The global marketplace is not a level playing field. There are significant factors that distort markets. We all understand and accept that labor rates are vastly different across the spring manufacturing countries of the world. So, will all spring manufacturing become concentrated in low-labor-cost countries? The answer to this question must give cause for concern unless you are in China, India, Eastern Europe or parts of the Far East, where costs are low and growth can exceed 20% per annum. Whereas the spring trade is
very buoyant in these parts of the world, it is not yet impossibly bad in the U.S., Europe and Japan, but will it continue? Are springmaking jobs safe?
I recently gave a talk to the UK Fasteners Industry about hydrogen embrittlement, a topic I may well revisit one day in this column. However, one of the other speakers at the seminar described the way the fastener industry in the UK had been decimated, with 84% of all fasteners being imported today. Contrast this with the spring industry, not dissimilar in makeup to the fastener business, and you find that less than 16% of the UK requirement for springs is imported. So why this massive difference between industries?
First, it has to be stated that the UK market has as level a playing field as anywhere in the world, and it is a moderately high-wage economy with a strong currency. There are no industrial or energy subsidies, no import/export tariffs with Europe, and low tariffs with the rest of the world, so why has the fastener industry been lost to market forces but not springmaking?
The answer, IST believes, lies with the fact that the overwhelming majority of fasteners can be bought from stock. Consequently, the Taiwanese fastener industry makes a magnificent range of stock fasteners, and has captured the world market by piling them high and selling them cheap. Springs from stock, on the other hand, are seldom exactly right; almost all springs have to be specifically made to the end user’s precise requirements. It is this simple fact that has preserved the UK spring industry and, doubtless, the spring industries of the U.S., stock item. The buyer might receive a cheaper offer from your competitor up the road, however, and this keeps all springmakers competitive.
On the other hand, if the end user moves his manufacturing to a low-cost country, the springs will likely be locally sourced. Is there a defense to this?
Probably not, unless your company investigates the possibilities of strategic partnerships, joint ventures, mergers and setting up new factories in the country to which your customer(s) have decamped. All these strategies could preserve your market and put you in line to take advantage of the growth in the country to which your customer has moved.
IST is a very small company offering global services, such as fatigue testing, failure analysis, information about spring materials and performance, and CAD programs. We are in the process of adopting the business strategy described here by appointing Zhou Wei to be our agent in China, Derek Saynor to be our agent in the U.S. for services not already covered by NIMSCO, and Amit Banerjee to be our newest employee in India. This gives us global coverage for a small company that has to retain good awareness of world trends.
Maybe your company also needs a strategic partner in China, India, Latvia, Malaysia or wherever. The point of this Cautionary Tale is that the spring market has become global, and you need a strategy to flourish in it.
Mark Hayes is the Senior Metallurgist at the Institute of Spring Technology (IST) in Sheffield, England. Hayes man¬ages IST’s spring failure analysis service, and all metallurgical aspects of advice given by the Institute. He also gives the majority of the spring training courses that IST offers globally.
Readers are encouraged to contact him with comments about this Caution¬ary Tale, and with suggested subjects for future Tales, by phone at (011) 44 114 252 7984 (direct dial), fax at (011) 44 114 2527997 or e-mail at firstname.lastname@example.org.