefold decrease in its rejects reports/million $ sales and reoccurrence reject reports/million $ sales even though it has seen a threefold increase in its sales over that same time period.”

Similar to zero defects, Carrel said that “100% delivery is perfection and is a very tough goal to hit consistently. And, similar to zero defects, Team 1 Plastics is constantly working towards 100% delivery. In a similar manner, utilizing continuous improvement activities and repeatable processes moves us forward towards the goal.”

Carrel said, “A key to 100% delivery is seamless communication with all parties; externally with customers and suppliers and internally with our teams and team members. Team 1 needs to understand customer orders today, and in the future, so we can plan and have the resources available when needed to execute and have them delivered on time. In addition, we must have the flexibility to respond quickly to changing customer orders. It is critical to meeting their needs and being a strategic supplier they can count on.”

Giles Johnston agrees with Carrel’s statement. In his e-book, “You’re Late!! 7 Common Mistakes that Destroy on Time Delivery Performance … That You Can Easily Avoid,” he listed the final mistake as “Poor Inter-Team Communication.” He wrote, “Even a small team cannot rely upon telepathy. The routines we have discussed along with the various points in the process … need to be managed. Communication binds all … together.”

Topics: Team 1 Plastics, Craig Carrel, quality, reliable, ISO/TS Certification, automation, continuous improvement, communication

4 Keys to Improving New Product Launch

Posted by Brenda Eubank on Tue. July 12, 2016

Most people would agree that the long-term success of any project is rooted in the management of the launch. If you do not put in the effort upfront in the planning, development, and launch of a new product, the product will, most likely, not be profitable. This is true whether your company is in retail, service, or manufacturing.

Mold_Design.jpgSo, what are some keys to improving your new product launch? Dave Seedorf, Engineering Manager for Team 1 Plastics, a plastic injection molding company for the automotive industry, recently shared four keys to a successful new product launch.

Not surprising, the first key is communication. Seedorf said that he has learned over the years that it is imperative to build great relationships with the customer’s designers and program managers. “It makes communication much easier, and they usually respond much quicker to my questions.”

Communication begins with the Request for Quote (RFQ) process -- the first step in Team 1’s new product launch. Seedorf said that in reviewing the customer’s RFQ data and requirements, “… it is critical to ensure that we are on the same page with the customer’s requests, eliminating assumptions.”

Of course, communicating with the customer is not enough. There needs to be communication among all the stakeholders. For example, Team 1 Plastics establishes an in-house New Product Launch Team to keep the information flowing to its Team Members. The Launch team, which meets regularly, is made up of representatives of several departments: Engineering, Production, Customer Service, Estimator, and Scheduling. Team 1 has found that utilizing a New Product Launch Team has helped them ensure that the timing of projects is met. It also provides a forum to discuss potential problems or road blocks and to develop solutions.

Cheaper is Not Better is the second key to improving the new product launch. Seedorf said that “searching for cheaper suppliers usually costs more in the long run.”

For a plastic injection molding company, the quality of a produced part is dependent on a quality mold. Seedorf shared that once when shopping for a mold supplier, Team 1 Plastics chose to use a supplier that had a cheaper upfront mold cost. However, when the launch process began the dimensional mold tuning stage, the charge by the supplier for standard dimensional adjustments to the mold exceeded expectations, causing the cost of the mold to be much greater than budgeted.

Don’t Over Source Your Supplier. You may be using the best quality and affordable supplier in your industry. But, if the work you give them exceeds their capacity, your new product launch could be in jeopardy.

Unfortunately, Team 1 Plastics learned this lesson the hard way. Seedorf shared the story of when the company had asked one of its suppliers to build new molds for three new products. “All of the molds were large, pretty busy, and complex.” That much work all at once for this supplier exceeded its capacity. Each of the molds was delivered late and was substandard, creating problems with part quality and delaying production.

Assess the Strengths and Weaknesses of Your Supplier is the fourth key. Each company has strengths and weaknesses. You want to utilize your supplier’s strengths to your advantage and to improve your new product launch. Conversely, you want to avoid your supplier’s weaknesses.

Seedorf said that Team 1 Plastics evaluates its suppliers to learn which type of mold each supplier excels in building and how well each company operates in standard conditions as well as under pressure. He said that one mold maker had built several molds for Team 1 without any noticeable problems. However, as the supplier’s company grew, it changed its operational processes. As a result of the changes, Team 1 began to experience quality issues from this supplier.

