|Modern Day Midas: Changing Metal to Plastic at Thogus Products Company|
|by Dianna Brodine|
|Profile Summer 2007|
Thogus Products Company, in Avon Lake, Ohio, has created a niche in the plastics injection molding industry by looking forward to the next big thing, rather than clinging to the formula for past successes. Although Thogus Products hasn’t found a way to change lead into gold, the company leads the industry in finding alternatives to metals in a variety of applications.
Thompson + Gus = Thogus
Jack Thompson’s grandson, Matt Hlavin, current vice president of sales and marketing for Thogus Products, recites more of the history. “Instead of just building the tools and letting them slip away, my grandfather decided to start molding. The primary customer back then was Packard Electric. Thogus Products was paying a lot of money for brass fittings, and my grandfather decided to save money by making plastic fittings.” Considering the direction the company was to take forty years later, it’s worth noting that Thogus Products’ first metal-to-plastic conversion was in 1960.
Now in its third generation of family ownership, Thogus Products Company is a woman-owned business and member of the National Minority Business Council (NMBC), headed by Hlavin’s mother, Kathleen Hlavin. Thogus has positioned itself as a boutique manufacturer of highly engineered components; metal replacement solutions; and the company’s original molded products, tube and hose fittings. Working with its customers to produce low volumes of 50 pieces or less or medium-high volumes of more than ten million pieces, Thogus services the industrial, medical, pharmaceutical, automotive, electronics, lawn and garden, plumbing, and government industries. “We have a proprietary line of tube and hose fittings that cover basically every industry - everything from the spouts for food and beverage dispensers (on coffee machines and water coolers) to electrical instrumentation and dials to replacing lead in radiation shielding applications. That’s really one of our strong points right now – we’re transcending the industry as the biggest player in the market,” says Hlavin.
Positioning the Business
Forty years earlier, Jack Thompson made the first metal-to-plastic conversion in the company’s history. Now his grandson was about to position Thogus Products as a leader in metal-to-plastic conversion, pushed by industry globalization. Hlavin explains, “If it’s a commodity product or a high volume product, you’re going to find a way to take the labor out of it. Then if the material can be manufactured in Asia and shipped here effectively, you can’t touch the price. And we have the EPA and regulations here that affect our prices that overseas companies don’t have. So we asked, ‘What markets are still here in the U.S. that haven’t been tapped yet?’” The answer was metal-to-plastic conversion.
According to the Thogus Products web site, re-placing metal parts with highly engineered polymers can generate large returns for customers through part consolidation and ease of manufacturability. After initial tooling costs, the total cost is often much less than the same part produced in metal. Thogus Products lists other benefits, such as the elimination of corrosion (plastics don’t rust), noise reduction (plastics are inherently sound dampening, reducing the need for additional insulating components), weight savings (plastics can weigh 50-70 percent less than a given metal component), and part consolidation (assembly of several metal stampings or castings fastened together can often be replaced by a single injection molded part).
Success in the new market wasn’t instantaneous. Hlavin admits that the change in philosophy was a painful process. “Our sales from 1997 to 2002 declined by 50 percent. If the company hadn’t operated debt free, I don’t know what would have happened to us.” Even when business was slow, Thogus Products was buying machines for the future. In 2000/2001, Thogus Products invested in itself with over one million dollars in improvements, including eight new plastic injection molding machines. “We knew the pipeline was full. That was one of the brilliant things my mom and grandmother did. They continued to invest in the business. They saw our vision.”
In 2003, the metal-to-plastic conversions that Thogus Products had been quoting started to hit. Since that time, the business has been growing an average of 26 percent a year. In June 2006, Thogus Products built a new 76,000 square foot plant on 40 acres with room for additions.
Developing the Market
“We have formed strategic partnerships with engineered material manufacturers such as PolyOne and GE Plastics,” says Hlavin. “We went to them and said, ‘you’re very good at developing materials – you have the scientists, the innovations, and the capital – but do you know how to sell them?’ Their understanding of the product, the customer, and the different applications was a little limited. As a molder, we understood the parts and processes.”
When PolyOne and GE develop new materials for use in molding, complications can arise when OEMs want to test the material in existing applications. The OEMs’ primary molders may not want to be involved in the initial applications, since the runs are typically small volume and more costly to set up. The TEMPS mold offers a solution.
