Pennsylvania Plastics Manufacturing Industry: Profile and Supply Chain Coordination Practices

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Pennsylvania PlasticsManufacturing
IndustryProfile and Supply Chain Coordination
Practices
Dr Irene J. Petrick, Principal Investigator Dr
Carleen F. Maitland, Co-Investigator Nicolai
Pogrebnyakov and Phillip J. Ayoub, Assistant
Researchers Pennsylvania State University

• Pennsylvania Plastics SourceNet Symposium
• March 13, 2008

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Acknowledgments

• PA Plastics Initiative Steering Committee
• Frank Sorg, Executive Director, PA Plastics
  Initiative
• PA Industrial Resource Centers staff
• Karla Sexton, Solutions Network Manager
• Center for Workforce Information and Analysis, PA
  Dept. of Labor and Industry
• Randy Murphy
• Penn State Survey Research Center
• Interview and survey respondents

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Agenda

• Background
• Profile of the Pennsylvania plastics industry
• Supply chain assessments of plastics
  manufacturers
• Technical assistance and learning

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Objectives of the study

• Characterize the Pennsylvania plastics industry
• Common supply chain practices
• Geographic distribution of the supporting supply
  chain
• Geographic distribution of the customer base
• Identify and explore best supply chain
  coordination practices

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Study design

• Focused on manufacturers of plastics, rather than
  equipment makers
• Undertaken jointly by Penn State faculty and
  staff at IRCs
• Data collection Sep 2006Aug 2007
• 70 usable mail and web surveys received
• 58 face-to-face interviews performed

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Agenda

• Background
• Supply chain assessments of plastics
  manufacturers
• Technical assistance and learning

Profile of the Pennsylvania plastics industry
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In general, you are

• Old (in terms of number of years in business,
  number of years associated with the supply chain,
  and number of years in the business for the
  respondent/interviewee) 81 gt11 years
• Small (27 fewer than 10 employees 81
  considered SME)
• Privately held
• In a 19.4 Billion industry with a diverse
  customer base

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Geography of plastics manufacturers
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Location, location, location

• Theres a major show in Atlantic City, it tends
  to be well attended by international companies.
  So if they wanted to look for someone in the
  States, theyll come to Atlantic City, rather
  than one of the larger national shows thats in
  Vegas or Orlando. And of course if theyre very
  interested, they can come to the plant, its a
  day trip. So location has actually helped quite a
  bit.

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Geography of customers and suppliers
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Geography of customers comments

• To sell in Europe we need to be CE certified, so
  we need components from our suppliers that are CE
  certified that will allow us to have the entire
  unit certified. Theres also been a strong push
  in the European marketplace for environmentally
  friendly components. So electronics, for example,
  cant have any lead, cant have any mercury, and
  all of our suppliers have had to meet those
  certification needs.

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Developing relationships

• Relationships matter with customers suppliers
• A lot of what were doing now is based on
  face-to-face with customers
• My philosophy as a supply chain manager is to
  build partnerships with our suppliers
• International market potential opportunity for
  manufacturers
• May have to learn new strategies possible area
  of government support

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Importance of capabilities

• Top three production processes used
• Injection molding (40)
• Extrusion (23)
• Thermoforming (20)

We have a lot of capability under one roof.if
someone comes to us and says, We want you to
mold parts, thats not what were all
about.Molders cant compete in this country is
were going to just mold parts. We cant just
shoot and shipWe have to add valuewith assembly
or secondary operations
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Demographics comments
Demographics comments

• one supplier I have been dealing with since Ive
  been here 20 plus years, and theyre probably our
  largest supplier.

Its a market where the industry is shrinking.
Its a mature market, declining rapidly, so were
basically stealing market share from other
suppliers.

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Demographics observations

• Longevity is a double edged sword
• Need newer firms with newer technology
• Other sectors may be more appealing to start-up
  entrepreneurs
• Number of employees may not always reflect
  capabilities due to automation
• Higher performers offer multiple development and
  production services

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Diverse customer base
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Plastics suppliers can add value

• Medical devices, aerospace and pharma are
  significant customers
• Potential growth opportunities for manufacturers

Molding is a skill that you cant teach out of a
book. Its something that has to be learned
through experience because there are so many
different resins.every resin requires special
handling, special drying, special temperatures.
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Customer base observations

• Certification and compliance are important in
  some sectors
• Particularly in medical devices

To sell in Europe we need to be CE certified, so
we need components from our suppliers that will
allow us to have the entire unit certified...
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Youre doing well, but not everyone
Three-year average growth of
Not a good indicator
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Performance comments

• In each of our three years in business, weve
  more than doubled our growth, our sales. Were a
  start-up company. I think that our experience
  probably compares favorably to other companies,
  to our competitors, only because we are new. But
  typically, I think the companies in our industry,
  our competitors have also experienced growth, but
  probably not as dramatic as our growth.

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Performance observations

• Significant market share uncertainty
• Manufacturers are unaware of the size of their
  market, or
• They are unaware of their position in the market
  space
• No difference in performance of both headquarters
  and branches

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Product and offer type

• 64 of respondents manufacture customized
  products
• 85 among top 20 performers
• 50 offer a bundle of product and services
• A consistent and growing strategy
• May be a future direction of growth

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Bundling goods services adds value

• If a customer brings us a unique product, we can
  take it and do three designs. We can have a
  prototype made up in a similar material, and they
  can try it out and see if they like it. This
  gives them a realistic feel of what the product
  is going to look like. Then we can take it and we
  can design the tooling around it. We can build
  the tooling and we can do the production of the
  plastic.

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Agenda

• Background
• Profile of the Pennsylvania plastics industry
• Technical assistance and learning

Supply chain assessments of plastics manufacturers
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Conceptual model
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Structure of the dominant supply chain
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Benefits from supply chain participation

• Over 50 report an increase in
• Ability to adopt innovations
• Profits
• Market share
• Sales to new markets and geographic locations

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Being part of a sector matters

• When we first came in and started the business,
  we were kind of more, Id say, renegades, but we
  certainly had our opinions about how we would
  operate versus our competitors and I think since
  weve joined the industry association, were
  working together with the business association to
  advance the industry in general, collectively,
  thats for a fact.

but in general firms in this industry dont see
themselves as a plastics cluster
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Coordination in supply chains

• We investigated coordination on
• New product development
• Marketing
• Production
• IT
• Process improvement

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Coordination patterns

• Top 20 performers initiate coordination much
  more frequently than bottom 20
• Most important coordination practices
• New product design (closer ties to the market)
• Process improvement (lean manufacturing)
• Improvements in production and process may be
  approaching natural limit
• Coordination on IT is the least beneficial
• Potential future growth

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Agenda

• Background
• Profile of the Pennsylvania plastics industry
• Supply chain assessments of plastics
  manufacturers

Technical assistance and learning
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State funding opportunities

• Selected suggestions from the manufacturers
• Reduce paperwork requirements in funding
  applications
• Improve process to identify opportunities
• Grants, not loans, to support manufacturing job
  retention
• Reduce the layers for government-supported
  programs

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Sources of advice for manufacturers
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Questions??