Many years ago, I worked for Digital Equipment Corporation (DEC) at their headquarter offices, which to this day everyone still calls simply “the Mill”. This sprawling 1.1 million square foot complex was built during the 1800’s to house the Assabet Woolen Mill, the nation’s largest producer of wool for the U.S. Military. (I remember DEC “old timers” talked about the lanolin that would drip down on hot days from the beams above onto their mini-computer systems!) We all know the sad story of how those 19th century textile jobs chased lower wages, leaving the Northeast states, first down to the Southern states, then to Mexico and the Caribbean, and then to the Far East. (Sad for us in the U.S., but happy for the recipients of those new jobs.)
The same has happened now with the high tech manufacturing jobs that replaced the textile jobs – they’ve mostly gone overseas. DEC vacated the Mill years ago. This pattern has been repeated in industry after industry.
The Beat of a Different Drummer …
So, it was with particular interest—and hopefulness—that I recently visited the headquarters of Nypro, a plastics manufacturer located, coincidentally, in another former textile mill, the 18-acre “Old Bigelow Mill” complex in Clinton, Massachusetts. Here is a manufacturing company which has bucked the trend and not just survived, but thrived in today’s global competitive economy, managing to keep a growing number of manufacturing jobs here in the U.S.
Founded in 1955, Nypro operates 66 separate businesses in 18 countries. Their sales and profits have grown for the last 20 consecutive years. In the past ten years alone, they have achieved an astonishing 22% CAGR.
Think Global—Grow Local
Ironically, one of the reasons Nypro has been able to keep manufacturing jobs in the U.S. is precisely because early on it expanded outside the U.S. and learned to think globally. In 1973, when it was only an $8M company, Nypro opened operations in Puerto Rico, followed by Taiwan in 1974, Hong Kong, mainland China, and eventually 15 other countries. They learned from the start to think in global terms, seeing U.S. operations as an integrated part of their global business, not as standalone business. As they have expanded their global presence, they’ve adapted their U.S. presence to support the global needs.
U.S. as an Innovation Hub
Nypro has kept its “center of gravity” in the U.S. by maintaining and growing a critical mass of technology expertise, innovation and product development capabilities at headquarters. For example, their flagship tool-making business is here in Massachusetts. But this innovation is tempered by customer demand – it is not a bunch of engineers making up ideas in isolation. Their innovation ideas come from the field, driven by customer needs across the globe, funneled into the technical center in their headquarters in Clinton. In addition, more recently Nypro has begun to amass a portfolio of process innovation patents that they can make available to their customers.
Expanded Services – Customer-Demand Driven
Figure 1. Full Range of Services from Nypro
Starting in the 1970’s, paralleling their geographic growth, Nypro began expanding their palette of offerings, adding assembly services to their core capabilities in injection molding. In the 1980’s they added tool building and in the 1990’s they added product development and product design. More recently they’re doing validation, final inspection, and even some medication filling, moved into “FDA territory”. They are doing more and more final labeling, packaging, and shipping to the customer’s customer. And they are beginning to move into metals, with their own metal plating operation in their decorating facility, as well as die-casting capabilities via partnerships—again driven by customer requests. Now Nypro offers a full range of services (see figure 1)
Nypro has essentially been riding the wave of enterprise virtualization. As major OEMs outsourced more and more manufacturing, design, development, and other areas, Nypro has been there to “catch the ball” and pick up those responsibilities. 100% of this expansion has been customer-demand driven. It has given Nypro innovative capabilities that most traditional plastics companies don’t have. This ability to excel in areas that their customers want to outsource has been key to their continued success.
Supply Chain and Operational Programs
Figure 2. Nypro’s Operational
These expanding responsibilities have also made Nypro an increasingly integral part of their customer’s supply chain. Some customers even have operations collocated inside Nypro’s plants or vice versa. As they become more and more integral to their customers’ operations, Nypro’s operational performance no longer affects just their own manufacturing effectiveness any more. Their operational performance has become key to the overall operational performance of their customers’ “virtual corporation”. Consequently, Nypro has continually expanded and improved their programs for achieving supply chain and operational excellence. This is a crucial differentiator, and I believe one of the keys to Nypro’s ability to maintain a manufacturing base here in the U.S.