Remember these four keys when your company is contemplating its next New Product Launch, or, as Seedorf said, “Your product will most likely not be profitable due to cost overages, quality issues, missed shipments to customers, and, potentially for manufacturers, line down situations.”

Topics: Team 1 Plastics, quality, new product launch, communication, Dave Seedorf

Laurie Harbour Gives Update of Plastics Industry

Posted by Brenda Eubank on Tue. June 21, 2016

LHarbour.jpgWhat is the State of the Plastics Industry in 2016? What challenges and opportunities lie ahead in the next two to five years? What key things should processors implement now to ensure their companies’ future success? These are some of the questions that Team 1 Plastics, a plastic injection molding company for the automotive industry, recently asked plastics industry expert, Laurie Harbour.

Five years ago, Craig Carrel, president of Team 1 Plastics, interviewed Laurie Harbour, President and CEO of Harbour Results Inc., in a video blog for Plastics Pipeline. Harbour began the 2016 update by articulating how the plastics industry has changed since that interview in 2011. “Plastics as an industry has continued to evolve. There is a greater use of technology in terms of equipment and processing. In addition, the way that the labor force is used has changed due to the lack of skilled and hourly workers. The other major change is that five years ago, the industry was climbing out of a deep recession. As it did, many of the key industries like automotive, appliance, medical, and aerospace, were beginning to experience double-digit growth in sales volume. Processers were at the bottom of a rapid return to high volumes and demand for products.”

Harbour contrasted that double-digit growth to current status. “Today in 2016, we are seeing all of those industries level off. Growth rates are below 2%, and some even predict a small recession in 2019. Although volumes are still high, growth rates will not see the same impact in the next five years, changing plans for processors going forward. Processors now have to capitalize on volumes and efficiency gaints to grow their profitability. In the rapid growth period, we actually saw companies working harder than ever but not making the money they would like to see.”

In the 2011 interview, Harbour had predicted that by 2015, there would only be a 10-20% labor gap between China and the US, making it more financially feasible for companies to build/expand new facilities in the U.S. Team 1 Plastics asked Harbour to comment on this prediction. “The labor rates in China have absolutely risen in the last five years. Although they still have a significant advantage over the U.S., we have seen a great deal of re-shoring occur for plastic parts. Exports in China have gone down dramatically and were actually negative in 2015. We are still seeing quite a bit of tooling or molds coming from China, because there is still a cost advantage. Tooling is becoming a huge cost among large companies today so any savings they can get, they will work to obtain.”

Harbour then focused on North America. “There has been quite a bit of investment in plastics in the U.S. Companies have added buildings or expanded existing facilities. The big change in the global economy is the effect of the exchange rates. The global economy is very shaky -- particularly driven by China which is working to slow its growth. The BRIC (Brazil, Russia, India and China) countries are doing very poorly, and Europe is still on a slow rebound. Right here on our continent, things are changing. The Canadian dollar is down to .70 cents on the U.S. dollar, making Canada a very attractive place for companies to purchase parts and tooling and giving Canadian companies an advantage over U.S. companies. The exchange rate difference is expected to continue through at least 2018. Additionally, Mexico is booming and to some degree is the new China. There is tremendous investment in Mexico, particularly in automotive (over $24 billion in the last few years), and the pull for automotive suppliers to be in Mexico is significant.”

Having commented about how the plastics industry had changed over the last five years, Harbour switched her focus to the current state of the industry. “All of the industries that Harbour Results studies, including medical, automotive, heavy truck, aerospace, and agriculture, are experiencing a flattening of their markets. Some are actually going backwards, such as appliances, because they believe 2016 is an uncertain year due to the U.S. election. Without knowledge of what consumer spending will be like after the election, they are leery to launch new products.

“Big companies, particularly in automotive, are moving to Mexico and putting up new facilities to support the growth in volume in that region. They are asking their supply base to move with them to support production. This is a big ask for companies because the investment is significant. Although labor cost is cheaper in Mexico, it is not necessarily a low cost region to do business in or to set up a new plant.

“Technology continues to be a factor in the plastics industry, specifically, in terms of equipment technology. Varying levels of automation are being invested in across companies. Many companies are evaluating what level of automation is critical for their type of business. They are examining the data and making sure not to over automate -- but to automate appropriately for the right level of efficiency.”

Harbour added that new equipment technology, such as 3-D printing, is beginning to impact the plastics industry. “There are disruptive technologies, like 3-D printing, that are looking to impact processors. We have seen that in low volume applications; the higher volume is just not there yet. But it will be, and it’s clearly something to watch in the near future.”

