As the economy gets squeezed more moulders are feeling the pressure
13 May 2024
When a plastic injection moulder goes bust, even if the company owns the tooling, it can be a complex and challenging situation with consequences that vary depending on specific circumstances.
Tightening margins, slowing UK economy is putting pressure on moulders
During the past 18 months energy prices, raw materials like plastic resin and transportation costs have all risen significantly, squeezing profit margins for moulders. On top of this the overall UK economy is projected to slow down in 2024, potentially leading to decreased demand for certain moulded products. This has put the squeeze on some plastic injection moulders, TEX Plastics are all too aware of the impact on their customer base should this become irrecoverable.
Taking over tooling is never straight forward
TEX Plastics benefit from the stability of being a part of the TEX Group of companies and this security has made them the natural choice for many manufacturers seeking a reliable manufacturing partner. However, TEX Plastics have also become very proficient in taking on established production and transferring tools. This process is never straightforward, but it becomes even more stressful when it's a distressed transfer as a result of a moulder becoming insolvent. In some cases, teams have worked around the clock to minimise the downtime on a clients production line feed or an essential plastic component.
So what are the potential challenges and considerations if a moulder becomes insolvent?
1 - The Immediate Impact
Production disruption: With the moulder no longer operational, the company's production of moulded components faces immediate disruption. Depending on the criticality of those components, this could impact product availability, lead times and potentially impact revenue.
Accessing the tooling: Even if the company owns the tooling, accessing it from the bankrupt moulder's premises may require legal negotiations or involvement from bankruptcy administrators, leading to delays and potential costs.
Storage and transportation: Once retrieved, the tooling needs proper storage and potentially transportation to another moulder, incurring additional costs.
2 - Finding a new moulder
Compatibility concerns: While the company owns the tooling, it might not be readily compatible with other moulders' equipment or processes. Adapting or modifying the tooling could be necessary, adding time and expense.
Lead times and setup costs: Finding a new qualified moulder and setting up production with them involves lead times and potentially significant setup costs.
Quality and consistency: Switching moulders might introduce slight variations in the final product's quality or consistency, requiring adjustments and potentially impacting customer satisfaction.
3 - Financial implications
Lost revenue: Production disruption can lead to lost sales and revenue, impacting the company's financial health.
Additional costs: Retrieving, transporting and potentially modifying the tooling, finding a new moulder and setting up production all create additional financial burdens.
Downstream impact: Depending on the product and supply chain, disruptions can affect other businesses and customers, potentially leading to penalties or reputational damage.
4 - Mitigation strategies
Proactive approach: Regularly reviewing the financial stability of contracted suppliers and having backup options in place can help minimise disruption.
Clear ownership and contracts: Ensuring clear ownership of tooling in contracts and agreements protects the company's rights and facilitates retrieval processes.
Diversification: Having multiple moulders for critical components or considering in-house moulding capabilities can improve resilience.
Insurance: Exploring insurance options that cover business interruption or supply chain disruptions can provide financial protection.
Ultimately, the specific consequences and recovery process depend on factors like the complexity of the tooling, the financial health of the moulder and the company's preparedness. By considering these challenges and implementing proactive measures, companies can minimise disruptions and navigate such situations more effectively.
TEX Plastics are offering a free ‘Plan B’ option
Companies today are expected to have a Plan B for everything from data back-up, to power supply. If your line feed needs plastic injection moulded components and is ‘just in time’ then you need to carefully consider the consequences. TEX Plastics are the first company to offer a free audit of your current tooling and moulding needs with a view to designing you a Plan B option – just in case your current moulder has difficulties.