I recently interviewed Alex Curtiss who discussed how his American company remains competitive when compared to Asian outsourcing, in their case in regards to machined plastic parts.Alex is the President and CEO of Engineered Plastic Products Corporation (EPP Corporation).
How can US companies remain competitive when compared with Asian outsourcing?
The way EPP approaches the issue of remaining competitive compared with Asian outsourcing is through supply chain management. The way EPP structures this with their customers is that once per year they come to EPP with the majority of their needs for plastic machining. They look at their EAUs. EPP then takes the requirements as literally one requirement. EPP then goes to their materials vendors to negotiate the fact that when they do receive an order it will be firm. The vendors usually will give a 15-20% discount over ‘discrete’ orders.
Traditionally, the problem when competing with Asian companies is that the manufacturers have been very hesitant to make a commitment, even if they know the commitment actually exists. In the old days 20 years ago they had something called blanked orders. No one wants to do blanket orders now because they are afraid if their business softens they will be forced to take the remainder of the requirement.
The way EPP structures things, which cannot easily be done with Asian sources, is to say “what is your EAU?” For example, if they say their EAU is 10,000 parts per year (roughly 800 per month) EPP does not force it on them. It is a pull system. The customer can save several ways:
Firstly, they save by making the commitment because EPP gets a better cost and can structure it into their manufacturing system, thus lowering the customer’s cost. EPP knows they have to run 10,000 parts at some point. They can use it as fill-in and optimize it because they know they will run it over and over again. Secondly, if the customer does not need 800 per month, EPP does not force it on them but instead allows them to communicate their needs.
Thirdly, the customer saves through inventory. EPP can literally do just in time inventory which will save significant amounts of money. The math calculations on the cost per day of holding inventory can easily be done. Fourthly, there are other side benefits including the flexibility of being able to change a part, to get some engineering assistance along the way, or whatever else is needed.
The key is a combination of commitment and flexibility. EPP has found a lot of customers come back to them to report that when things go wrong with an order language becomes a problem. They will then have to wrestle with the supplier to determine who is at fault, and the customer usually has to pay up front. EPP is ISO Certified and they guarantee 100% quality. When the material goes in it goes right to the line, most of their customers don’t even check their parts. If they want anything at all EPP sends a written quality report with it, but most customers don’t request this.
Why should companies consider working with domestic suppliers?
Another issue to consider if going to foreign suppliers is the copyright and legal protections which exist in the US and which don’t exist or are different overseas. There is the risk of patents being ripped off and designs being ripped off. EPP has had numerous customers tell them that they are fearful of doing that.
Also, from a financial standpoint Asia is starting to get a little more expensive. EPP can compete with the flexibility and other advantages mentioned in the previous question above. The customers can feel they have a secure situation in terms of their design – they can also easily communicate with EPP on any changes to the design. This makes it a lot easier.
However, if you are dealing with a basic commodity which is not going to change with wide tolerances and where quality isn’t particularly important, then perhaps you should go overseas. Yet, for a wide variety of things that are produced in the US they need to look at US sourcing now because we have some good tools to compete.
EPP is seeing an increasing number of people talking to them about problems with Asian sourcing. When they offer their version of the supply chain management system it becomes very attractive to them. Often when comparing costs among EPP’s type of precision products, they are within a few percent of Asian sources. In addition, the customer gets the security, flexibility and high-touch from EPP. The customer also factors in the time they have to wait for an example from an Asia supplier (between 10 and up to 20 weeks), compared with 2 days from EPP once they make their commitment.
It is important for domestic manufacturers to embrace the idea of flexibility. Alex belongs to the GOA (Greater O’hare Association) in Chicago. Most people don’t realize that the Chicago area is the largest industrial base in North America. Alex also sits in on the Council of Manufacturing CEO’s and they talk about this issue all of the time. Alex thinks manufacturing as a whole is starting to take root in this country. Short of another recession, Alex believes US manufacturing will be a driver.
Alex also wishes there were more young people looking at manufacturing. EPP’s manufacturing group needs people badly. Alex believes we should talk more young people into studying manufacturing. This would enable EPP to fill a lot of jobs.
About Alex Curtiss
Alex has authored publications on the subject of plastic materials and plastic machining. His work has been featured in Product Design & Development Magazine and Purchasing Management Magazine, among others. Alex has also been invited to speak on the subject in front of trade shows, corporations, and seminar groups.
Alex founded Engineered Plastic Products Corporation in 1976 and has since built the company into America's premier plastic machining supplier. EPP supplies the highest quality plastic parts to critical industries such as aerospace, medical, fluid and pneumatic power, scientific instrumentation, and the military.
At EPP, Alex has developed the concept of the "Plastics Application Engineer." The EPP team of plastics experts help their customers determine the proper plastic material and manufacturing methods for their custom components. This complimentary service has helped EPP stand out as America's premier plastic machining supplier.
Alex’s background is not only materials, but in processes and design. His company helps their customers select the materials, figure out which process works best, and gives them the tools and information they need to design components for their equipment which are efficient and will do the job for fit, function, longevity, etc, all for a cost which makes sense.