FUTURE ATELIER: "LOCATING PRODUCTION IN GERMAN-SPEAKING EUROPE"
Shortage of skilled workers, entrepreneurship and bureaucratic madness: What future does plastics processing have in German-speaking Europe? / Discussion with KI Group expert panel
Whether we are talking about energy prices or wages, tax rates, the shortage of skilled workers or a dilapidated infrastructure, the debate about the future of German-speaking countries in Europe as a location for production is more relevant than ever. What future do plastics processors see for themselves in this region? This was the topic discussed by PIE in cooperation with sister publications Kunststoff Information (KI) and K-PROFI, together with four practical experts as part of the online discussion series Future Atelier – 50 Years of KI.
Based on eight central questions, we document below what the plastics experts from Germany and Switzerlandsaid about customer markets, taxes, bureaucracy and the funding framework, the transport and digital infrastructure, personnel recruitment and experiences with working from home. The members of the panel were: Jochen Hauck
, COO of Simona
(Kirn / Germany; www.simona.de
), a globally active manufacturer of semi-finished goods and injection-moulded parts; Aline Henke
, CEO of Hankensbütteler Kunststoffverarbeitung
(Hankensbüttel / Germany; www.hk-automotive.de
), a medium-sized enterprise focusing on the automotive industry and representing the classic injection moulding sector; Barac Bieri
, owner and CEO of Swissplast
(Sargans / Switzerland; www.swissplast.com
), which operates four thermoforming plants in Germany and Switzerland; and finally, Dr.-Ing. Arno Rogalla
(Bad Bramstedt / Germany; www.rogalla-consulting.com
), who has worked as an interim manager at many companies in the plastics processing industry.
What is the market situation?
Aline Henke, CEO of Hankensbütteler Kunststoffverarbeitung (Photo: HK Automotive/Stefanie Kersting)
Jochen Hauck: I am not worried about our core products such as pipes, sheets and injection-moulded parts for the infrastructure with water and wastewater management, cable protection and renewable energies. Never before has so much public money been pumped into the infrastructure. In this market we see a very positive development. In addition, EU politicians are trying to bring production back to Europe. For the region as a whole, this is a positive move.
Aline Henke: Whenever we are asked how the transformation of the automotive industry is affecting our company, we always say: It’s irrelevant whether we clip electrical lines or fuel pipes. Medium-sized business as a whole has really pushed the digital transformation. As far as the prospects for the industry are concerned, we have to remember that simple car components have not been manufactured in Germany for some time now. With innovative ideas we will be able to keep production here, but only if the conditions are right.
How relevant for success are the image of plastics and the environmental discussion?
Barac Bieri: Sustainability will certainly be a key topic in both the medium and long term. There are considerable reservations in the media and among the general public that we use materials that may look green but are not really green. It is a challenge for the industry to speak plainly here.
Jochen Hauck, COO of Simona (Photo: Simona)
Jochen Hauck: In the sustainability discussion surrounding the famous drinking straws, we sat back, perfectly relaxed. We manufacture pipes and cladding for example for plant construction and for handling chemicals. Our plastics in the production facilities have been in use for 30 years and our pipes have been used in construction for 100 years. Nevertheless, the discussion also affects us as a manufacturer of durable products. A study has been published by Germany’s federal environment agency on the subject of microplastics in the groundwater – and suddenly the focus is on our pipes.
Aline Henke: Time and again, there’s the threat of reverting to the image problem. In public perception, converters are frequently placed in the ‘nasty packaging’ corner. We must fight this together and clarify the situation with the major players. After all, plastics are a resilient answer to sustainability.
Has innovative strength in German-speaking Europe really declined? If so, why?
Arno Rogalla: That’s how I see it, but I’m not sure whether it is connected solely with the material plastics. Nearly every project nowadays takes longer than expected, is more expensive than planned and often a different product comes out than intended. Formerly, we Germans came up quickly with a solution that was good, inexpensive and, in the end, was better than the customer had expected. It does indeed seem to me that this ability has got lost. The innovative strength is there, but the discipline and strictness to utilise it in a targeted manner are lacking.
