So you start out your day by brushing up with the latest business developments.
BIG MONEY NOW NEWS: Dateline 8/11/2016
Frank Executive, CEO for Giant Corp, announced today that the Medical Device Injection Molding Division of his company would be moved to a current off-shore facility as a cost-cutting initiative. Mr. Executive stated that this specific shift could save the company at least $50 million per year. He further stated that this “strategic business move would concentrate manufacturing resources into fewer locations, improving product build efficiency and better utilizing plant capacity. While the shift to a larger factory would have some short-term associated costs, corporate leadership believes that this move would ensure continued sales growth. We expect no impact on our customers during this shift. Additionally, we anticipate continued profitability given current and future rates of production.”
As the company shifts the division to the larger facility, approximately 500 current workers would be affected in areas of fabrication, assembly, warehouse and plant administration. Some employees at the middle management level could be offered transfers to oversee the production move. Other employees may be able to move to different U.S. or global operations. Company officials believe there will be less movement with that division’s sales, engineering and customer service employees. “We understand that this decision will have a large impact on some of our employees, their families, and the community. However, we have committed to treating our departing employees respectfully and will ensure a smooth transition,” stated Vice President for Human Resources Candide Official.
Mr. Executive also stated that this move should be accomplished in less than a year since retrofitting of the offshore facility is nearly complete. He noted that the majority of the relocation and related expenses will occur before the next corporate annual meeting, scheduled for June 2017. Corporate officials expect that the increased financial gains anticipated due to this move will be seen by stockholders via increased stock value in late 2017.
So that’s how you find out that your supplier is moving their production division out of the U.S. – on a business news website. You’re confused and somewhat concerned. While that article states that there will be no disruption to future orders, you’re not so sure. Some of your company’s staff has visited the current manufacturing facility numerous times over the years and they have gotten to know many members of the production team. This change probably means that a number of them will lose their jobs or possibly relocate. Will the employees at the offshore facility take the same care or will there be problems and delays? It’s certainly hard to know at this point.
As you re-read the article a statement jumps out at you, “continued profitability given current and future rates of production.” And then another, “increased financial gains anticipated due to this move will be seen by stockholders via increased stock value”. That all sounds like they expect to continue their current pricing structure. This move isn’t intended to reduce prices to their customers but to make more profit. It might seem logical to think that if their costs are going down, your costs probably should as well. That doesn’t look to be the case.
This situation is all too common in today’s business world. A company moves their production to a more “business friendly” state or even out of the country altogether. This type of situation often has unforeseen ripple effects through the company that is moving as well as among the customers of that company. Quality control issues, production delays, and shipping problems are only some of the effects that could occur. All of those factors and more could change your own company’s profitability projections.
What does this all mean to you? That is really the bottom line. First of all, you should be evaluating your medical device injection molding suppliers regularly. Develop a matrix that you can use to determine that your supplier is still meeting your increasing needs. This could include measurables such as production turnaround time, supply chain considerations, and quality control as well as supplier responsiveness and flexibility to your ever changing needs. Second, it is always good to consider, or project, your company’s future needs compared to the trends you may see in how your supplier does business. Try to gauge the direction of this ongoing relationship.
How do you know that your supplier may be too big to fit your needs going forward? Some of the signs could be that the relationship no longer provides mutual benefits, or that your calls are not returned in a timely manner, or that your point of contact is always changing; leaving you to constantly reiterate your program needs. It might be that your supplier moves too far away and it causes transportation and delivery delays.
It all boils down to this question; do you want the biggest supplier that originally offered you the lowest price to win your business, or the best long-term partner?
No matter how you make the determination, there comes a time when you decide that your supplier is too big or is just no longer fulfilling your needs. When that occurs, think about Polymer Conversions to supply your tools, thermoplastic & silicone medical device injection molding, assembly, decorating and packaging. We’re big enough to do the job right the first time and small enough to respond quickly when you need us. We’ve been here for over 37 years and will continue to be here to serve and support your company’s growth agenda and our community. You’ll get the same cross-functional support team with every project you send our way, and will never have to worry about the future or quality of relationships being built.