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The Boomerang Effect

As the 21st century began, China loomed as an ominous threat to manufacturers in Wisconsin and across the United States. The common refrain was that American manufacturers could not compete with China's low-cost labor and lack of environmental or labor standards.

Countless Seminars were held to the topic. News articles and television programs amplified it. Best-selling books were written about how domestic manufacturers can outsource jobs to Chinese suppliers.

Indeed, many Wisconsin manufacturers lost market share to Chinese competition. Others closed up shop, saying they were unable to deal with low-cost global competition.

However, many manufacturers in southeastern Wisconsin are not only dealing with global competition, but they are they're beating it. Select manufacturers in old-line industries such as investment casting, injection molding, precision machining and tool-and-die making are routinely taking business away from their Chinese competitors.

To effectively compete, many Wisconsin manufacturers have transformed their operating models using the principles of lean manufacturing, automation, quality assurance and control, just-in-time delivery, innovation and technology, said Mike Klosinski, executive director of the Wisconsin Manufacturing Extension Partnership (WMEP), a private, nonprofit organization dedicated to the growth and success of Wisconsin manufacturers.

"Many Wisconsin manufacturers have not sat still (in recent) years, " Klosinski said. "Putting in place lean (principles) has been the biggest strategy. And by taking on more services around their product, understanding their customers' customers and being more innovative and creative about developing new products, they've turned into value suppliers. As a result, those companies' large customers are electing to source with someone they can trust instead of sourcing overseas."

Automation and Value

Like Signicast, Plastic Components Inc., a manufacturer of injection molded plastic components based in Germantown, competes directly with the Chinese and other emerging markets. The company produces components that are used in a wide variety of manufactured products and has customers around the globe.

Also, like Signicast, Plastic Components relies heavily on automation and technology to keep its parts price down.

Plastic Components, which started with three machines in 10,000 square feet of space, has evolved into a 42,500-square-foot facility with 42 machines and 58 employees. The industry standard averages five employees per molding machine; Plastic Components averages 1.4.

Plastic Components' focus on automation and technology has kept its labor costs down, which keeps its pricing highly competitive with other molders in China and other emerging markets.

In 2007, Plastic Components achieved record sales of $11.3 million. The company is off to another record-breaking start to 2008, with first-quarter sales posting 14.8 percent growth over the first quarter of 2007, Duffey said.

The company shipped more than 117 million parts in 2007 and shipped more than 37 million parts in the first quarter of this year.

Plastic Components has found ways to use its low-cost capabilities to market itself, much like Signicast.

The company's marketing efforts are highly targeted at original equipment manufacturers that use pieces similar to those made by Plastic Components. Many of the companies it pitches to use foreign suppliers.

Plastic Components has expanded four times at its Germantown facility and has no expansion room left.

Next Generation Manufacturing

Signicast, Plastic Components, Barton Precision Products and Reich Tool & Design are all exhibiting traits of next-generation manufacturing, Klosinski said, and are positioning themselves for future growth.

"One of the elements of next-generation manufacturing is more rapid product development and being innovative in your product and market identification," he said. "If we're going to succeed, one of the metrics that will have to change is the percent of revenues that are derived from new products and markets that have been developed in the last three years. Companies that are doing it today are getting a head start on being a next generation manufacturer. There is a better opportunity to preserve your margins, you're there in a new market and you're making a product that has not been subject to competition."

Originally published in the Small Business Times.

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