Jochen Hauck: What’s left to innovate in plastic products? Plastic products are mature products. When we create innovations, they often come about in combination with a service or with digitalisation. I’m not sure that we are optimally positioned when we apply the systems concept. We find this enormously difficult in the German-speaking countries of Europe. Another stumbling block is the willingness to take risks, invest money and perhaps even see the project fail.
Have the framework conditions worsened?
Barac Bieri, Owner and CEO of Swissplast (Photo: Swissplast)
Barac Bieri: The framework conditions even within German-speaking Europe are worlds apart. We have two plants in Bavaria, in the south of Germany, and one in Thuringia in the east. In Thuringia, we have 30% investment subsidy, in Bavaria zero. This is an extreme distortion of potential. In Switzerland, hardly anything receives public funding. It would be good to subsidise less if the tax rates were lowered. In Germany, much too much money is lost in the administrative quagmire.
Aline Henke: The amount of testing and the regulatory frenzy in the German funding landscape is unbelievable. When we simply sift through documents for a funding application, I always have to bear in mind that our cows here in the country are faster than the Internet. The processing and implementation of the guidelines swallow an unbelievably large amount of resources. If you need a consultant to help you apply for funding, something is wrong. It would be better to reduce the bureaucracy, to thin out the funding framework and, please, also lower taxes for everyone. As regards the other underlying and boundary conditions: Wage costs are relatively high, so are energy costs: That will catch up with us sometime.
Jochen Hauck: It would be good if the tax rates were lowered instead of first taking money off the companies and then giving it back again via complicated subsidy systems. These systems are often bureaucratic monsters that take up a great deal of time and human resource capacities and, at the end of it all, are less efficient than if the companies themselves are left to operate with their own money.
Arno Rogalla: If a topic is sexy, politicians love to jump on it and promote it, even if there is no official programme at all for it. On the other hand, I have witnessed misdirected European funding, for example to the benefit of companies that relocate production from Germany to Poland. We in Germany thus sponsor the relocation of jobs to Poland with our EU contributions and subsequently finance the unemployment here. That’s crazy. Another aspect is that German-speaking Europe and the Netherlands were once the pacesetters in academic training. Through the dilution of the education system, this is no longer the case. We lack the possibility to promote leadership. We have allowed others to impose on us what our education system should look like. And now we’re paying the price.
What success criteria do you see in German-speaking Europe?
Arno Rogalla: What is good is that anyone operating in a niche area, ideally with a product of his own, does not have to move around in a big competitive environment and is not dependent on the awarding of contracts from the automotive industry. These niche and in-house products are still interesting even if the wage costs and unit costs are relatively high. If the products are really good, they can be economically manufactured in Germany and exported throughout the world. For this reason, it is also interesting to watch the start-up scene, strengthen it and support it. Start-ups often furnish ideas that are suitable for niche applications and perhaps make it possible to be successful on the global market without major competition.
Jochen Hauck: We will always be successful with our products, even in a competitive environment, if we not only supply the product but can also accompany it with a system or a service. In other words, if we not only sell a semi-finished product such as a plastic sheet, but can also supply added value. In my opinion, this is the only way out of the cost trap. I am convinced that production in a low-wage country with the service and innovation from here will not function.
Arno Rogalla (Photo: private)
Arno Rogalla: Mouldmaking in China is at present very cheap. We need to reinvent ourselves. In mouldmaking, we are replaceable. For this reason, we need to pick up speed, make cavities in 3D printing, secure the know-how and the intellectual property for the EU market and create legal security.
Aline Henke: I will go along with that. We have a small mouldmaking department of our own, have assemblies supplied, make the know-how-intensive things ourselves, and work together with trustworthy partners. In such cases, we can help one another with machine utilisation and equipment. For this, you need the right experts at the right place who have an overall view of such complex processes. Where they are based is secondary.
The quality of a product is one thing. What about availability and speed?
