It’s Not All Going Abroad

Plastics processors can’t help wondering what kind of business is “safe” for domestic manufacturers and what will be the next to flee to China, India, or some other lower-cost region of the world. One theory holds that high-tech processing is more suited to the U.S. But some Chinese molding plants are being stocked with all-electric injection presses in clean-room environments. Some say low-tech, low-value products are targets for outsourcing overseas, but shipping costs come into the equation. As economist Bill Wood notes in his Outlook column (p. 61), it’s more efficient to ship rolls of film than plastic pipe. So guess who’s suffering more from imports?

Or take the case of a U.S. importer of cast polyester lawn statues—low-tech, inexpensive products requiring manual labor—just right for production in the Far East. That is, until the importer found that shipping cost him as much or more than the actual manufacturing. So he’s looking to move production Stateside.

Matt Langton, v.p. of sales and marketing for United Plastics Group (UPG), Oak Brook, Ill., has a pretty good idea of what kinds of jobs are better suited to the U.S. or elsewhere. His firm has 10 contract manufacturing plants in the U.S., Mexico, U.K., and China—where UPG just opened its third site. He told me recently, “Certain applications belong in low-cost countries—labor-intensive jobs and ones not worth automating because of frequent model turnover. Also small products rather than bulky ones. Would you rather ship cell phones or car bumpers across the ocean?”

The products likely to stay in the U.S., he said, are ones that involve special quality standards or proprietary intellectual capital, or are good candidates for automation. He cited medical products as a prime example of all three. It’s much harder to ensure FDA-mandated manufacturing standards in a plant 10,000 miles away. There are concerns for protecting intellectual property. And medical products with longer life cycles are suitable for advanced automation that can erase any cost advantage abroad.