By Cara Walton, director of market intelligence, Harbour Results, Inc.

It’s been an interesting three years for the manufacturing industry. In 2020, we dealt with COVID-19, but, together, we learned what to do and what not to do. And despite starts and stops, ups and downs, the plastics industry persevered. Then, 2021 brought a year of unprecedented high demand for durable goods, driving major supply chain challenges – primarily raw material and people shortages.

Throughout 2022, we had to navigate our businesses through 2021 obstacles, as well as new and different challenges that continue to impact the North American manufacturing industry. While the growth in the first part of the year was relatively positive, it, unfortunately, didn’t last.

As one might expect, the industry will continue to face challenges in 2023. According to the 2022 MAPP Plastics Benchmarking Study conducted by Harbour Results, Inc., respondents agree that the top three concerns among plastic processors are access to labor, increased wages – specifically the push for a $15 minimum wage – and growing raw materials prices. Additionally, the US economy is facing a recession – most agree that this will be a short and corrective recession, which will have a minimal impact on businesses. However, it is important that businesses stay vigilant. The supply chain issues will lessen but will still impact the industry. And labor will continue to be another big factor to address.

The good news

Despite all this, it is not all doom and gloom, as the demand for durable goods plateaus, it is important to note that many original equipment manufacturers (OEMs) – those buying plastic parts – are profitable. This is a positive sign and will likely translate to new products and programs – though it may be at a slower rate if consumer spending slows down.
The automotive market is expected to continue to expand as automakers invest billions in battery electric vehicle strategies. Forecasters predict global new vehicle sales will increase from 2022, reaching nearly 83.6 million units in 2023.

Growing demand from the packaging and healthcare industries, along with accelerating use in consumer goods and electronics, is likely to drive demand for plastics injection molding, specifically the need for more decorating of plastic parts, in the global market. In fact, the global plastics injection molding market is expected to grow at a rate of 3.51% from 2020 to 2026. Looking at the packaging segment, in 2020, it accounted for the largest share of more than 32% of the market by volume. In terms of growth, the healthcare segment is expected to lead during the forecast period, at a compound annual growth rate (CAGR) of 4.89%. This is a result of the rising demand from the medical industry due to the pandemic and an aging population.

Other considerations on the horizon

The plastics industry will continue to see more pressure to be environmentally friendly. From improving manufacturing efficiency and sustainability, using natural fibers and recycled polymer content, and new ideas for reuse and recycling – companies have moved sustainability to the forefront. In-mold labeling, in-mold decorating and in-mold rolling all provide a great opportunity for improved sustainability.

Additionally, as the advancement of technology continues, additive manufacturing is being adopted for more products and higher volume products – it is not just for prototyping anymore.

There also is the introduction and perfecting of new technologies to support the industry’s drive to improve efficiency and sustainability. Smart company leaders are looking at how each technology can support their manufacturing niche to further differentiate their solutions from competitors.

Success starts at the top

The plastics manufacturing industry will face near-term challenges but looking forward to 2024 and beyond there will be a great deal of opportunity for companies focused on delivering best-in-class solutions. Managing all the uncertainty in the marketplace and being a top performer starts with leadership. Good leaders challenge everything. They are not satisfied with the status quo but push to identify and implement improvement across the facility to drive efficiency and flexibility – the holy grail of manufacturing.

There are 10 areas leaders need to focus on over the next 18 to 24 months to drive business success.

  1. Assess the business annually. Conduct regular reviews of everything – operations, strategy, sales process, financials/balance sheet and culture. Then leaders should be honest with themselves and their team about the results and how to address them.
  2. Listen to the data. Work with an analyst to find the story the data is telling and then prioritize what to work on to drive performance. Look at the best month(s) – what were the conditions? What did leaders do during this time?
  3. Go see and act. Walk the shop floor and talk to team members about what they see and address daily. Then call or visit customers to understand how the product integrates with theirs. Take all this info and create short-, mid- and long-term actions, using some of the structured business tools.
  4. Don’t dumpster dive for sales. Are the company’s sales aligned with the type of work the managers do well or do they sell anything to anyone? Know the business and target audiences. Develop the pricing and quote with confidence to get sales that result in profitability.
  5. Remember, bigger isn’t always better. Material price increases in the last two years have tricked some companies into thinking they were bigger. The growth can hide issues, so look at production hours and units rather than dollar amounts.
  6. Be flexible. Top performers succeed in a variety of business climates. Be prepared to deal with changes – labor, increased costs, etc. – so the business is optimized for various conditions.
  7. Run perfectly every time. Reduce variation as much as possible by going back to the basics. Create a culture of continuous improvement. For every new product launch:
    a. Quote it to set a baseline
    b. Launch it and compare it to the quote to drive improvement
    c. Look at it six months later and compare it to the quote
  8. Attract and retain talent. Let’s be clear, this is NOT solely an HR issue. Create a shop environment and culture that makes people want to stay once hired. Today, workers and future workers want something different, so the old ways of hiring and keeping people are no longer valid.
  9. Focus on technology. Create a technology roadmap that covers multiple facets – automation, software, process, quality and human capital. Become educated on technologies and look at what is needed when work is awarded. When company leaders invest, they need to do it smartly, making sure they have optimized their current equipment to full utilization before buying new.
  10. Remember, cash is king. Cash is the most critical metric for any business – if leaders don’t manage it well, it will catch up to them. Top performers operate with a 13-week cash flow to understand what the future holds for their business.

As a director of market intelligence at Harbour Results, Inc., Cara Walton runs the company’s manufacturing intelligence tool – Harbour IQ. She is responsible for strategic direction and growth as well as managing all data acquisition and intelligence gathering. Since its inception, Harbour IQ has collected and analyzed millions of data points from thousands of manufacturing companies on business and operation performance; established itself the leading manufacturing benchmarking resource with more than seven years of trended data; and features a market research division conducting custom market studies for manufacturers across all durable goods industries.