Captain Billy Tyne faces the fight of his life. Miles from shore, he and his crew battle a monster storm. Waves 40 feet high pound the fishing boat, washing up on deck to sweep men and equipment overboard. Shrieking winds drown out all communication. All hands work feverishly, but the storm wins. The Andrea Gail and her entire crew are lost – sunk into the depths of the Atlantic Ocean.
How did this happen? They knew a storm was coming. They thought they were prepared. But this was a storm like no other – two powerful weather fronts plus a wild hurricane – the Perfect Storm. And they underestimated its power.
You may recognize this as the plot for The Perfect Storm (2000) starring George Clooney and Mark Wahlberg. But it can be all too familiar in the business world. You navigate storms on a regular basis. But one day, nothing you know about surviving industry changes works because this storm is ocean-sized. You’ve never seen anything quite like it before – and you don’t know what to do.
Let’s take a look at three of the biggest threats currently attacking our industry. Then we’ll offer you some strategies for facing them, so you can survive this Storm of the Century.
CRASHING INTO THE PERFECT STORM – 3 BIG FRONTS COME ROLLING IN AT ONCE
For over 100 years, the injection molding industry remained steady. Growth was consistent and relatively predictable. This pattern began to change in the last few years, challenging the industry much like the storm rocked the Andrea Gail vessel in the movie. The biggest “weather fronts” facing us are the rise of tariffs, the ravage of inflation, and the realities of the post-pandemic workplace.
Overseas tooling has become a growing business as toolmakers seek to control costs. But new taxes on overseas goods – intended to stimulate the U.S. economy – have hurt manufacturers, who must absorb these extra costs. What can you do to reduce their impact on your bottom line?
Inflation bowls over everything in its path. From hiring more workers to ordering necessities, inflation impacts every aspect of your business. It’s important to stay ahead of the game with inflation to keep it from completely knocking you down – in your buying and pricing strategies and in your relationship with your customers.
Prevention and control of the COVID-19 virus forced the world into protection and isolation mode. With them came social distancing, a sharp increase in remote working, and other adjustments. These have added an interesting dynamic, especially to sales and customer relationships.
3 SOLUTIONS FOR THE HIGH ADDED COSTS OF TARIFFS
Tariffs have been around for some time, but in the past few years, we have felt more of an impact in our industry. The list of tariffed countries has grown, and the tariffs themselves are larger. It's become more urgent to find solutions that minimize the impact these tariffs have on business.
In the injection molding business, tariffs can really sting. Many of our tools and parts need to be purchased overseas, and there is no avoiding tariffs on these items.
Here are 3 solutions you might consider that can reduce the impact.
Solution 1: Buy from a non-tariffed country
Ask yourself – Could I source tools from a country that is not being tariffed by the United States? Do some research. You may find another supplier that can provide quality tools without the markup of a tariff.
Solution 2: Adjust how overseas items are sent to you
Tariffs are based on the value of finished goods coming into this country. Consider having your supplier break out the engineering cost from the mold-building cost as separate line items. Doing this will lower the overall impact of the tariff.
Solution 3: Look for ways to re-shore parts production
At Pleasant Precision, we have seen an uptick in requests for us to provide parts that customers have been purchasing overseas. Our proprietary Round Mate® System offers a competitive advantage to our customers – its interchangeable insert molding design leads to decreased lead times and reduced tooling costs. Buying from a U.S. supplier will get you improved quality and speedier delivery. Examine your processes and look into what parts you can purchase domestically.
HOW TO KEEP INFLATION FROM DESTROYING YOUR PROFIT MARGINS
We knew higher inflation was coming. Now it is here, and it will be making us uncomfortable for a long while. The biggest problem of inflation is the increased cost of raw materials and packaging. This will narrow profits and could kill your business entirely if you aren’t proactive in dealing with it.
Here are some things you can do:
Monitor your costs closely – and pass extra costs along in your pricing modelThis is not cheating. It’s protection. You are simply passing along the extra cost of doing business. Be prepared to also pass along the savings when your reviews show your costs have decreased. Your customers will be happy to know they can trust you to be honest and fair.