In the area of supply chain management, Nypro has done considerable work to consolidate their supply base, and has moved to pull-based, build-to-order manufacturing. Nypro has in some cases helped their customers improve their own supply chain capabilities, not as a paid service, but simply to further cement the relationship. Nypro also plays a supply chain orchestrator role (see our article “Governance of Federated Business Models”
for a definition of orchestrator). That is, they have developed deep relationships with a breadth of material and service providers and a deep understanding of each provider’s capabilities, so that they can pull together the right team for each project for their customers.
Most customers today are global, and demand consistency across the world. Nypro developed N.O.W. (Nypro Operating Way), a set of disciplined operating practices designed to guarantee the same standards and operating processes to achieve consistent outcomes and quality at any plant in the world. This is very similar in concept to Intel’s “Copy Exact” program.
Lean and Controlling Costs
While no one succeeds by cutting costs alone, in today’s global economy aggressive continual cost control is a must for survival and profitability. As Nypro has grown, they have larger customers with larger volumes demanding greater and greater discounts on those volumes. To meet this challenge, Nypro has become a big advocate and practitioner of lean, eliminating waste and error. Almost every other year Nypro does a complete analysis of every job. Anything that is not absolutely essential for keeping high customer satisfaction is eliminated. For them, lean is not a tool box, but a way to run the company. They continue to do visual factories and systems to identify where all the costs are—it is part of daily activity. They’ve conducted seminars on lean for some of their customers, and published a guidebook for their customers on how to take advantage of Nypro’s lean capabilities.
Automation also plays a key role here in reducing errors and waste. Nypro was the first company in the U.S. to put robots on molding machines. In 1981, they created Automated Assemblies Corporation (which they own 100%) that builds and installs robots. It is an independent subsidiary, with only about a quarter of its production going to Nypro, the rest going to other companies (including competitors). Nypro’s aggressive approach to automation is another critical factor in their ability to keep manufacturing jobs in the U.S. by continually lowering the labor portion of their total cost. Nypro led the transformation of the plastics manufacturing industry from a job-shop mentality, reliant on the “arts and skills” of the individual craftsman, to a volume industry reliant on the science of production.
In short, actually putting into practice the many advances in supply chain and operations that have evolved over the past 20 years has proven to be a powerful competitive differentiator for Nypro.
Nypro is the sixth largest employee-owned company in the United States. In addition, they make various forms of employee ownership available to their employees outside the U.S., using other mechanisms (e.g. Stock Appreciation Rights programs) suitable to each region’s local regulations. Employee ownership yields significant advantages. The customer knows when they talk to an employee that they are talking to a stockholder that has an interest in the success of the firm. Equally important, Nypro is not held hostage to the whims of the market. They are able to make investments that might cost some points on the bottom line in order to better serve their customers and their own long-term growth.
In the past five years, 35 of the top 100 U.S. Plastics manufacturers have gone out of business; most liquidated, a few were acquired. During that same time, Nypro has grown at a CAGR of 12%, and has expanded their U.S. manufacturing presence. Their “secrets” of success?
- Global Integration + Local Innovation: Innovation driven by customers from the field around the world to a core center of excellence in the U.S. Deep integration of that core with the global subsidiaries.
- Full Palette of Services—Riding the Out-sourcing Wave: Building full suite of capabilities, but again driven by customer demand.
- Supply Chain and Operational Excellence: Implementing best practices.
- Lean and Automation: Eliminating waste, reducing the labor portion of cost to nearly nothing.
- Employee Ownership: Freedom to invest; employee sense of responsibility.
Nypro has proven that the migration of jobs to low cost regions is not a foregone conclusion. They provide an inspiring example of how we can improve competitiveness, and keep good paying jobs in the U.S.
Much of the information for this article came from an excellent interview I had with Al Cotton of Nypro.
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