In discussing the current state of the plastics industry in terms of production, Harbour said, “There is a lot of capacity in the market, and capabilities are strong.” She added, “Our concern is that we still don’t see companies taking advantage of the volumes to drive efficiency during good times. Also in automotive and several other industries, we are seeing a shift from low mix and high volume to high mix and low volume on several key parts, particularly those that are customer interfacing. This is causing new operational challenges for those that are not use to this model of production.

“Cost pressure continues to be a challenge for all companies. The best processors have a very good understanding of their cost and are leveraging their business to fill up their facility and optimize capacity to drive profitability. Others are still struggling to fight tightening of prices and are not working on the right things. Those that focus on what they can control and drive improvement in their business will remain strong and get new opportunities.”

Finally, Harbour discussed how the labor force is affecting the current state of the industry. “The labor force continues to be a challenge for all manufacturing. The U.S. and State governments are still not doing a good job in promoting manufacturing to the younger generation as a viable career choice. As a result, the schools are missing a whole population of people that could be great manufacturing workers. Companies are struggling to find the right people that are highly motivated.” Harbour added, “We don’t see a massive shift in this any time soon. Frankly, processors have to invest in this in order to find and train the people they want.”

When asked about the future of the future of the plastics industry in the next two to five years, Harbour stated, “Each industry will continue to have strong volumes through 2020. However, with an uncertain global economy, concern regarding the U.S. election, and the exchange rates with Canada and the Euro, companies need to closely watch what happens over the next 12 – 18 months as it relates to their growth plans. Due to the uncertainty of the future, now is the time to get more efficient and capitalize on volumes to make more money.

“Technology and investment in process are at the forefront of things that companies will have to work on in the next two to five years. The challenge of good labor will continue as the boomer generation retires and gaps emerge in the employee base. In addition to proactively finding the next generation of manufacturing workers, companies will have to utilize technology to fill the gaps.

“Constant changes in the economy, and their impact on the markets in which companies play will be critical as well. All economists believe another recession will come, or at least an adjustment in the market, around 2019 or 2020. It will not be as deep as 2008, but an adjustment will need to come. Companies have to be prepared for their operations to adjust down and up flexibly in order to maintain profit margins. They have to work now to establish the efficient foundation to manage these peaks and valleys.”

Team 1 Plastics asked Harbour to share three "Keys" that a plastics company should be implementing right now to ensure (as best it can) its success in the next two to five years. Harbour replied, “A long-term strategic plan is the first and most critical key. Most companies that we assess don’t have a long-term plan or vision for where they want to be and how they will get there. The best companies have this and have made significant strides coming out of the recession with this in place.

“The second key is a solid Strategic Sales Process. We have found in the last 12 to 18 months that a solid Strategic Sales Process is lacking for many companies. Most companies are still selling the way they have for 20 years. The problem is that times have changed, the customer has changed, and work does not ‘just come’ anymore. Harbour Results has been working with processors and other companies to develop these demand models, to plan for the type of customer they want in the future, and to determine how to scale their business.

“The last key is to become a more data-driven organization. Not just with operational metrics like efficiency, scrap, changeover time (although those are critical), but gathering data at the front end of the process on sales, hit rate, quote rates, profitability by customer, etc. These front-end metrics are crucial to link the demand and operations together and to drive profit and capital expenditures. Most companies are very weak at sales planning. Bottom line is that we can run plants well, but without sales, it means nothing.”

Harbour then concluded her update of the state of plastics industry, “Times are good in many different industries for processors today. Companies need to stay focused and not become complacent. History shows that things will change -- sometimes slowly and sometimes quickly as in 2008. Companies need to be ready -- being ready means being flexible and remaining profitable.”

Topics: Sales Strategies, Laurie Harbour, Concerns In The Plastics Industry, Plastics Industry, Team 1 Plastics

Peering into the Future of Plastics in the Automotive Industry

Posted by Brenda Eubank on Tue. May 24, 2016

According to an old Danish prfuture.jpgoverb, “It is difficult to make predictions, especially about the future.” This may be true, but if a business is to survive in this world of rapidly changing technology, one must attempt to predict the future and prepare its business for the changes coming.

The plastics industry is no different, especially those focused on the automotive industry. Team 1 Plastics, a plastic injection molding company for the automotive industry, recognizes the need to prepare for the future. In a recent interview, Craig Carrel, President, talked about the changes he sees coming, “Team 1 is excited about the future. There are tremendous changes coming in the automotive marketplace that will create new opportunities for our business to grow and provide value to our Tier 1 customers. The key is to be working with the best Tier 1 customers so that we are partnering with them on the new technology and will be prepared for these changes.”