Arno Rogalla: Reliability of delivery is becoming an ever-greater problem in Europe. If we look at China in the coronavirus crisis, and at present at the picture of container freight from China to Europe and the US and vice versa, we see that freight costs have increased more than fivefold. There are already companies carrying out ‘reshoring’, in other words, fetching their production back from China to German-speaking Europe. With local production and with distances of 1,000-2,000 km from the customer, I have an advantage.
Barac Bieri: I am absolutely of your opinion. Speed is the absolutely positive point for Europe, especially for Western Europe. This is shown to a large extent by our success at Swissplast. We try to offer the customer a solution as quickly as possible. The customers are coming to us later and later with their ideas. In the old days, we had six months for a project. Nowadays, we must be happy to have six or eight weeks. With these parameters, converters with the most flexibility will win.
Where would you locate a subsidiary company?
Jochen Hauck: Simona is a 164-year-old, medium-sized company. The idea of getting something moving without a link to the headquarters on the Nahe river between Bad Kreuznach and Idar-Oberstein seems difficult. It is part of our DNA that Germany remains the location for innovations. We have sometimes considered shifting certain functions to places such as Frankfurt am Main, which are more international and thus more attractive for young people.
Aline Henke: I always say you really have to want to be employed at our site in Hankensbüttel. It is an hour from us to the nearest motorway, and attracting staff here is a holistic project. We also have to constantly explain the job description of a process mechanic. You don’t have to do that in Vechta or Cloppenburg because everyone has a mate there who trained as a process mechanic. If I had to do something new, I would attach importance to a rail connection. The pandemic has opened up a different view of living in the country. If the traffic infrastructure is right, people can live in the town and work in the country – or vice versa. I certainly don’t see a black future for Germany as a location for production.
How are working from home and smart working conditions taking hold in plastics processing?
Barac Bieri: Everything to do with administration can be done independently of location. Anyone who has worked from home in the last nine months did not really have to be working in Germany at all. Perhaps employees need to become more flexible to be able to continue doing their job in Europe.
Aline Henke: Almost all of us are now back at the company, but we also allow working from home wherever feasible. Web meetings have now become an integral part of our communications and support location-independent working. Working from home needs a clear mindset in the company. Many production workers feel disadvantaged when they have to stay at their workplace while others can work at home. That creates an explosive situation. The legal right to a home office has not made it any easier. It would have been better for the companies to decide on that themselves without any additional legislation.
Jochen Hauck: Admittedly, I was not a fan of working from home before the pandemic came along. But within the space of four weeks, we had to learn how working from home functions. After a year, I have to say that it has significantly changed our company. Today I believe that 30-40% of administration – not production or production-related tasks – will remain at home. The mind change that has taken place in the last few months is proving to be very sustainable. Nevertheless, we cannot relocate all the tasks to the home on a permanent basis, because all the employees need to come to the company from time to time.
Final round: Could you please complete the following sentence: My biggest concern for plastics processing in German-speaking Europe is …
Jochen Hauck: ... that we, in the course of the increasing discussion on the environmental compatibility of plastics, lose business to other (not more sustainable) materials.
Aline Henke: ... that the conditions become so much stricter that industrial locations will only be able to continue existing with great difficulty.
Barac Bieri: ... that energy costs and taxes in Germany explode.
Arno Rogalla: … that we run out of innovations.
Tips from the expert panel for plastics converters:
- The discussion about microplastics will increase for all products sooner or later. Be prepared for this with regard to operations, and have the right arguments ready.
- Consider the views of skilled staff when discussing the image of plastics. Show your contribution to resource conservation and sustainability.
- Ask yourself whether your product can be made more attractive by adding a service or digitalised tools.
- Keep a close watch on the start-up scene to see whether you can find niche products not being supplied by any other competitor, products no other supplier is bothered about.
- Optimise your flexibility with the target of short-term supply capability. Find partners who work with a similar orientation to speed as yourself.
- Consider whether all activities necessarily need to be located at existing sites or whether you can recruit staff at “trendy” places.
- Bring developers, customer service people and production staff regularly together to share ideas.
19.08.2021 PIE [248319-0]