Plastics Molder Offers Cost-Competitive Alternative to Overseas Manufacturing
Semco produces a variety of custom molded plastic fuel and reservoir tanks for the lawn and garden, agriculture, power sports, automotive, and consumer products industries
Photo courtesy of Semco Plastics
According to one company official from Semco Plastics, in St. Louis, Missouri, dealing with overseas manufacturers can be fraught with too many problems for an OEM looking to maximize profits and run an efficient operation. All too often, parts and components coming from Asian countries, such as China, take too long to reach the U.S., and, when they get here, they are sometimes defective. Couple that with language and time zone problems, and the risk of intellectual property (IP) theft, and sending work overseas becomes less appealing.
"Lead times are usually shorter with American manufacturers," says Matt Wasiak, national sales manager at Semco Plastics. "Coming from Asia, it's 60 to 90 days, for example, from China; whereas, I can ship products just-in-time for them. So if their numbers move up or down, I can react quickly. In Asia, they have to fill an entire shipping container to make it worth their while, so you'll get a whole container, whether you want it or not. So inventory costs come into play as well."
The cost of customs duties, as well as other added fees, has steadily increased, according to Wasiak. "I believe it was 2% to 6% about a year and a half ago for goods coming into our country," he recalls. "That price has gone up as the Chinese government has increased it. Sometimes, the duty cost can be expensive and they're not quoted on the part cost, so it ends up being a surprise afterwards. And they'll even put in what they call an inspection fee. So there are some unknowns that go into the cost of that part that are never revealed when the part is quoted."
Robots Help Company Compete
Semco Plastics serves a wide variety of industries, handling a large volume of work for the automotive, consumer products, power sports (the ATV and UTV industries), and medical markets. The company offers its customers a wide variety of custom, plastic molding options, including injection molding, blow molding, gas assist molding, and thermoset molding. In addition, Semco offers insert molding, foam filling, in-mold decorating, full assembly, part design and engineering, in-house mold building, robotic automation, and full turn-key programs.
"We do quite a few different types of molding and also design and engineering; we have a full tool and die shop, and we also have a large warehouse," says Wasiak. "A lot of our customers demand just-in-time, and we're one of the largest suppliers for the lawn and garden industry. We make fuel tanks for them, and right now, things are going extremely well because of the season. We're one of the largest suppliers of fuel tanks for this industry, for riding lawn mowers and snow blowers. There are also a lot of plastic components that go with the tanks.
"We have about 50 molding presses and all of them are equipped with robotics," he added. "If you have a part that has to be run for several days or months, it makes sense."
Per part costs, transportation costs, and lead times can become issues when dealing with an overseas supplier. Part costs, Wasiak says, are especially critical in the automotive industry. "Part cost is everything when it comes to an automotive part," he says. "The margins for a supplier like me are razor thin. They've got to look at every cost associated with that part. When it comes to the transportation costs, prices are going up when bringing parts from Asia to the United States. And the lead times are sometimes unpredictable coming out of Asia. For instance, China has a real power shortage, so some factories are told they can only run three or four days per week. So the Chinese government will move the power grid around to different parts of the city. Or, there will be a work shortage because, many times, one supplier in Asia will be paying, say, 62 cents per hour, and the one across the street will be paying 66 cents, so that supplier will lose a bunch of their workers. So that puts them behind the eight ball."
One of the ways Semco Plastics has been able to compete with China, says Wasiak, is by removing labor through automation. "We have robotic automation on our presses, for loading and unloading the machines to be more competitive with China. Another reason is the lead times, which are increasing for jobs coming out of China. Many times, companies in the United States can't have that wait time. Their business moves up and down quickly, so they have to react quickly. If they don't have parts, it can shut down an assembly line."
Sometimes, quality becomes an issue with overseas manufacturers, especially if the parts are rejected for any number of reasons. "In China, you're not sure what plastic or metal is going to be used," Wasiak explains. "They'll often quote one material, then use something else. Also, what you have is 90 days of lead time, and if they make the components wrong, what does that company do? They can't wait that 60 or 90 days. So that frustrates a lot of people. Another issue is that labor costs are steadily increasing, which is making U.S.-made products more attractive."
American manufacturers are often able to meet their customers' needs more efficiently and more cost effectively than their overseas counterparts. "With quality, we're ISO-9001:2008, so all of our components are put under a very close microscope," Wasiak comments. "Many of our components have very tight tolerances. Some are very small and some of them are very large. So when you have tight tolerances, you have to have checks put into place. We're also able to provide on-time delivery through just-in-time, so a particular customer doesn't have to warehouse the parts; I can send the product to them when they need it. We warehouse and inventory the products for them."
Protecting intellectual property rights can also be a never ending chore when dealing with overseas contractors. One of Wasiak's customers experienced IP theft directly. "There was a plumbing manufacturer that we were making components for," says Wasiak. "The work ended up in China. This particular plumbing company came up with a new line of faucets that were in the big box hardware stores. Two weeks later, another well-known company came out with their products—knockoffs that looked identical—and the products came out at a third of the price. They copied the color, the style, everything; they stole the patent. This happens a lot."
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