Although one can’t know exactly what the future holds for the automotive industry, current emerging technology and upcoming governmental mandates do provide a glimpse into it.

According to the CNN 10: Future in Driving report, “A new wave of innovation, led by carmakers and automotive-tech companies, is transforming the driving experience. Thanks largely to on-board computers, our vehicles are becoming smarter, nimbler, safer and more fun ... Fully self-driving cars remain some years away. But new technology in the next five to 10 years will help cars park themselves, monitor the alertness of the driver and even communicate with each other to avoid collisions.”

The YouTube video, Together We Ride, released by Nissan Newsroom in October 2015, gives a clear picture of what this car manufacturer believes is the future of automobiles. “We envision a world where you share your journey with your car, not as a tool, but as a partner. It’s not just about potential about what could be, may be, or what’s possible. This is a promise of a future that’s smarter. Safer. Easier. And absolutely electrifying.”

Emerging technology has allowed car manufacturers to already add many new sensors -- things like, monitoring the traffic around the car (cars talking to each other), monitoring the driver's health and distractedness, and personalizing the interior environment of the car (learning the driver's preferences and automatically adjusting to them).

According to Carrel, “Plastic is a key component of these types of sensors and provides the framework and structure for them.” He then addressed the future of self-driving cars. “We are seeing rapid advancement in systems that will take more control of driving away from the driver. Many are already being added to cars, and more is projected over the coming years. These systems will employ lots of sensors -- cameras, radar, etc. They all will have some plastic components.”

Plastic is also a key component in helping car manufacturers achieve the 2025 fuel economy requirements by Corporate Average Fuel Economy (CAFE). According to its website, “Enacted by Congress in 1975, CAFE's purpose is to reduce energy consumption by increasing the fuel economy of cars and light trucks … which will improve our nation’s energy security and save consumers money at the pump.”

In August 2012, Whitehouse.gov announced that the Obama Administration “finalized groundbreaking standards that will increase fuel economy to the equivalent of 54.5 mpg for cars and light-duty trucks by Model Year 2025.”

“Because of their light weight and versatile properties, especially with the upcoming CAFE requirements to 55 mpg by 2025, plastics will continue to play a key role in automobiles,” said Carrel. “We are seeing a renewed interest in material replacement using plastics to help reduce the vehicle weight to improve gas mileage.”

Carrel then addressed the emergence of hybrids, electric cars, and non-traditional fuel cars. “Currently they do not play a significant role in the automotive market, less than 5% market share, but all the major car companies have developed an electric vehicle as one way to achieve the 55 mpg CAFE requirement. No one is predicting they will significantly increase their market share over the next five years, especially if gas prices remain low, but they will continue to grow in importance. The key will be to lower their cost while increasing their range to 300 miles per charge to be competitive with traditional gas engines.”

Automotive industry expert, McKinney & Company, agrees with Carrel. In its January 2016 report, “Automotive revolution – perspective towards 2030,” electrified powertrains are discussed. “Stricter emission regulations, lower battery costs, widely available charging stations, and increasing consumer acceptance will create new and strong momentum for penetration of electrified vehicles (hybrid, plug-in, battery electric, and fuel cell) in the coming years … Over the next decade, electrified vehicles will achieve cost competitiveness with conventional vehicles, creating the most significant catalyst for market penetration. Advances in charging technology, range, and awareness will further improve the customer value proposition.”

The report continued, “At the same time, it is important to note that electrified vehicles include a large portion of hybrid electrics, which means that even beyond 2030, the internal combustion engine will remain very relevant.”

Good news for Team 1 Plastics. “A full electric car has a lot less components, metal and plastic, and would be a major shift for companies like Team 1 who supply a lot of precision plastic components in the traditional gas engine,” remarked Carrel. “The key to the future is to make sure we remain diversified across many vehicle systems, Tier 1 customers, and OEMs to take advantage more of the opportunities and minimize the risk with all the significant automotive market changes. We need to make sure we are providing the ‘best overall value’ today, but we also need to make sure we have an ongoing dialogue with them about their future technology and systems and how can we help them become even more successful.”

