INDIA AND THE GLOBAL
PLASTICS SUPPLY CHAIN, EMAP, LONDON 2004
Françoise Pardos, Pardos Marketing, February 2006
Trends in the
The converting industries, downstream from petrochemicals and plastics
production, are all affected by the geographical shifts of plastics
capacity and demand, and deep-sea trade keeps increasing. There are
many aspects to these shifts.
New strategies for converters in rich countries
Plastics converters in Europe, US, Japan, the high wage countries,
find it increasingly difficult to continue their industrial activity
in their former home sites. For the past 20 years, their strategy
has been partly outsourcing, and relying on plastics converting in
countries and regions with lower labor costs. Pros and cons of outsourcing
away must be balanced, because labor cost is not the main component
of plastics finished products, it is the raw material, and the logistics
of long distance shipping are contrary to the marketing need of immediate
availability to the customers, and fast delivery.
When the OEMs, Original Equipment Manufacturers, like the car and
telectronics products makers, move to distant countries, where assembly
costs are very competitive, and a local demand is emerging, the plastics
subcontractors will follow their industrial customers, and move as
It started with telectronics, back in the 1975-80s, plants shifted
to the then “Asian dragons”, then diversified into much
cheaper products like PE shopping bags. In 2003, about 65 % of plastics
shopping bags used in Europe and the US were imported from Asia.
In some countries like the UK, there is no local bag producer left.
Another strategy, for plastics contract manufacturers, to remain
competitive with low- wage countries, particularly China, is to resort
to a variety of automation technologies and lean manufacturing techniques
to help keep costs at competitive levels.
From robotics that removes parts from the molding presses and forming
machines to automatic-eye inspection systems and in-line decorating
operations and packing functions, automation is keeping plastics
contract manufacturers, and their OEM customers, competitive.
Lean manufacturing is a buzzword, and the rule, in plastics processing
plants, trying to do more with less and with fewer people, and to
get to the core business. Yet this strategy is just a manner of buying
some time, as all converters worldwide, including the locals in the
lower cost markets, are quick learners, and able to leapfrog all
technical and management innovations, to continue ahead of the flock
with their competitive cost advantages.
Outsourcing the plastics converting industry
Now, larger and larger parts of the plastics converting industries
have established plants in the lower cost countries, name Asia, essentially,
from plastic bags, to car parts, toys, sport shoes, appliances, telectronics,
telephones, portable radios, shavers, and every other thinkable consumer
The few converting segments left in the rich countries continue
to be in markets that create products that must be made domestically,
such as building and construction, food packaging, large automotive
and appliance parts for those consumer durables still produced there,
and for smaller converters not strong enough to move to Eastern Europe
or Mexico, or, more drastically, to China.
The plastics industry continues feeling pressure to go where its
OEM customers go, and major manufacturers are tending to locate where
costs-to-manufacture are low and labor is plentiful.
And looking at a table like a variety of fabricated products and
the quantity produced in China and exported from that country is
quite revealing. One example, at random:
China, production and export of products using polyolefins
packaging materials in 2001
In million units
|Color TV sets
Source: Sinodata Consulting
Is a similar trend happening in India?
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