Prism Plastics drives efficiency with more machines and fewer workers. Welcome to the new manufacturing model
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Prism Plastics co-owners Rod Bricker (left), Jerry Williams and Gerry Phillips.
Photo: JOHN SOBCZAK
At Prism Plastics LLC in Chesterfield Township, a mere three employees per shift work the 26,000-square-foot factory, programming machines and packing boxes. These employees don't wrench on parts. Their hands are not callused, at least not from their day job.
The plastic injection molding supplier produces 500 million parts across its four plants and 28 molding machines. The machines need no sleep, coffee breaks or vacations. They work three shifts, 24 hours a day, seven days a week. And with just 58 total employees, Prism is the model of modern manufacturing -- fewer humans, more machines, higher efficiency, increased productivity.
But increased productivity is a contentious topic, politically and economically, as Southeast Michigan and the nation continue to recover from an economic recession and high unemployment.
Over the past year, manufacturing productivity increased 2.9 percent as output increased 5.5 percent, the U.S. Bureau of Labor Statistics reported this month.
In the world of economics and labor statistics, higher productivity translates into a reduction in hiring. Nationally, the automotive industry employs 780,700, down from more than 1.2 million in 2002. Michigan's auto employment is down to nearly 96,200 from more than 190,000 a decade ago.
In other words, manufacturers are producing more with fewer workers. And work continues to return to the U.S. from the effects of a global economy, but more of that work will be done by machines, rather than humans.
The reduced workforce has paid off for Prism, which also has plants in Port Huron and Harlingen, Texas. Revenue has grown from $5 million in 2009 to $12 million in 2011, with projections of $18 million this year and $22 million in 2013.
But what increased efficiency and further automation mean for the economy remains a debated issue.
President Barack Obama and Republican presidential candidate Mitt Romney have told the public several times during the election season that the U.S. worker is the most productive in the world.
Obama has used the productivity of the American worker as a battle cry for the U.S. manufacturing sector to invest more in the U.S., thus creating more jobs.
Romney has said increased productivity equals increased income for workers -- a statement that caused a rift between the candidates about the definition of "productivity."
The problem is that increased productivity guarantees neither jobs nor income, said Michael Mandel, chief economist at the Washington, D.C.-based Progressive Policy Institute.
During much of the 20th century, wages, productivity and U.S. gross domestic product all grew 4 percent annually, according to the Bureau of Labor Statistics. But that began to fall apart in the 1980s as automation made its way to the production line.
Mandel said what's happening in the U.S., and especially in Southeast Michigan, is that manufacturers are automating every production activity they can and outsourcing other aspects to low labor-cost countries like China and Mexico.
"It's clear there have been gains in productivity, but these gains in productivity are about exploiting the supply chain," he said. "From the point of view of the manufacturer, it's irrelevant because they are doing more productive work, but for the economy it's very relevant."
Hourly pay falls
For the Southeast Michigan workforce, supply chain efficiency means average hourly earnings in the automotive supply base are down to the lowest point in years. The average hourly earnings in the supply base were $19.68 in July, down from $19.80 in 2002 and $21.32 in 2006.
Manufacturers are importing more goods and completing the manufacturing process in the U.S., creating the large trade deficit, Mandel said.
The U.S. global trade deficit for manufacturing grew by 7 percent, or $15 billion, in the first half of 2012 compared to a year earlier, according to the Manufacturers Alliance for Productivity and Innovation.
The trade deficit has resulted in as many as 130,000 to 260,000 manufacturing job losses in the U.S., Ernest Preeg, MAPI senior adviser for international trade and finance, said in a release.
Prism sources many of its raw materials, including resins, from Florence, Ky.-based Ticona's plant in Texas.
Dave Andrea, senior vice president of industry analysis and economics at the Troy-based Original Equipment Supplier Association, said the manufacturing industry, specifically automotive, is in a period of transition where employers are returning work to the U.S. from overseas, while manufacturing, and laborers, are going through an evolution.
"Are we ever going to get back to the total number of employees in the industry in the late 1990s? Probably not," he said. "But automotive will remain at the top of the manufacturing sector, and we're starting to see a structure, pushed by globalization, where offshored work is returning."
The trend of onshoring is real, as companies are reassessing manufacturing costs in a different, more accurate method.
Tom Aepelbacher, vice president of global sourcing and productivity for Bloomfield Hills-based TriMas Corp., told Crain's in March that new manufacturing efficiencies stateside and rising foreign labor costs and rising transportation costs are causing manufacturers to rethink outsourcing.
"We used to get nice savings by sending work overseas, but those days are over," he said. "We're getting a lot smarter at our own manufacturing here, and we're looking to aggregate lower costs here because we know costs are rising there."
Prism is capitalizing on efficiencies, making a case for its customers to bring work back, said Gerry Phillips, co-owner and vice president of finance for Prism.
"2008 was a wake-up call that (companies) had to be more efficient in this industry, and a lot of injection molders didn't make it," he said. "We've taken steps and been rewarded by taking work from Japan, China and Europe because we've taken the whole labor aspect out of the equation, and we've invested in technology to help the people we do have to become more efficient."
Prism's largest customers include Takata Corp., Autoliv, Key Safety Systems and TI Automotive Inc.
To expand its Chesterfield plant, Prism took out a $2.5 million line of credit, purchasing six Toshiba molding machines, valued at about $500,000 each.
And while work is returning to the U.S., more work will be done by machines, and the few operators of these machines require a more skilled workforce, Phillips said.
"These jobs are good jobs, and they don't need a four-year degree," he said. "But these jobs require more skill, and I see us (the auto industry) moving to a more skilled workforce."
Short on skills?
A skilled labor workforce shortage looms as productivity increases.
In April, Mark Tomlinson, executive director of the Dearborn-based Society of Manufacturing Engineers, called the skilled labor shortage in the U.S. manufacturing sectors "oncoming tsunami." He said that while the industry should have been prepared, it failed to maintain training programs.
But companies are engaging in training programs again, Andrea said.
"When you look at the future workforce and the skills, it is much more of a total package," he said. "The compensation and the quality of life and the opportunity in the industry all have to go together, and we're in that transition right now. Our members are becoming more active and creating a workforce map of where we are and where we'll be in five years or even 15 years."
Prism is recruiting actively from Ferris State University's plastics program and is looking at local community college programs, but it internally trains its operators, whose job functions include programming and monitoring the molding machines.
The workforce is playing catch-up, but eventually the industry and economy should rebound even more, Andrea said.
"We're looking to keep the highest value-added jobs and the jobs that have the highest economic multiplier that support other jobs in the supply chain," he said. "There's always going to be downward economic pressure on output, but the industry is working through the transition to a positive outcome."
In the meantime, while other companies are adhering to a new model of manufacturing, Prism will continue to thrive in its low-cost, low-labor model, Phillips said.
Dustin Walsh: (313) 446-6042, email@example.com. Twitter: @dustinpwalsh