Topics: Future Opportunities In The Plastics Industry, Trends, Team 1 Plastics, Craig Carrel, automotive industry, Plastics Pipeline blog, technology, value

Competing Globally Operating Locally

Posted by Brenda Eubank on Tue. March 29, 2016

global_business.jpgHow can you, as a local manufacturer, compete globally? According to Houston Chronicle writer, Brian Hill, in his article, “How Can Small Business Enterprises Compete in a Global Market?”, there is “tremendous opportunity for revenue growth through selling … products and services internationally” because “about 95 percent of the world’s population [is] located outside the United States.”

The opportunity is out there. But how do you seize that opportunity? What are the keys to expanding your business beyond North America? What are the challenges to having a global business?

Hill admits that “It is challenging for businesses that do not have brand name recognition overseas to get a foothold in a foreign market.” However, he argues that “One advantage is that American goods and services are highly regarded in other countries because of their reputation for quality.”

For the article, “How Some US Manufacturers are Successful in Competing Globally”, written for Industry Week, Michele Nash-Hoff “… interviewed several companies that do all or the majority of their manufacturing in the U.S. to find out what they are doing to successfully compete in the global marketplace.”

Here’s what she found out that the companies had in common:

  • All of the products are sold to other businesses (referred to as B-to-B) instead of to consumers.
  • The products fill specific needs and requirements of other manufacturers.
  • All of the companies manufacture their products in America.
  • The companies export their products to other countries.

Although not included in Nash-Hoff’s interviews, Team 1 Plastics, a plastic injection molding company for the automotive industry, fits these common denominators:

  • It serves Tier 1 customers and OEMs (original equipment manufacturers) in the automotive industry. None of its parts are sold to consumers.
  • All of the parts are manufactured in its plant in Albion, Michigan.
  • The company currently exports its parts to Canada, Mexico, China, Spain, Japan, Thailand, Honduras, and Germany.

From its beginnings, Team 1 Plastics has focused globally. According to Craig Carrel, President, Team 1 has always had an international focus to its business. “Our target market at the business inception was the Japanese transplant automotive suppliers in south central Michigan -- in particular, in Battle Creek. Automotive is truly a global business. All major suppliers are international and have operations around the globe. Thus our competition is global also.” In fact, Team 1’s business has grown with mostly international automotive suppliers – now mainly European with a North American presence.

A key lesson that Team 1 can share is that it takes time for international customers to feel comfortable with American suppliers. And, in turn, it takes time for the American suppliers to understand the international customers’ systems, requirements, expectations and needs. Carrel said that you want to make sure that your company can meet, and hopefully, exceed the customers’ expectations and needs. In Team 1’s experience, once the international customers gained confidence in its abilities, then their relationships and business together grew quickly.

As with any business venture, Carrel pointed out that there are challenges in being globally focused. For example, “Sometimes key decisions require approval from the company’s Headquarters. This can cause delays, change of direction, or a requirement for additional information. You need to be able to provide support for the company’s local operation so that the Decision-makers at Headquarters feel comfortable and will support the decisions made by the local operation.”

To help the relationships and communication, Team 1 encourages and welcomes visits from its customer’s international teams. “We want to make sure we are known as much as possible throughout their whole organization,” Carrel said.

Another challenge is to make sure your company is globally competitive against the best international competitors. Many of Team 1 Plastics’ international customers have created benchmarks to rate their plastic molder suppliers, looking for the best overall value in service, quality, delivery and price. According to Carrel, Team 1 has received high marks in most areas and has been recognized as a top global plastics molder. The ratings systems “force us to continually improve all phases of our company so that we are the number one choice for precision plastic components.”

Although its customers are international and have operations around the world, Team 1 does not need to follow them around the globe. Carrel said, “We need to make sure we are globally competitive but laser focused on being the top plastic molder in the Americas (NAFTA region). At the tier 2-3 level, our main competition is in the U.S., Canada, and Mexico.”

Acknowledging that many Presidential candidates are discussing the negative effects and major job losses caused by the NAFTA treaty, Carrel offered a counterpoint based on Team 1’s experience. He said that Team 1 Plastics has been a major beneficiary of NAFTA and the ease of trade between the countries in the NAFTA region. “We have over 20% of our sales going to Mexican automotive facilities and have grown our business and added jobs because of NAFTA.”

Topics: benchmarking, Team 1 Plastics, growth, manufacturing, target, globally competitive

Making Automation Work

Posted by Brenda Eubank on Tue. February 16, 2016

About ten years ago, Team 1 Plastics, a plastic injection molding company for the automotive industry, made a decision to focus on automation on its production floor. Craig Carrell, President and Co-owner, described the change. “One of the things that we’ve changed dramatically is the focus on automation. When we started, there were a lot of people at machines handling the parts; and over the last ten years, we’ve really seen that the way to go is to move out of direct labor. The automation and the information technology Automation_-_Robot_1.jpgpieces have come down in cost, making it advantageous for a molder like us. So we’ve made a big push into automation.”

