Staying alive means seeing the opportunity in challenge

One of the bright spots in the North American plastics industry remains Hoffer Plastics Corp. where, for 56 years, the family-owned custom injection molding company in South Elgin, IL has built a business that has stood the test of time and several recessions. Currently in its second generation and led by CEO William A. (Bill) Hoffer, the company continues its pursuit of excellence for its customers, employees and for the third generation.

MPW: How does Hoffer get past the bad news so common in the industry today and maintain a strong business?
Hoffer: Recently Plante & Moran made a comment at an industry conference that we have 7800 processors in North America, and in the next 12-18 months, 1000 of those will be gone. With that, some 250,000 molds will move. This seems to be substantiated by discussions we have in an industry-benchmarking group that meets quarterly. While the news lately has been anything but good, we feel that there’s a lot of opportunity for Hoffer, with our extensive capabilities for tooling transfers as well as managing those programs. The question is how do we take advantage of that opportunity?

MPW: How has the company grown and evolved in the past half-century?
Hoffer: We’ve been doing this for 56 years, and have developed a good reputation in the industry. Bob Hoffer [Bill’s father] built a company based on three basic principles: putting money back into the company, trying to improve the working environment for the employees, and a focus on taking care of customers; all this while remaining financially stable and debt free. We continue to satisfy long-standing customers even given all the market changes we’ve had over the decades. I think that speaks strongly to the fact that we listen to the customer and have met their needs and developed these relationships.

As to Hoffer’s growth, we could have probably expanded much more than we did. I can remember spending many hours in my dad’s office years ago talking about what Gordon Lankton did [with Nypro], but dad said he could never do what Gordon did—get on a plane on Monday morning and come back on Friday night. Instead, he built a company based in South Elgin on a focused-factory concept, with individual plants within the same building. We established good quality systems and a great tool-room support system. Those were essential to establish a position with long-term customers: building tooling, maintaining tooling, and moving up the line to exceeding customer expectations.

For example, for several decades we’ve molded nylon actuators for an aerosol valve. We have a mold built in 1978 that continues to run today. It has produced parts, continues to meet customers’ quality requirements in 2009, and has run in excess of 35 million shots during its lifetime.

MPW: Hoffer implemented the “focused-factory” concept a couple of decades ago. Is that model still working for the company today?
Hoffer: The family management is committed to the original vision from 1953, and to see where we are today is a testament to the foundation that was established. We have a core of functional disciplines including great tooling competency (24 full-time tool makers), mold qualification, process validation, and how we track and measure customer satisfaction. The focused-factory concept grew out of studies done by GE and DuPont many years ago that showed the optimum number of molding presses for a plant was 12. We built the first factory in 1960-61 and wanted to make a manufacturing cell of approximately 12 presses. We continued that process as we continued building and expanding Hoffer Plastics, ending up with eight cells we call plants. This has evolved as the market has evolved.

Conceptually, instead of having one big room with presses down each side as far as you can see, we’ve developed these focused manufacturing cells that specialize in particular tonnage presses, customers and markets, and we’ve stayed with this concept. The original plants [plants 1, 2 and 3] have up to 300-ton presses. Larger plants have 400-600-ton presses with high ceilings and overhead cranes to handle the larger molds.

This concept includes a finite area with a manager and dedicated employees that run that area. Operators are inspector operators. They can apply to transfer to another plant within Hoffer, but typically they work every day with the same people, the same manager, in the same plant. They have a quality control system online, they work within their plant, and they run the same products most of the time.

MPW: What technology have you implemented to accommodate growth?
Hoffer: We think we have continued to step up to many of the challenges our business presents. While maintaining our program of updating presses—the average age of our presses is under 10 years—we have automated many jobs with robotics, established processing guidelines with RJG technology, and also looked for other ways to help maintain the business. One of the most unique pieces of equipment that we’ve purchased—unique to this business—is a fluidized bed oven for cleaning screws, barrels, and hot runner manifolds. This was a big investment, but with this type of custom molding, we have a library of screws that we change often when we do color changes or material changes. The fluidized bed oven uses silica sand heated to 800ºF, and cleans the residue plastic without any intervention. This has proven to be a much safer, more environmentally friendly way to handle this problem. With so many molds and so many color changes and material changes, this has been an excellent investment. We’re changing a screw almost every day; all of this to meet the customer requirements for on-time delivery.

That’s just one of the things that we’ve implemented to be ready for the competitive requirements of the future. With 96 presses and 400 different materials with numerous combinations of colors, we have a high degree of complexity. Because of our background in packaging, closures and aerosol parts, we have some molds that run in 10 different colors. Complexity is something we must deal with and this is just one of many advantages we bring to our customers.

MPW: How do you see the injection molding industry today?
Hoffer: What we see today is a troubled supply base. A lot of people in this business—for all the right reasons—pushed the edge for many years. Then the perfect storm hit our industry and there are many people deciding they can’t do this any more, and will either sell or go out of business.

But it comes down to who will be here for the customers in the long term. We have a renewed focus on the markets we serve and even some new ones, to see where we can become a major factor with these customers, both old and new.

MPW: Where does Hoffer Plastics go from here?
Hoffer: We want to see the business grow. I’m second generation, and all three of my children are working here, so we’ve got a tremendous stake in the business. We have a big commitment to continuing what dad started in 1953. All that is great, but the reality of finding the right opportunities to promote this growth faces us every day. If Plante & Moran is right, and if more custom molders fall out of this business, then how does Hoffer Plastics find the right opportunities—getting 1000 tools means nothing unless it’s the right market—to keep our business growing successfully?

MPW: What do you believe has been the primary problem with so many molders going out of business?
Hoffer: I believe it’s a problem with costing. The industry has been in a cost-down, cost-down, cost-down marketplace. Customers have embraced many initiatives to lower costs/purchase prices in any way they could, which is understandable. Many of us at different times have agreed to costing that either was not realistic or could not be met. Many companies are either not truly reflecting their costs, or they are desperate to stay in business. Many times if a bid is 25% less than conventional pricing, something’s wrong. This is really not that complicated. Unusually low prices are never long term. Everybody has to reduce their costs to get to lower target pricing, but you also have to face the realities of costs. Unless someone compromises the specifications, changes the material, or makes basic design modifications, costs shouldn’t be that different.

We continue to get letters [from customers] about imposing price reductions—imposing these on an industry that’s already on the brink due to recession, the credit crunch, and the most difficult market conditions seen in years. For a business that’s cash poor or highly leveraged, they are in great jeopardy. There’s a lot of angst when a molder goes out of business. We get calls from companies telling us their molder is going out of business and they’ve got to get their molds out immediately. What the industry is going through now is troubling because we had a marketplace being driven pretty hard for many years, and now customers have to evaluate who’s going to be here long term and who isn’t.
   
MPW: Who will be left standing?
Hoffer: Today, it’s truly a case of only the strong will survive. It’s important for us to position the company where we can take advantage of opportunities that exist in this market. That will be the wave of the next two years, and after that things might begin to stabilize.

It’s a difficult market right now. As good as things were for so long, this has been a reminder of how quickly things can reverse. Things will never go back to the 1990s again.

Getting the whole supply engine started again will be difficult, especially with the unique market dynamics that exist currently. This market will recover, but to decide it will recover like past recessions is folly because the components are different now. We plan to continue as an industry leader, being here and being part of this dynamic supply base of injection molding. —Clare Goldsberry