Rhoda Miel
PLASTICS NEWS STAFF
The Pacific
Ocean rolls onto the beach just 200 yards from the back door
at Pacific Allied Products Ltd. Workers can watch the surf while
they take breaks from making bottles and expanded polystyrene
containers at the Kapolei, Hawaii, plant. On a clear day, they
can see Diamond Head, just 25 miles away.
A
world away, in Michigan's remote Upper Peninsula, nearly 13
feet of snow had fallen by mid-January. On winter afternoons
at Ironwood Plastics Inc., deer come in from the fields to feed,
nabbing the food that employees hand out to help the animals
make it through the harsh winter.
Just
beyond the city limits of Ironwood, Mich., skiers zip downthe
four hills surrounding the town while a few brave souls checkout
the 120-meter ski jump just four miles from the injection molder.
The
separate families that own the operations -- Pacific Allied
Products and Ironwood Plastics -- share many of the same concerns
of how to do business in remote locations. They worry about
training workers, developing a niche that fits with customers'
needs and juggling the demands of everything from intermittent
power outages to snow plows.
These
are the costs of setting up a business where your heart leads
you, rather than where the marketplace normally dictates.
"We
came here because of a personal lifestyle," said Scott
Stephens, whose parents opened Ironwood Plastics 21 years ago
as part of his father's dream of returning to an Upper Peninsula
town like the one where he'd grown up.
"There
are disadvantages, but you have to find the advantages and exploit
the hell out of them."
Setting
up shop in out-of-the-way places bucks the trend for an industry
that typically seeks out sites based on customer demands, said
consultant G. David Moore. His company, Cumming, Ga.-based Moore
Associates Consulting Ltd., conducted a national survey of molders
dealing with site selection.
The
three issues deemed most critical, he said, were the local market,
labor availability and quality and utility costs
"Most
people come in and say, `I have an expertise, and this is the
market that expertise serves,"' Moore said. "But you
can define your way into success and fight the trend of moving
where
your market is."
Locating
in out-of-the-way places requires a good business plan and brings
a whole new set of hurdles for any processor, he said.
"There
are costs that are associated with, say, opening [a facility]
in your hometown, but there are advantages as well," Moore
said. For example, start-up shops may do better by setting up
where their personal support is the strongest, closer to financial
backers, lawyers or technical wizards.
"As
a small guy, sometimes it's more important to have that support
than to be close to the market," Moore said.
Even larger
companies are opting to locate new sites in more rural locations
to take advantage of a stronger labor supply at lower costs,
said site selection consultant Dennis Donovan, a principal with
Wadley-Donovan Group of Morristown, N.J.
Each
time a trained employee leaves, it costs companies about $2,500
in lost training, Donovan said. A more stable work force permits
employers to invest even more in training and produce the specialized
parts their competitors cannot.
Although
Donovan does not recommend that every business seek out the
back roads, he added, "You can recoup a lot of transportation
costs through lower labor costs."
Improved
technology, from the fax to e-mail, has helped put remote molders
in closer touch with their customers, maintainsBrad Weber, president
of Terhorst Manufacturing Co. of Minot, N.D.
The
60-employee company is one of only about two dozen plastic processors
in the state. It opened in 1926 to make metal parts of wind
generators but during the years has added toolmaking, injection
molding and expanded polystyrene production to keep up with
changing demands from customers in the agriculture and construction
industries.
Its average
customer is 500 miles away, but by working carefully with trucking
companies, Terhorst can meet delivery demands with custom parts
produced to exact specifications by a stable employee base,
Weber said.
It
is all a matter of perspective, he said.
"You're
only as remote as you want to be," Weber said. "It
used to be, you'd have to have three, four days to get a copy
of the [specifications] from a customer. Now, with the technology
available, you've got a fax right away.
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Missy
Nasi
Shipping, with her two sled dogs. |
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"It's
not like you have to be right next door to get information."
Paul
E. and Linda Smith had no experience in the plastics business
prior to 1982. He had worked in international banking, she for
the federal government's Office of Management and Budget.
What
they had was a desire to live in Hawaii. The couple advertised
to buy a company, finally settling on Pacific Allied Products,
which at that time mostly produced foam cups and EPS forms for
the construction business.
"It
had a technology I could understand, a marketplace we felt was
not fully served and a solid track record," Paul Smith
said.
Pacific
Allied eventually added PET blow molding capabilities.
Hawaiian
island life is everything they had hoped for, he said. Sun,
warm temperatures, beautiful views of everything from the surf
to volcanoes. Their yard is filled with tropical fruit trees:
mangoes, papayas, limes, oranges and tangerines.
"Anything
in Hawaii comes down to the personal location preference,"
Smith said. "Hawaii is paradise. It really is."
But
doing business there is not easy.
"The
most significant part is, you are so far from any significant
market," Smith said. "You're forced to focus on a
small market."
Hawaii,
with a population of 1.2 million, is a captive market, but even
accessing all of those potential customers means shipping between
islands -- not just packing a load on a truck.
Pacific
Allied operates more like a niche testing facility than a mass
producer. On any given shift in the 24-hour, 7-day-a-week operation,
workers are switching over one of the three blow molding machines.
"If
we get an order for 100,000 bottles of any particular style,
say a clear 2-liter, that's probably the largest single order
for any one bottle we'd ever get," Smith said. "Five
days of anything at any time would be an excellent run."
Any
foam cutter could end up with 10-12 different jobs during the
course of a week -- sometimes switching jobs after less than
an hour.
Pacific
Allied has 200 different products, including the 20-foot-tall
foam Santa Claus figures used in Honolulu's Christmas decorations,
roofing insulation, and the specialized packaging used by Kimo's
Ono Hawaiian Food, which sells a "luau in a box" on
the Internet at www.luauking.com.