Every injection molding press at Team 1 is outfitted with some type of automation. Most have a rectilinear robot that is programmed to perform tasks such as extracting parts and placing them on to a nest and/or a conveyor. Some robots inspect the parts; some de-gate the parts and deliver them into final packaging.

Some presses utilize Gate Cutting robots either built into the End of Arm Tooling (EoAT) or as a stand-alone unit. Others have Selective Compliance Articulated Robot Arm (commonly referred to as SCARA robots). These versatile robots can perform many different operations. They can separate parts when more than one part is produced in a mold. They can count parts. They can perform cell packing. And, with different end of arm effectors, they can even do some measuring and testing.

At Team 1 Plastics, automation is used to minimize the manual handling of the parts, producing a more cost effective process. Automation is also used for efficiency of production. Tim Henry, Production Team Manager and Assembly Manager, put it this way, “A lot of what our automation does is designed to cut down on waste. We know that waste eats up profits.”

Even the way that Team 1 has organized its production floor is based on being efficient. Its plant has four production zones: 

  • Zone 1 consists of 11 injection molding machines ranging in size from 40 to 180 metric tons
  • Zone 2 consists of 11 injection molding machines ranging in size from 25 to 180 metric tons
  • Zone 3 consists of 3 injection molding machines ranging in size from 180 to 280 metric tons
  • Zone 4 consists of 3 injection molding machines ranging in size from 180 to 300 metric tons

Automation_-_Robot_2.jpgDue to the role that automation plays in Team 1 Plastics’ production environment, only one Production Operator is required in each zone. Parts in both Zones 1 and 2 tend to be small, and the machine and automation do the majority of the work, including placing the completed parts into a container. An alarm notifies the Production Operator to print a label, exchange the full container with an empty one, and move the finished goods into the Warehouse pick-up zone.

Parts produced in both Zones 3 and 4 tend to be larger and require more Operator contribution. The parts are placed via a rectilinear robot onto a conveyor. The conveyor then moves the parts to the Production Operator who may have a secondary operation to perform, such as a small inspection or layer packing. The conveyors in these zones are capable of running in either direction to accommodate the Production Operator’s work load for that day’s shift, eliminating extra movement by the Operator.

Printers, located at every press, enable the Production Operator to print a label after the parts are packed. The Operator attaches the label to the packing container and delivers it to the warehouse where the parts are scanned and added to the real-time inventory.

Team 1 Plastic’s production monitoring software, ProMon, also enhances efficiency. The software, available on the touch screen monitor located at each press, provides the Production Teams with a variety of useful feature and functions, including the most up-to-date manufacturing standards, a quick reference on what part defects to look for, order status, and run history, and the software gives the Production Team the ability to create Maintenance work requests.

The software also provides guides for the Set-Up Technicians. It provides detailed instructions of how to set-up the job for the specific part to be produced, what process parameters will be running, what alarms should be set, and what conditions they should look for. All of these functions are available to the Team without ever leaving the production zone.

Henry said that production packets, consisting of multiple documents, required for every production run, used to be kept in filing cabinets. Before the production changeover was produced, someone had to retrieve the multiple documents from the filing cabinets and build these production packets. After the job was completed, someone needed to break down the packets and return the documents to the filing cabinets. Sometimes the paperwork was misplaced or outdated, and the packet would need to be recreated before production could be run. This was a necessary, but tedious and time-consuming process. The addition of the ProMon software at every press completely eliminated this packet-building process.

Efficiency even determines where Team 1 stores each mold. The company used to store the molds at one end of the plant. Someone had to go get the tool when changing to a new part and take the previous tool back to the storage area. Now, the molds are stored near the presses which use them. Henry explains, “Storing the tool directly where you’re intending to use it is another example of eliminating waste.”

And, as mentioned previously, waste eats up profits.

Topics: Team 1 Plastics, automotive plastic components, efficiency, automation, production monitoring software

2 AM Production Emergency?

Posted by Brenda Eubank on Tue. January 19, 2016

What happens in your plastics manufacturing facility at 2 AM when your production team is struggling with a part? Is it automatically a “5-alarm” emergency? Or, do your employees have the information they need to make an informed decision – like knowing that enough product has already been made for the order so they can shut down the part for the rest of the shift?

