You Can Compete on a Global Scale

Global Trends Cause Problems and Create Seemingly Unfair Advantages, but Also Provide Opportunities for U.S. Machine Builders to Have a Big Impact

By Rich Merritt

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August 2006 Cover ImageYou can circumnavigate the world, but there’s still no getting around it. Machine builders are affected by global trends as much as every other manufacturing segment. Concentrate on a small domestic niche market and ignore what’s happening in Europe and Asia? That just doesn’t cut it any more.

Machine builders also face the challenges of lower-cost products from Asia, performance and safety innovations in Europe, as well as international standards, fluctuating currency, support requirements, and all the other issues steering global markets.

The good news? These clouds have silver linings. Despite all the competition industrial OEMs get from machines made in Europe and China, there probably is a substantial market for your products over there, too.

Compete Globally
It wasn’t hard to find machine builder companies that compete globally, and do it quite successfully. “We build material handling equipment (See Figure 1 below) and specialty folder gluers for the corrugated box industry,” says Mike Harrington, director of R&D at Alliance Machine Systems Int’l., Spokane, Wash. “We build approximately 350 machines worldwide. About 250 machines are built in the U.S. and 100 or so in Europe.”

Harrington says his competition primarily is European companies, but he’s starting to see Korean and Taiwanese machine builders entering his market. His biggest problem is price. “Our U.S. customers are more interested in buying based on features and productivity,” he notes. “In our other markets, purchasing decisions are based more on price than productivity improvements.”

Another problem is meeting safety requirements. “While all European countries accept machines labeled with the CE mark, there are local inspection agencies that interpret codes differently,” adds Harrington.

     FIGURE 1: LINES FORMING IN GERMANY
  Alliance Machine Systems
 

This automated load forming (ALF) system for the corrugated box industry is installed in Germany, where competition is tough. The U.S. machine builder makes nearly a third of its 350 machines in Europe.

Paul Brancaleone, engineering manager-controls at Battenfeld Gloucester Engineering, a manufacturer of plastic processing equipment (See Figure 2 below) in Gloucester, Mass., says there’s a major difference between his company’s domestic and international customers. “Overseas customers tend to think in terms of complete systems when purchasing our equipment. In North America, they tend to buy machines to build a system,” he notes. “The domestic market has more of a component-based point of view.”

BGE’s competitors mostly are German companies, and they’re tough to compete with in Europe. “Dealing on a competitor’s home turf can be very difficult,” says Brancaleone. “You need to find a good niche market, and run with it. It’s been a buyer’s market in our industry for several years now. The ability to cut costs, while continuing to build quality equipment, is the key to making a profit today.”

BGE also has to deal with standards. “Making machinery that is globally accepted and up to all safety standards can be costly,” adds Brancaleone. “It’s a struggle to control costs and meet the customer’s needs for approved parts that are locally obtainable.”

Scott Bivens, electrical engineering manager at Packaging Technologies in Davenport, Iowa, says his company has a slight technology advantage over its European competitors and is exploiting it. The company makes packaging machinery for the food industry. Its ChubMaker machine for packaging liver and sausage uses a wire clip that’s more economical than the preformed clips that European packaging machines use. It sounds like a small item, but it makes Packaging Technologies competitive.

“We’re on a par with European machine builders,” Bivens says. “Our performance is equal, and we’re selling into Europe and Russia. We want to break into the Chinese market, but we can’t make a profit there because our Japanese competition is too cheap. Companies in both countries build a copy of the ChubMaker at a fraction of the cost, and sell it to customers in China.”

FIGURE 2: EXTRUDING IN CHINA     
Battenfeld Gloucester Engineering  
This U.S.-built cast polypropylene film extrusion line was installed in China. The OEM has since added a second line. The film is used for food and consumer packaging.

 

Bivens says control and safety standards affect his machines, but adds his firm largely got past that obstacle long ago. “Because we’ve been shipping into Europe for years, we modified our machines 10 years ago,” he says. “Prior to the early 1990s, standards were more diverse country to country, and you could be required to design your machine for a particular country’s requirements. Now with the Europe Union and the CE mark, it’s much easier because the CE mark covers most of Europe, and is getting more and more recognition in other parts of the world.”

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