That
means the entrepreneurs have had to develop a work force that
can adapt to changes quickly.
"Everyone
in a remote location has to focus on the ability to be flexible,
and do an equally good quality job on every one of those changeovers,"
he said.
To
encourage people to stick around, Pacific Allied treats employees
celebrating their 10- year anniversary with the company to a
trip to the U.S. mainland.
The
cost of doing business in paradise starts from the ground up.
To buy a 100,000-square-foot industrial site like Pacific Allied
Products costs about $26 per square foot.
"I
could buy land in downtown Los Angeles for less than that,"
Smith said.
Warehouse
space rents for 50 cents per square foot per month -- forcing
processors and customers alike to specialize in just-in-time
delivery.
Raw
material costs come at about a 10 percent premium over anything
on the mainland. That includes everything from resin to the
company's own shipping materials.
Electricity
runs 11.5-12 cents per kilowatt hour -- double the Midwest industrial
average of about 5.5 cents. Hawaii has no natural gas infrastructure,
so instead processors rely on propane, at $1.60-$1.80 per gallon.
With
little plastics production on the islands, Pacific Allied also
has to train the bulk of its work force from scratch.
"You
have a lot of condo maintenance people, but almost no machinery
maintenance people here," he said. "You hope to keep
people for at least three to four years just to retain them
long enough to pay for their training."
The
strong work force was just one of the selling points that brought
Ironwood Plastics to the 6,000-person community of Ironwood.
Gordon
Stephens was born in the Upper Peninsula town of Iron Mountain
-- about 100 miles south of Ironwood -- spending the first years
of his life running wild through the small town and surrounding
countryside.
His
family moved south to metro Detroit to work in the auto industry
when he was 13. He learned the plastics trade through jobs with
Ford Motor Co. and Master Industries Inc.
He and his wife, Joan, were anxious to move out of the city
and settled for a while in Phillips, Wis., working with Phillips
Plastics Corp. Phillips had considered two sites for an expansion
-- Chippewa Falls, Wis., and Ironwood. It chose Chippewa Falls.
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Randy
Ahnen,
Tooling Engineer, and Ben Busch, Product Inspector, show
off their preferred method of commute. |
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The
Stephens family chose Ironwood to start out on their own and
follow Gordon Stephen's calling: "To go back home,"
his son Scott Stephens said.
The
family already was familiar with the area, taking in the surrounding
slopes as skiers. In 1979, there was little else happening in
Ironwood.
The
town that grew up on the iron and copper mining industries was
in a major depression. There was one plastics supplier in place
there already, mold maker Everson Tool. Only one copper mine
remained open, and it closed in the 1990s.
"It
was like a bomb went off here," Stephens said. "It
was terrible. Everything was in disrepair. The only things happening
were skiing and snowmobiling, and there wasn't much of that."
The
family found a town ready to open its arms to any new business.
"The
city was really anxious to see us come in, even though at that
time, we were talking about a business with three machines and
six employees," he said.
Local
officials provided tax abatements and other assistance to help
the family establish Ironwood Plastics. The operation also found
plenty of people with a lot of experience operating heavy equipment.
"The
basic education of the people here is wonderful," Stephens
said. "There is a heritage of machine trades from the mining
days. There are good training programs in the high school, but
it kind of ends there."
Ironwood
Plastics had to invest in additional training, but the community's
isolation helps ensure it holds on to good people.
"There's
really a good work ethic here," Stephens said. "People
take their job seriously. Unlike in an urban area, jobs are
not a dime a dozen.
"Because
there's very little turnover, we can take our people a lot further
skillwise."
Now
the 150-employee company enjoys its status as a mainstay in
the community. If the managers need input from the city or local
utilities, they get attention.
"In
the city, people wouldn't even know about your company. Here,
we're a major employer."
And
while Scott Stephens said he could not understand the lure of
the town when he was in high school, he now appreciates the
community where his own children can spend all day skiing, taking
in sleigh rides and hockey games.
He
is vice president of administration for Ironwood Plastics. His
brother Mark runs the main operation in Ironwood while Rob Stephens
oversees a second small shop in Two Rivers, Wis.
But
all of the workers' skills and local support cannot help win
business on its own. Ironwood is nearly a five-hour drive away
from its nearest customers in Minneapolis.
Although
Michigan is among the most populated plastics processors, Ironwood
is far out of the auto supply loop. The city of Ironwood is
635 miles from Detroit. Washington, D.C., is closer to Detroit
than is Ironwood.
That
means Ironwood Plastics has to specialize to compete and survive,
Stephens said. It focuses on small parts, with presses ranging
from 45-250 tons. The company boasts both insert molding and
continuous reel-to-reel operations.
"We
do the tough projects that no one else wants to mess with,"
Stephens said.
And
the business also has to convince skeptical customers that its
employees can cope with the Upper Peninsula's extreme weather
conditions. In 20 years, Stephens notes, it has closed because
of bad snow fewer than 10 times.
Consultant
Donovan warned that scenery and bucolic settings cannot take
the place of a solid business plan. Molders need to be certain
they can compete on price and meet their customers' demands,
no matter where they are.
"If
you want to move someplace remote, you do it because you want
to, not because your customer wants you to do it or the market
wants you to," said Jeff Mengel, a partner with Auburn
Hills, Mich.-based consultants Plante & Moran LLP.
"You
can make money, but you have to really want to be there, and
you have to work hard at it."
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Missy
Rappley
Molding Tech, and Laverne Morello, Product Inspector,
operatevertical molding machine. |
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John
Lorenson
Manufacturing Coordinator, feeds the deer outside the
plants
back door.. |
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