FOR IMMEDIATE RELEASE
ARLINGTON, Vt. (June 26, 2012) – Managing work returning from offshore, hiring creatively, and identifying environmental opportunities that are both sustainable and economically viable are key manufacturing trends that will impact the medical device supply base for the foreseeable future, according to Jeff Somple, president of Mack Molding’s Northern Operations. “How suppliers and their customers handle these challenges can ultimately affect their success,” says Somple.
U.S. manufacturing begins to rebound
“Over just these past few years, there has been a confluence of events that is now beginning to drive OEMs back to the United States for manufacturing,” says Somple. “They include the experience component, changing labor costs, and the ‘ease’ factor.”
As companies become more aware of all that is involved with offshoring, they are also gaining a better understanding of the program model that best fits a low-labor cost region, as well as its hidden costs, explains Somple. “A decade ago, boards of directors all over the country were asking their CEOs why they weren’t in China. Fast-forward 10 years, and we’re now hearing about programs that are coming back. Not everything, but those that make sense.”
Chief among them are projects that require hefty upfront design, ongoing customer/supplier interface, multiple engineering changes, speed-to-market, and inventory control, among others. “One air freight shipment of products because you’re going to miss a customer deadline can cancel out a year of savings on the labor side. Successfully managing multiple SKUs of one product with a supply base that is 30 days away by boat is virtually impossible, unless you’re willing to hold massive amounts of inventory. So the U.S. buying community has evolved in its thinking about what fits and what doesn’t.”
In addition to the experience factor, offshore labor costs are increasing while domestic labor remains flat. “So the gap is shrinking,” adds Somple. “In fact, with the current 20 percent annual increase in offshore labor costs, it won’t take long for the gap to close dramatically.
Layer on to that the fluctuation in Chinese currency, and the playing field is beginning to level out. “Cooler heads are prevailing,” adds Somple, “and that’s all we’ve ever asked for. If it’s a product that makes sense to manufacture in the U.S., give us a level playing field so we can compete and go after it.”
Finally, there’s the ‘ease’ factor. “Working within the same time zone, speaking the same language, traveling easily to see your products being developed, prototyped and produced – all are important factors to companies as they work under pressure to get products to market,” says Somple. “Then throw in the other wild card regarding regulatory requirements, copyright and patent protection, and you have yet another hurdle to clear.” There are also significant differences in culture and business ethics, which means U.S. companies will eventually have to invest in offshore staff who can serve as culture brokers.
For those considering offshore manufacturing, Somple strongly urges a very thorough analysis of the project first, including putting a dollar value on problem resolution. “Look back on recent domestic product launches and critically evaluate what it would have cost to solve all the issues that took place had the product been manufactured overseas. Then take a pragmatic look at your new project and how complicated it is. Finally, factor time, a realistic cost scenario, quality, and the ultimate acceptance of your product in the marketplace into your overall consideration,” advises Somple.
Hiring remains a challenge
As manufacturing has waned in the United States, so has the number of people going into the field. “Manufacturing has been perceived as a shrinking industry, so the labor force has shied away from learning skilled trades, like running a drill press or a molding machine,” says Somple. “Combine that with the highly publicized shortage of engineers, mathematicians and scientists in this country, and it’s easy to see the gap that’s developed between the U.S. and the rest of the world. So on a macroeconomic level, we have a talent deficit, largely of our own making.”
The extent to which that issue filters down to a micro level in your local community depends on where you’re located. “In New England, where Mack is headquartered, the manufacturing sector has been hit hard,” says Somple. “On top of that, we’re in a rural area where there is not a vibrant manufacturing base, which can help you attract good people if you’re growing and running your business well.”
Consequently, Mack has had to get creative in its hiring practices, including establishing both a college intern program and a robust employee training module, as well as fine-tuning its list of recruiters.
