Benchmarking plastics processors: Know your competitive set
Top of the cycle.
Those four words draw a great deal of attention in the automotive sector. For some suppliers with limited data and market knowledge, the words mean an impending cliff. Other suppliers with robust market intelligence interpret them to mean opportunistic growth and cost structure preparation.
For over 20 years, plastics processors — injection molders, blow molders, extruders, and thermoformers — have relied on the competitive insights and analysis of Plante Moran’s North American Plastics Industry Study (NAPIS). Companies that complete the survey receive a customized, free, and confidential benchmarking report that can influence success well-beyond the top of the cycle.
Take the NAPIS survey to confidently assess the health of your business with comparative data from the competition.
Over the years, we’ve collected and analyzed a treasure trove of data. We’re always asked: “How is success defined?” If the plastics processors were to hold an NFL-style scouting combine, they’d look for a company that had:
- 10 percent return on sales
- 15 percent return on assets
- >5 percent sales growth
While these qualities describe the “composite player,” processors that participate in NAPIS gain vision and comfort — a factual understanding of where they stand in the marketplace based on revenue, process, customer, and a number of other data cuts. The benchmarking data exposes the parts of a company that require focus.
Participating in benchmarking exercises is always good for external comparison, but NAPIS also helps companies understand their cost and operating structure for a wide range of applications, starting with disciplined program quoting. Tops of the cycle bring a great deal of changes in vehicle programs. These programs can be pulled ahead, pushed back — or, in the case of Ford Motor Co.’s recent announcements to end the majority of its passenger car programs — completely rethought all together. Companies that know their cost structure can profitably price new business aggressively and understand allowable levels of productivity over the program life.
Most plastics processors don't fully appreciate the impact of indirect labor loading and target press utilization on press rate calculations.
Of course, understanding company press rates significantly influences the accuracy and discipline of new program quotes. There’s no one production strategy (level load versus flexible, long-run versus low inventory, low-mix versus high-mix) or no one equipment array (level of automation, material conveyance, press or auxiliary capital) that explains all press rate variance. Still, our experience and survey data show most plastics processors don’t fully appreciate the impact of indirect labor loading and target press utilization on press rate calculations. Participants of the 2018 NAPIS see how various operational and financial analytics are interrelated.
Cost structure preparation
It’s natural for buyers to target cost cutting — particularly, SG&A (selling, general, and administrative) expenses. However, we find that SG&A in successful companies averages just 13.1 percent of total sales. Is there waste? Without a doubt, but there’s a deeper cost pool — 75.4 percent of sales — that gives leadership greater cost-saving opportunities. In this deep end, the cost drivers are material cost management and organizational structure. Successful companies focus on renegotiating material contracts while times are good and identifying material cost indexing mechanisms to protect against future market volatility.
Successful companies focus on renegotiating material contracts while times are good and identifying material cost indexing mechanisms to protect against future market volatility.
On the organizational front, the most successful plastics processors focus on full-time equivalent (FTE) head count and compensation, but its labor productivity driven by the FTEs that truly moves the needle. Here, successful companies — based on return on sales, return on assets, and sales growth — deliver value add per loaded labor dollar of greater than $2.04. Do you know where your company and suppliers stand?
Value of NAPIS participation
NAPIS is always open for supplier participation. The initial 2018 data set includes over 213 facilities representing over $5.5 billion of sales. The average participant spends less than two hours to complete the survey. Upon submission, a participant receives a 72-page, individually tailored report card grading the company against its peers. The report is “board presentation” ready and contains expert industry and benchmark analytics commentary. To learn more about the survey or access our annual executive summary, visit plantemoran.com/napis.