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Scott Hopper's directive was simple. Set up a 100,000 square foot PVC pipe manufacturing facility, find capable workers to make the product, and stay within budget. And, oh, by the way, you'll be doing this 2,000 miles away from company headquarters.
Harvel Plastics is now in operation in Bakersfield, Calif. The Easton, Pa.,-based manufacturer of PVC pipes opened the California facility last fall and employs 23 people. As the company grows, that number could increase to around 90.
| "The logistics of shipping to the West Coast and to Asia made much more sense for us to have a facility out here."
-- Scott Hopper, California plant manager, Harvel Plastics |
Every employee besides Hopper, who is the plant manager, was hired from the Bakersfield area.
Harvel's story is not uncommon in the steadily-growing plastics industry. Companies are looking to expand into new corners of the country and the world, providing plastic products to a growing consumer base.
Plastics companies are popping up all over the United States, as evidenced by the 1.3 million people employed by plastics companies. The number of jobs has increased by 26 percent since 1991, at a time when most manufacturing sectors are seeing little or no growth in job creation.
For Harvel, the decision to expand was easy. How to do it was another matter.
"The logistics of shipping to the West Coast and to Asia made much more sense for us to have a facility out here," said Hopper. "We can get to those places much faster."
Once Harvel knew it wanted a plant on the West Coast, certain requirements had to be met.
| "We have nine plants across the country, so California was the last geographical area where we needed a manufacturing facility."
-- Paul Klaus, chief financial officer, Norwesco |
"We had to look at several things," he said. "Reliable power, access to rail, getting to docks, those were all important factors to us."
In Bakersfield, Harvel is a couple hours from the Los Angeles seaport. Harvel ships its products to Asia by boat.
Labor intensive
Finding an able work force is the key to any plastics company expansion or relocation.
David C. Anderson, of Anderson and Associates in Somers, Conn., has helped numerous plastics companies find sites and design buildings.
"In the segments we look at, good technical, skilled labor is a real problem," said Anderson. "People that can come right in and fill job slots is a big problem and has been for five to 10 years."
While labor is a huge issue, it isn't the only factor. Often, proximity to customer base is important in plastics location decisions.
A plastics company may not be able to locate in a state where power or labor is cheaper because it is simply too far away from the customer.
"Obviously, a company has to evaluate its customer base," said Anderson. "Once that is established you consider other factors."
Norwesco expands into California
Norwesco, based in Minnesota, based its decision on just such a reason.
The company, which makes plastic tanks for the agriculture industry, chose central California to be closer to its customers. It's building a 25,000 square foot facility in Hanford, Calif., and some of its largest customers are located in the state.
The facility will open with 20 employees, and plans for additional hires.
The company makes a variety of plastic storage tanks, with some holding as much as 12,000 gallons.
Norwesco must be close to its customers, because of the high cost of shipping. The company's plants usually serve customers within a 500-mile radius.
"We have nine plants across the country, so California was the last geographical area where we needed a manufacturing facility," Paul Klaus, chief financial officer for Norwesco, told The Fresno Bee.
Transportation is a critical piece of the puzzle for any plastics company.
"The cost of shipping your product to the customer, that's a big factor," said Anderson.
Important in Norwesco's decision was rail access, because the plastic resin pellets the company heats to make the containers arrive by train.
The power factor
Once a company decides what area of the country it needs to be in, the cost of power can clinch the decision between similar communities.
The ongoing deregulation of the electric industry has affected how companies choose their power provider, but the local utility is still an important player for plastics companies.
"There are certain advantages now that deregulation is happening," said Anderson. "But any reductions in cost are due to an overall lower cost per kilowatt hour, not because of any special incentives for plastics companies.
"It (power) is important, but it still is a secondary consideration to a company's location and the labor pool."
Expanding North and South
In Vermont, one company recently moved into the state while another is expanding its operations.
In Milton, Husky Injection Molding Systems opened its 240,000 square foot, $80 million manufacturing campus in 1998.
| "People today are looking for any break they can get in energy, efficiency of labor, use of robots."
David C. Anderson, Anderson and Associates, Somers, Conn. |
In Arlington, Mack Molding tripled its work force, from around 30 to over 100.
In Atlanta, a packaging company, Paxis, opened a processing center that employs 50 people. Paxis takes packages from multiple companies and combines them with packages heading to similar regional destinations. The bulk mailing process saves the companies money.
Paxis opened other facilities in New Jersey, Los Angeles, Northern California, Cincinnati, Denver and Dallas in 1999.
International demand increases
As countries in Central and South America continue to develop, the demand for plastics products in those areas will continue to grow. To get closer to the Latin American market, many companies are setting up operations in Puerto Rico.
There are 74 plastics manufacturing plants employing over 4,000 people in the U.S. Territory. U.S. laws and regulations govern all companies in Puerto Rico, which makes it easy for American firms to set up shop there.
Cutler-Hammer, a subsidiary of Eaton Corp., is investing $4 million in expanding its plastics plant in Puerto Rico. Labor is also a significant draw for U.S. companies, with the average hourly wage much lower in Puerto Rico than in the United States.
Nypro, Inc. has enjoyed a history of success in Puerto Rico. The company came to the island in 1972, and has undergone multiple expansions. The company makes and assembles plastic parts used by health care and electronics companies.
"As Nypro continues to expand its molding, manufacturing and research capabilities, we expect to be instrumental in the Latin American market," said Reynaldo Encarnacion, president of Nypro's Puerto Rico operations.
A changing industry
Like other industries, plastics firms are adapting to the world they serve. Anderson said companies today are looking for ways to cut costs and increase efficiency. Recycling of plastic has added another dimension to the industry.
"People today are looking for any break they can get in energy, efficiency of labor, use of robots," said Anderson. "At the same time, all of our clients are very cognizant of the environment. About 99 percent of leftover plastic in plants today is reused, so that's a big change."
-- Lance Yoder
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