Does your Enterprise Resource Planning (ERP) software provide real-time production information? According to Glenn Nowak’s article, The Value of Real Time, “Too many manufacturers miss out on critical decision-making pieces of the puzzle because of a lack of timely production details. A lack of real-time information can cause crippling effects throughout the entire enterprise. Live data, on the other hand, can reduce the loss of time, resources and, ultimately, money from the bottom line.”

Your ERP should provide the information that help your employees make a good decision at 2 AM. Nowak pointed out that “Out on the shop floor, the robots and work centers are gathering tremendous amounts of data. Production details regarding performance and maintenance are being tracked, as is in-depth information about the products being made.” That data should be readily available to your employees whenever they need it.

Maybe you don’t have an ERP – many small and medium-sized businesses (SMB) don’t, according to the article, ERP a Big Challenge for SMBs, by Drew Robb “…87 percent of potential ERP buyers fall under the SMB category, which it defines as companies with annual revenues of less than $100 million. The vast majority of these companies do not currently possess an ERP system.”

ProMon.jpgTeam 1 Plastics, a plastic injection molding company for the automotive industry, developed its own production monitoring system, called ProMon, that allows a paperless production and quality system on the manufacturing floor. Networked thin-client computers, located at each of the presses, deliver work instructions and quality check points. The touch screens allow the machine operators to interact with them. The operators can quickly and easily record any quality checks they made on the part. And, they do have the information they need to make a good decision at 2 AM.

Gary Grigowski, Owner and Vice President, said that Team 1 Plastics does a “…good job of integrating technology that services what our customers need. Whether it is our ability to easily take in orders, quickly integrate them, consider impact of new order on scheduling, or integrate 100% automatic quality testing.” Speaking of the ProMon system, Grigowski said that “since it was internally developed, it is specifically designed for Team 1's systems and can easily be updated to make it more efficient.”

Joshua Nye, IT Manager, echoed Grigowski on the advantages of Team 1 Plastics’ proprietary ProMon software, “The biggest advantage by far is customization. Basically, if the data exists, we can deliver it to you just about anywhere you want it, and how you want it displayed … If you go with a canned [third-party developed software] system, there will be minor tweaks and views you can create; but overall, you fit into their system rather than their system changing to fit you. Our system is specifically built to work in the way Team 1 has been designed to work.”

But, proprietary software comes with its own set of challenges. Your internal IT department must be able to program the software, including updates driven by customer or employee requests. Nye said, “The priority is always to get the application you are working on fixed or updated with new features as they are needed, however with a steady flow of requests, new ideas, etc., it isn’t always easy to keep up on properly documenting the code, creating, or revising any knowledge base.”

And, with proprietary software, the IT team is literally on their own – there is no Support team that they can call. “When we have a problem or an issue arise, we are the only ones that can really fix it. There is no support center to call to work through the issue; there is no FAQ on a product website to lean on. Big software companies have the developers, and they also employ technical writers and such to create their knowledge base, FAQ, and support sections,” said Nye.

Maybe these IT challenges are more than your company wants to handle. In that case, there are lots of third-party software ERP options for you. And, there is a lot of advice on choosing and implementing them.

Manufacturing Tech Insights dedicated its entire December 2015 magazine to ERP systems, including its list of the Top 10 Manufacturing ERP Solution Providers for 2015.

The Resources section of SoftwareAdvice.com’s website has articles, e-books, and research to help you, including Key Criteria For ERP Software Selection, which offers “guidelines and tips before embarking on an ERP selection project.”

In EnterpriseAppsToday.com, Drew Robbs shares his 7 ERP Implementation Tips:

  • Avoid ERP Rigidity
  • Consider ERP Customization Needs
  • Involve Upper Management in ERP Implementation
  • Focus on Early ERP Expectations
  • Get Right ERP Implementation Partner
  • Pay Attention to Reporting
  • Head to the Cloud

Forrest Burnson, summed up what you need to consider when shopping for a third-party ERP system in his Enterprise Resource Planning Software Buyer Report – 2015, “For prospective buyers, the task of selecting and implementing a new ERP system can be daunting. When selecting a solution, buyers should take into account not only their current needs, but what their needs will be five or 10 years down the road, as well as whether they’ll be able to integrate existing and future data in the new system.”