“With the intern program, we try to expose Vermont’s brightest to careers right here at home that are fun, exciting and part of a growing industry,” says Somple. “We’re building a lot of interesting products across several markets, particularly medical and solar. We’re trying to get that word out to the future generation of workers, and it’s succeeding. We’ve had 11 interns from colleges all over the country each of the last two summers, and three have now come back to Mack as full-time employees, all in different disciplines.”
Mack has also developed a robust training program for its employees, which includes modular software that tracks each individual’s level of job preparedness. Additionally, the company invests in professional development programs, like lean manufacturing and geometric dimensioning and tolerancing for engineering staff. And when a new hire comes on board, a training matrix specific to that position is developed, which can include visits to other Mack facilities, off-site development programs, orientation sessions with other functional areas and staff, and the assignment of a mentor. “It’s so hard to find and attract good talent, so we want to do everything possible to help them hit the ground running and blend seamlessly into the company,” adds Somple.
In addition, Mack actively recruits at colleges and technical schools, and uses niche recruiters. “For example, we’ve had recent success with recruiters who specialize in placing individuals who are just coming out of military service. Not only are they coming out of the service with incredible skills, but they are also tremendously enthusiastic and ambitious about applying those skills to a new career.” Another benefit for employers is that those leaving active duty may be able to take advantage of one-time relocation assistance from the military.
Sustainability is the new checkbox
Customers are requesting proof of sustainable manufacturing practices more and more frequently. First, it was ISO 9001. Then it progressed to ISO 13485. Now, it’s sustainable manufacturing. “Which is understandable,” says Somple. “As companies do more and more outsourcing, their ability as Fortune 500 firms to control their carbon footprint is only through their suppliers. They want to ensure that outsourcing is not coming at a cost to their environmental standards or sustainability efforts. So if we want to be extensions of our customers, we must embrace their sustainability philosophies.”
Mack does that first and foremost by maintaining profitability. “Our true responsibility to our communities, our employees and our customers is to remain successful and profitable,” says Somple. “So our global corporate citizenship must have a business purpose behind it, not just a feel-good factor.”
For example, one of Mack’s most recent projects was a corrugate recycling program that reduced the company’s packaging costs by 20 percent, while simultaneously increasing its cardboard recycling yield from 45,000 lbs annually to 270,000 lbs per year. Three steps – installing an on-demand packaging system, purchasing a heavy-duty baler, and entering into a recycling agreement — allowed Mack to be environmentally responsible while also remaining competitive. Proceeds from the corrugate paid for the baler in just eight months. Combining corrugate proceeds with saved landfill costs, Mack is now generating about $20,000 per year in new revenue from this project – all while keeping significant amounts of cardboard out of the waste stream.
Mack is also taking an ‘eyes open’ approach to molding with resins that are blended with recycled materials, like wood pulp, carpet fiber, paper pulp, and other recycled byproducts. This circumvents waste from the landfill and redirects it as inexpensive filler into resins, bringing down total material costs. “So again, these projects make financial sense, both for us and our customers,” says Somple, “yet also address sustainable manufacturing.”
Mack has developed an environmental management system that systematically and comprehensively tracks and reduces environmental impacts in all business operations. On top of that, the company participates in numerous community-oriented projects, like sponsoring employee vegetable gardens and participating in local river cleanup efforts – all geared toward environmentally friendly resource management.
As customers review their suppliers’ sustainability efforts, Somple recommends evaluating the business proposition behind the projects. “Poke and probe the numbers. Are your suppliers greenwashing for the sake of the sustainability checkbox on supplier surveys, but driving up your costs in order to pay for it? It’s a risk.”
About Mack Molding
Mack Molding, designated an Environmental Leader by the state of Vermont, is a leading custom plastics molder and supplier of contract manufacturing services. Mack specializes in plastics design, prototyping, molding, sheet metal fabrication, machining, and medical device manufacturing. Founded in 1920, Mack is a privately owned business that operates 10 facilities throughout the world. Don Kendall is president and CEO.