1. The Economics of Lights Out Manufacturing David O. Kazmer, PE, PhD University of Massachusetts Lowell

2. Modern Manufacturing

3. Cost Structures Total Production Costs Total Labor Costs Total Consumables Cost Total Facilities Costs Machinery Maint’nce Facilities Yield $/Hr Output Downtime Energy Resin

4. Cost Parameters Cost parameters N.E.China Operator labor$13/hr$0.70/hr Eng/Mgt labor$30/hr$3/hr Energy cost $0.08/kWh ABS resin $1477/ton$950/ton Machinery cost$30/hr$15/hr Facilities cost$7.00/ft 2 $4.20/ft 2 Maintenance rate10%20%

5. Injection Molding Economics Case Study for a Mid-Sized Molder 200 million parts per year Average part weight: 10g

6. Obsolete Molder 8 cavities/mold with cold runners Poorly selected hydraulic machines (26 kW) 50 seconds per cycle (optimistic) Cooling issues & semi-automatic 95% quality level (optimistic) 1 operator per 1 machine 1 eng/mgt per 15 operators 2 shifts, 5 days per week 4 hour setup per 10,000 parts

7. Obsolete Molder Characteristics #Operators#Machines#Eng/MgtEnergy Use

8. Standard Molder 16 cavities/mold with 50% hot runners Well selected hydraulic machines (30 kW) 45 seconds per cycle (optimistic) 98% quality level (optimistic) 1 operator per 2 machines 1 eng/mgt per 15 operators 2 shifts, 5 days per week 2 hour setup per 10,000 parts

9. Standard Molder Characteristics #Operators#Machines#Eng/MgtEnergy Use

10. Lights Out Molder 32 cavities/mold with hot runners Electric machines (35 kW) 35 seconds per cycle Fully automatic including crating, etc. 99.9% quality level 1 operator per all machines 1 eng/mgt per all machines 3 shifts, 7 days per week 0.5 hour setup per 10,000 parts

11. Lights Out Characteristics #Operators#Machines#Eng/MgtEnergy Use

12. New England Comparison China

13. Head to Head Competitive Assessment

14. Validation: World Production US Plastics industry went from surplus of $894 million in 2000 to a deficit of $1,387 million in 2002 A swing of $2,281 million. In 2001, China exported $6bn of fabricated plastic products last year. In 2002 China doubled the volume of its exports China also exports plastics in many other forms… China is world's largest petrochemical importer Chinese petrochemical demand is doubling every 8 years.

15. Validation: Molded Utensils In 2003, US imported more than 100bn plastic bags A coalition (Intelplast Group, PCL Packaging and Sonoco Products) claimed that Asian countries were flooding the US market with below-cost PE bags and demanded an anti-dumping duty In September, the US Inter’l Trade Commission determined that "there is a reasonable indication that a US industry is threatened with material injury by reason of imports of polyethylene retail carrier bags from China, Malaysia and Thailand that are allegedly sold in the United States at less than fair value". A producer of plastic utensils found that they could purchase products from China for less than the cost of their resin.

16. Investment, Risk, & Specialization Lights out costly to achieve in lower volume applications Sensing & quality control protocols Robotics & materials handling Scheduling & switchover What volumes make sense? Existing plant or green field plant?

17. Break Even Comparison

18. Risk Factors Volume won’t materialize Application may be yanked Investment in technology won’t work Time value of money not realized

19. Manufacturing Strategy Develop long term relationships Contract stability Rational quoting Risk/profit sharing between customers & suppliers Specialize in technology/application area Unique capabilities & knowledge Fewer competitors Focused set of manufacturing tools Reduction & re-use of investment 57 37 32 Enter long term contract, give concessions Make strategic investment in lights-out Redefine standard procedures Quote based on new cost structure

20. Summary Two primary drivers in marketplace Technology drives molder productivity Internationalization & consolidation enables leverage Future shock for custom molders High volume applications go lights out Definition of ‘high volume’ going down Profit margins driven by manufacturing efficiency Lower volume applications will remain Sampling, point of use, specialty applications Profit margins widely variable