Be upfront with your customers – explain what is causing your higher prices.Communicate clearly that your rising prices reflect unavoidable rising costs. Make sure your customers understand that raw materials are a cost of creating the product, not a profit center. Your customers should understand that passing along material and colorant cost increases is a standard industry practice. You may just need to remind them of this.
Be smart about your material purchasing.Study the buying history and habits of your customers. Use the cycles you see to adjust your material purchasing. Smarter purchasing can lower your overall cost of manufacturing.
Remember… everything is negotiable.Shop around! Know the true market value of products. This will give you an advantage in negotiations. Don’t be afraid to ask suppliers for better pricing. You’ll find that if you ask, you will get a yes more often than not. It never hurts to ask!
THE POST-PANDEMIC WORKPLACE IS A DIFFERENT WORLD!
You may be tired of hearing about COVID-19 by now, but there’s no denying that the crisis ushered in significant change. To be effective in the marketplace, we must recognize those things that are here to stay and how they affect how we work.
Embrace the reality of remote work
Remote work was growing in popularity before COVID-19, but the realities of a worldwide pandemic forced instant change. Companies that didn’t think it was possible to allow employees to work remotely had to move quickly. Despite security or other concerns, they had to put a workable remote model in place or be forced to shut down.
When the pandemic settled into less of a daily threat, many companies discovered that they could continue to operate just as well with a large portion of their workers in a mobile setting. In fact, it reduced many of their costs for maintaining office space, travel, etc.
Keys to navigating in the new remote workplace:
Trust your employees – Don’t micromanage them!Give your employees the freedom to work on their own. Micromanage their every move, and you’ll find yourself with a worker shortage. The most desirable workers will exit your company for one that treats them like the professionals they are.
Set goals as a team and give each part of the team responsibilities per area
When you set goals as a team, everyone can buy in and feel a sense of accomplishment as you work together to complete the list. Break the goals down into manageable parts and assign each to different parts of your team.
Keep tabs on your team with regular PULSE meetingsPulse meetings – short, daily standing meetings where a team plans their work with the help of a Pulse board – are more interesting and more effective than standard meetings. Use them as a check-in with your employees. You can talk about their progress and ask what help or support they need from you. This is a great way to communicate without micro-managing.
Make peace with web meetings
| With travel restrictions and sheltering in place came the rise of web meetings. They were in use before, of course, but once in-person meetings were not possible, everything from work meetings to doctor appointments to family holidays were moved online. That’s when companies realized that web meetings could be more efficient and cost-effective.
Even if your company has remained or gone back to a largely in-plant workforce, be aware that many others are still working mobile. Embrace technology. Upgrade your infrastructure and policies if necessary. Smooth and easy online meetings will make you attractive as a modern, forward-thinking company.
How can you make the best use of web meetings?
- Create and share a clear and focused agenda for each meeting
Make sure people know what topics will come up so they can be prepared.
- Webcams on!
Encouraging everyone to keep their cameras on keeps people more engaged with the meeting.
Focus on non-verbal cuesWatch for facial & other nonverbal expressions and respond if you see confusion, frustration, etc.
Create a new kind of office culture during web meetingsWork to decrease formality and increase flexibility and personal connection. These things are important to employee well-being in the modern workplace.
APPLY WHAT YOU’VE LEARNED HERE, AND YOU CAN SURVIVE THE STORM OF THE CENTURY!
In the past two years, we have seen major changes in the marketplace. With the triple threat of tariffs, inflation, and the post-COVID workplace in motion, it can feel like we are facing our own Perfect Storm.
If you want to survive it and be successful, you must change the way you do business. Be proactive and monitor each situation closely. This will set you and your business up for success.
Your customers will come to rely on you as a trustworthy, forward-thinking company they can count on as a partner in riding out the storm.
Pleasant Precision has already applied many of these practices to our own work and is working on others. At Pleasant Precision, we are Solutions Providers to the plastics industry. Please get in touch if we can assist you in setting up your own workplace for success. We’d love to help!