Strategies to help molders cope with inflation, supply chain
From left: Marcella Kates of MAPP; Jeff Ignatowski; Josh Hauser and Megan Tzanoukakis.
North American injection molders are dealing with supply-chain disruptions and rising prices. Learning to pick the right customers is a key to remaining profitable and successful.
As an example, Josh Hauser, business development manager for Vital Plastics Inc. in Baldwin, Wis. described receiving "canned letters" from customers in response to attempts to pass along a price increase.
"They want to see your continuous improvement program and all these things that really don't take into account that we know what we're doing," Hauser said.
He said about 80 percent of Vital Plastics customers are reasonable about price increases, and the company has been separating from the 20 percent that have not.
"So, if I get the 'canned letter' from one customer, and customer B says, 'We totally understand this, just get this thing finished right away,' well, the other customers don't deserve my time any longer," Hauser said. "We're done playing those games, we do things very well, we treat our people very well."
The key is that Vital can back it up, showing the data that it is continually improving, meeting quality standards and delivering product on time.
Hauser was part of a panel on addressing supply-chain issues and the changing role of the molder at the Injection Molding & Design Expo, held May 25-26 in Detroit. Plastics News and AMI were joint organizers of the trade show.
Jeff Ignatowski, director of sales and marketing at Champion Plastics Inc. in Bloomfield Hills, Mich., said his company's automotive end-market customers have been open to discussions about price increases.
"I think overall, the change has been positive for our customers. You know, for those who have been in the automotive industry, you understand that it's generally been a very regimented culture. And so they've been a lot more accommodating to the supply-chain issues, you know, allowing changes that normally you'd have to go through the various processes, elaborate testing and sampling. ... And part of it might be out of necessity," he said.
Ignatowski added that companies in the automotive supply chain are learning to do everything possible to meet their delivery schedules.
Megan Tzanoukakis, vice president of supply chain for Sussex IM Inc. in Sussex, Wis., said her company has "great distribution partners" that have helped the company navigate issues in finding some engineering resins that are in short supply.
But resins aren't the only product with supply-chain issues — even wooden pallets have been hard to find, she said. So Sussex IM's customers understand the situation.
"I think they're dealing with the same things, we are within a very uncertain market," Tzanoukakis said. "It's just very uncertain out there. And that's where everyone is, they're trying to understand and predict what's going to happen in the future. And it's just it's very difficult."
Hauser said Vital Plastics is taking an analytical approach, studying the resins it needs, its suppliers and its customers to forecast the future.
Ignatowski described a similar strategy: "Our approach has really been being as transparent and upfront as possible, trying to demonstrate to our customers that, you know, yeah, we do have a supply issue. But we're trying A, B, C, D, we're trying everything in our power to resolve it."
Sometimes molders have to have tough conversations with customers, Tzanoukakis said.
"It's hard. It really depends on your relationship, right? The better relationships, they understand they're willing to work with you. And what do they want right now? Reliable supply, right, that's what they want. So the ones where you have a good relationship, and they really want their products, it's not that big of a deal," she said.
For customers that are focused only on price, "it becomes really, really challenging," she said. "But eventually they get there."
Hauser talked about how molders traditionally have little pricing power, and the result has been that many companies are either not profitable or losing money, according to Manufacturers Association for Plastic Processors (MAPP) benchmarking data.
"The truth is, we've squeezed enough blood from the turnip," Hauser said. "We're managing the transition the best way we can with the most important customers."
Ignatowski agreed: "It really is all about relationships that you have with your customers. And part of that is also picking the right customers.
"You know, we found over the years where we've got the long-term customer relationships, you know, 20, 30 year relationships, those discussions tend to be a lot easier. We've even in the past 12 to 24 months, we've separated, you know, divorced, if you will, with customers, because we didn't have that relationship and they weren't receptive to having what's called just adult conversations about 'We're having issues, but we can solve them together.'"
Tzanoukakis said that for materials with long lead times, Sussex IM has been working with customers to help with accurate forecasts for the volumes they'll need in the future.
"For resins that are fire retardant, or anything with glass fill, those have 12-to-25-week lead times. And that's where we've had to go back to our customer and say, 'You need to provide us a forecast.' And then if they don't use all that resin, then we're going to have a conversation about how to pay for that resin. Because we used to hold a lot of that resin for a very long time, but now that a lot of it is two or three times the price it used to be, we can't do that anymore.
That's promoted "a lot of good conversations" with customers about product lifecycle, she said.
"Where are we in this lifecycle? Is it going to grow? Is it going down? It has been very helpful, because you can have those open conversation with customers and get more insight into their product and where it's going and where the next generations are," Tzanoukakis said.
Hauser said some customers have been open to accepting price increases.
"We've had some interesting feedback that we got from a number of our customers, which was 'What took you guys so long? Why did you wait five years to give us a price increase?
"We're learning through advisory groups that it's a muscle that you have to exercise, it's inflation, cost of labor, it's all going up every single year, and we're just eating it and those days are over," Hauser said.
He added that the conversation is changing, Vital is no longer worried about resin, delivery times or quality.
"We're worried about paying people good wages and having a career that they want for a long period of time, and not leave for the next dollar an hour or the next $200 bonus. It's really about getting people in the door that want to stay and encourage boomerangs who leave to come back. And to weed out the ones that don't fit. That's our supply chain issue, it's labor," Hauser said.
Tzanoukakis said Sussex IM is winning work as customers reshore some work that was previously done in China.
"We're seeing, because of the China issues, a resurgence of Made in America, right, which is amazing for everybody in this room. At Sussex we do a lot of molding, but we do value-added automation, assembly, and also fulfillment. So our customers are looking particularly for like a one-stop shop."
Hauser also talked about the changing mindset of young workers, who may not be as attracted to molders with a "family culture" as older workers.
"There's nothing wrong with family businesses that have been around for 60 years. But then the young laborer, maybe he came from a broken family, they're not as interested in the family mentality as they are about their time. Time is the most valuable thing to labor right now. It's not pizza parties or free breakfast, it's PTO, it's dress code, it's changing," Hauser said.
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