Burnson continued, “Buyers should also weigh the benefits and drawbacks of different pricing models, and ensure they have a clear understanding of what the total cost of ownership will be depending on which path they take. Finally, they need to consider how well-equipped their IT department is to handle such a massive undertaking, and should seek outside consulting and implementation services if they are unable to do it in-house.”

Whichever ERP system your company uses, make sure that it provides the information your employees need at 2 AM.

Topics: Team 1 Plastics, effective communication, Plastics Pipeline blog, technology, ERP, production monitoring software

Ensure Your Team is Rowing in the Same Direction

Posted by Brenda Eubank on Tue. December 15, 2015

Are all of your company employees striving for the same target? Do your employees even know what the target is?

Think about this … can you imagine a competitive rowing team being successful if one of the members of the team is rowing2.jpgturned around in the boat and rowing in the opposite direction from the others? Or, maybe they are all rowing in the same direction, but they don’t know where the goal line is. Would they be successful then? It’s highly unlikely.

You’ll probably agree with this statement: Having your team know what your business target is and then having everyone work together is a key to a successful business

But, you may be wondering, how do I achieve this?

Consider incorporating Open-Book Management.

“Making the economics of a business transparent, involving all employees to understand and share in the improved financial results, is a recipe for success,” according to Bill Fotsch, Founder and Head Coach of Open Book Coaching. “Labeled, the ‘Open-Book Management Guru,’ Fotsch has helped more than 400 companies boost employee engagement and increase customer retention over the past 25 years.” “The trust and focus on the common good captures the employees’ hearts while the information captures their minds. Open-Book Management creates an empowered, learning organization.”

In the Harvard Business Review article, A Winning Culture Keeps Score, Fotsch wrote, “In many businesses, however, people have no clue what winning would mean. More profits? A higher stock price? How can I affect those? Maybe ‘winning’ just means making my KPIs—or not getting laid off. Employees can’t get excited about winning, because they never know whether they’re winning or not. They need a score to tell them.”

Open-book management can help. It focuses the employee’s attention on a “Key” number -- “the one number that, if improved by a significant margin, will leave the business healthier and stronger at the end of the year. If that number is headed in the right direction, you’re ahead. If you hit an agreed-on target, you win.”

Team 1 Plastics, a plastic injection molding company for the automotive industry, adopted an open-book management philosophy with workers in 1999 so that all Team Members would have the information to act like owners in their jobs. This allows them to focus on a “Key” number with regular updates to help guide the company toward success.

What makes a number “Key?” According to Fotsch, “You can’t pick just any old metric and call it a key number.”  He suggested these three attributes: “It’s directly connected to the financials. It’s not imposed from on high. It’s for now—not forever.”

For Team 1, the “Key” number is Operating Profit. Team Members work together to achieve the financial target of the company – surpassing the pre-determined minimum yearly operating profit. Once this target is achieved, everyone who is eligible earns a bonus.

Why is Operating Profit the “Key” number for Team 1 Plastics? According to its Bonus Plan Summary, it is Operating Profit that creates and drives the bonus. Operating Profit is their best indicator of success - accurately reflects how the Company is doing. And, Operating Profit is easy to calculate and understand.

Each month, Team 1 Plastics holds an “Open-Book” Meeting, sharing the company’s finances with the Team members. The meeting allows for open and honest discussion, allowing the Team Members to ask questions and understand how the company is doing. “We have monthly meetings where we go over our financial statements,” said Craig Carrel, President. “All of our Team Members know what it takes to be successful and share in the related bonus plan.”

And the Team Members appreciate the Open-Book management. Andrew Zblewski, from Team 1’s Maintenance department, shared “Team 1 is a very unique company. The monthly open book meetings allow me, the employee, the opportunity to see the vision of the company as well as the knowledge of any concerns that may affect me personally and financially. These monthly meetings also allow us to voice concerns and ask questions in an open and honest atmosphere. This stops any rumors or fear feelings from growing out of control and allows us to feel more secure in our positions.”

Elaine Luca, Accounting Specialist, shared her perspective, “As the Accounting Specialist at Team 1 Plastics, I see on a daily basis all aspects of the company’s financial information.  It brings a ‘trust’ factor knowing that this information is shared with all Team Members. This open book policy gives Team Members an understanding of how the company is doing; it opens the door for them to participate with questions or comments.”

Open-Book Management has worked for Team 1 Plastics. “With a company that is comprised of Team Members who conduct themselves as owners, better decisions are made at all levels because all Team Members have a vested stake in the outcome,” said Carrel.

Topics: Team 1 Plastics, automotive plastics, team, open book management, profits, transperancy, target