TEMPS stands for Thogus Engineered Material Prototype Solution. Essentially, it’s pre-prototyping. TEMPS is an adjustable mold that allows OEMs to prototype a part without the risk of having to build prototype tooling during the development process.
“It goes back to our partners. With these new age materials, you can’t buy bar stock or rod or a block of the material and machine a part, because it’s not readily available. SLAs are great for fit and function, but to actually test the material in its production application, the only way you can do it is to build a part.” The TEMPS mold allows Thogus Products to mold and machine one part in the production-intended material, giving OEMs the ability to see, feel, and test the part in the engineered material with little financial risk.
Hlavin enjoys the ‘jaw drop’ effect that occurs when sales calls are made to potential customers. “When we can make 100 phone calls and 90 people call us back, that’s fun. It’s still a long close, because it’s a paradigm shift we’re selling here. But there’s intrigue, there’s interest, it’s funky, it’s alive. We’re not a number or a bid sheet, we’re a boutique molder.”
Another step in Thogus Products’ journey away from traditional injection molding is driven by a new (July 2006) regulation in the European market. Implementation in the U.S. is likely not far behind. The RoHS (Removal of Hazardous Substances) Directive?defines acceptable levels of certain substances, including lead, in new electrical and electronic equipment and components placed on the European market. Although not a standard in U.S. markets, if a product is manufactured in the U.S. and exported to Europe, it must comply with RoHS standards. RoHS could eventually have a significant impact on the medical industry, where Thogus Products excels with a product that replaces lead in radiation shielding for x-ray technology.
Hlavin believes it’s only a matter of time before RoHS comes to the U.S. “California will adopt first, and it will work its way across the country. We’ve invested heavily in it. We’ve been processing this lead replacement material for about five years. We’ve spent a tremendous amount of money and time and resources in developing this. The technology for processing this is not typical and we had to custom-design our equipment to handle it. The volume is very low right now. We mold 50 pieces a year for certain customers.” One reason for the current low volume is that lead replacement material is very expensive. Whereas lead can cost less than one dollar per pound, the material used by Thogus Products can run from the mid 30s to upper 80s per pound. The government is the biggest customer for this material, followed by medical.
Crafting the Future
Crafting the future of the industry is hard work, especially if potential customers can’t see the end benefit. Thogus Products has committed to its customers, not only by watching the trends in the injection molding industry but also, by watching the trends in its customers’ industries. Thogus Products actively investigates its markets, using the internet and a variety of industry trade organizations, believing that it has an obligation to its customers to understand the customers’ businesses as well, if not better, than the customers themselves. Hlavin explains, “We try to understand their process… their engineering, purchasing, assembly line or manufacturing procedures, scheduling, forecasting, and sales side. After you get outside of the operations portion, you look at who they’re selling to. Who’s the end customer? What does that end customer want? What industries are they servicing? And where’s that industry going five years from now?”
Thogus Products also is keeping an eye towards strategic alliances, and then eventually acquisitions. Hlavin recognizes that most customers looking for a custom product provider will stay close to home. If the provider isn’t geographically close, the customer will find other high performance molders that are closer to home. In order to grow its business across the country, Thogus Products needs to have locations that can service its customers near their business locations.
The third generation of this family-owned business is already in place. Thogus Products will eventually be turned over to Hlavin. One of his younger sisters also recently joined the company. There’s no timeline set now but the Hlavins know that it’s important to have a plan. “We’re talking about it, moving much of the direction and control of the business, but it’s not happening any time soon,” says Hlavin. “My mom’s not the retiring type.”
Maybe that’s the key. Thogus Products Company hasn’t retired to rest on the reputation of its successful product lines. It has sought new markets and created industry change. Hlavin sums it up, “Our industry is trying to simplify but we love the complexity. Complexity and chaos are the ultimate marketplace. It’s the ultimate opportunity.”
Perhaps Hlavin subscribes to a theory offered by James A. York, a distinguished professor of mathematics and physics at the University of Maryland. York is famous for coining the mathematical term ‘chaos’. He also is famous for saying, “The most successful people are those who are good at Plan B.”