1. David Kazmer, P.E., Ph.D. Univ. Mass. Lowell Competing in the 21 st Century

2. Agenda Current Trends –Globalization –Politicization Strategies –Consolidation –Specialization Products Processes

3. Globalization Concepts Efficient Resourcing –Labor –Materials –Regulations Environmental Intellectual property Trend Escalating –Infrastructure –Market access

4. Globalization: Typical Case Studies (India) Flextronics: printed circuit board assembly, plastics manufacturing, box builds, and testing services. Solectron: manufacturing unit and design center in Bangalore and a post manufacturing center in Mumbai. Samsung: home appliances, cell phones, PC monitors and disk drives, laser printers, fax machines and televisions. LG Electronics: home appliances, computer peripherals and televisions. General Electric: major R&D center in Bangalore.

5. Globalization: Long Term Consequences Lack of supply chain flexibility –Raw materials availability, political fall-out, shipping, demand fluctuations… –Reduction of internal capabilities (NPD) Sharing of know-how leads to new competitors –Outright theft of designs –Access to common components

6. Politicization: Concepts Political lobbying & legislation has extraordinary effects on manufacturing –Cost (value of dollar, interest rates) –Infrastructure (OSHA, health care) –Tax incentives (research, depreciation) –Technology initiatives (nano, bio, energy, …) –Anti-plastics campaign (PVC, diseases, …) Very dynamic (election year vs. not)

7. Politicization: Case Study 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".

8. Politicization: Case Study 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. –China also exports plastics in many other forms… –In 2002 China doubled the volume of its exports China is world's largest petrochemical importer –Chinese petrochemical demand is doubling every 8 years.

9. Agenda Current Trends –Globalization –Politicization Strategies –Consolidation –Specialization Products Processes

10. Consolidation Concepts Mergers & acquisitions have changed nature of the industry –Fewer, bigger producers Motivation –Focus on large multi-million $$ customers –Global footprints near points of assembly –Provide more of the supply chain, start to end –Enable new business & technology strategies

11. Consolidation Case Study Nypro –Not very significant until 1990 –Currently $800MM in sales Strategy –Globalization –Outsourcing (manufacturing, design, inventory) –Bankruptcies and consolidations –More value added in and out of press Investment in global business & technology

12. Product Specialization Concepts Processors can focus on products –Vertical integration allows tight integration between market, design, and processing Research indicates plastic parts are 10-40% of product value –Value is retained if vertically integrated –Outsourced suppliers typically recoup 5-10% Product technology & IP raises barriers to competition

13. Product Specialization Case Study Head up display maker –Internal molder –$15 reflector 0.25” Thick 100 sec cycle –Possible cost: ? –Is it OK? Other example: Visteon & HVAC Units Other example: Nypro & cell phones

14. Process Specialization Concepts Focus on advanced processes –Technology allows new capabilities –Investment, know how, and IP provides barriers for competition Similarly, process focus can lead to a market focus –Market focus allows greater recognition with better, more confident service

15. Process Specialization Case Study Proto-mold –Automated quote, design, build, mold $=f(Q,t) Suggested changes –Parts in 5 days 100-10,000 qty $7.00 - $3.00 vs. ~$0.40 in commodity market Other example: NAL & Stanley in auto lighting –Use of multi-shot molding

16. Conclusions It isn’t all about labor rates –Automation & localization can largely offset True commodities (bags) in jeopardy? It is about differentiation –Market understanding, penetration, & recognition –Product & process specialization –Cost & time performance

17. Final Thoughts Mid-Term: Oil Supply –Increasing Asian demand –Weakening dollar Government debt Trade deficit Euro as preferred currency Long-Term: Labor Demand –Global supply of all labor –Improving supply chains