Diversification helps auto supplier avoid crisis

ONE silver-lining story to come out of the COVID-19 pandemic is that of a former Tier 2 supplier to Ford Australia and GM Holden – Sneddon & Kingston Plastics – which successfully diversified from engineered automotive plastic products into other sectors.

Based in the northern Melbourne suburb of Preston, Sneddon & Kingston has remained in the same family since it was founded in 1948 and today produces rigid food packaging and components for medical equipment, as well as parts for Australian-based global automotive components supplier APV and off-road accessories specialist ARB.

In 2014, the company was among seven businesses to share in a $4.3 million government funding package put together by the federal, South Australian and Victorian governments under the Automotive New Markets Program that was intended to help automotive suppliers remain viable after it was announced that Ford, Holden and Toyota would all cease vehicle production in Australia.

In an interview with GoAuto, Sneddon & Kingston Plastics general manager Blair Sinsheimer said business on the food packaging and medical sides were going well and that the company now had so little reliance on automotive work these days that it “almost wouldn’t notice the effect” of a drop in demand.

The medical parts, which include components for sterilisation apparatus and consumables for laboratory diagnostic applications, are obviously crucial as the coronavirus epidemic escalates in Australia.

“I’m feeling a lot more comfortable than I would have been if the automotive industry was still running here and I was still 90 per cent automotive – I’d be very nervous,” he said.

“It’s taken us a long time to do it but we’re finally there and (the decision to diversify) was good timing if you ask me.”

Mr Sinsheimer said the company was now “in a fortunate position” to help customers that were struggling due to the pandemic, by offering flexible payment terms.

“We’re able to accommodate a few people when they are suffering financial hardship or complications in response to this (pandemic),” he said. “Where we can we are offering people assistance. We haven’t really seen too much of the effects and I think there are a lot more to come.”

Asked if the supply of raw materials into Sneddon & Kingston Plastics had been affected by the pandemic, Mr Sinsheimer said a delivery of tooling from China had been disrupted “for a few weeks” but explained that tooling “is a one-off buy” and as such was more of an inconvenience than a threat to ongoing business”.

By contrast, Brisbane-based product commercialisation specialist and plastics manufacturer Evolve Group is investing heavily in bringing tooling in-house after experiencing supply disruptions out of China.

Evolve Group managing director Ty Hermans told GoAuto the company – a major source of plastics to Century Batteries , manufacturer of Tred off-road recovery equipment and supplier to various local automotive aftermarket businesses – had experienced “tooling locked up in China”.

“We’ve had projects stopped on us, we’ve had factories sitting on our tooling mid-production and it really impacted our business so we’re investing heavily in bringing our toolmaking back so we can do everything in Australia and not rely on China,” said Mr Hermans.

“That’s been one of the (pandemic) impacts but also a bit of a silver lining for us as it’s forced us to act on the reshoring of toolmaking, which was always going to be on the cards at the right time.”

Mr Sinsheimer said Sneddon & Kingston Plastics largely sourced raw materials from the Middle East and that supply had so far not been impacted. But he was conscious that this could change as the pandemic unfolds.

“If anything at the moment, we’ve encouraged our customers to build a bit of stock in the event that we may have disruption in the business due to someone within our business getting infected – but again, I think it’s early days,” he said.

“These companies are still producing; obviously our food packaging sector is going well because people are panic buying and the on the medical side of things people are ordering up because people are buying medical machines.”

Despite his company’s success in a post-automotive form, Mr Sinsheimer lamented the lack of local demand for engineered plastics.

“It’s a shame because 10 years ago we would have been considered one of the best, I would like to think the best, engineering plastics manufacturing company in the country,” he said.

“Now the proportion of what we do with that is probably about 30-40 per cent because we’ve moved to the food packaging industry and that is purely because it can’t be touched by a global market.”

He explained that this was due to the cost and speed of shipping, as well as reasons of quality control and risk management.

“That’s what drove us to move into that sector because the natural geography of the sector is protected on an international level and that’s why we’re going well now,” he said.

Mr Sinsheimer was hopeful that more businesses in the post-COVID-19 world would develop similar habits, which combined with highly visible supply chain disruptions caused by the global pandemic, would encourage more businesses to manufacture plastic products in Australia.

“Once things start to settle back into the norm, people will begin looking at sourcing for their new project,” he said.

“At the moment everyone’s in damage control and just trying to make it work. Projects are being put on ice and to be quite honest I’m quite happy about that. I’m quite happy to keep things ticking along rather than focus on new projects as now is not the time to be focusing on new projects.”

Outlining his company’s measures to protect workers and the business from COVID-19, Mr Sinsheimer said the temperatures of all employees had been monitored for almost a month, that as many as possible had been working from home for at least three weeks and that extra precautionary measures were implemented at the production facility a fortnight ago.

“We run a 24-hour, five-day-a-week operation over three shifts and are segregating all our shifts so that the shifts don’t come into contact with one another,” he said.

“In the event that someone enters our plant and has an infection and tests positive (for COVID-19) it’ll only be that one shift that goes into quarantine and that won’t take out the entire business.”

Mr Sinsheimer added that these measures were also helping protect the supply chain for his customers and that he was asking businesses on both the input and output sides of Sneddon & Kingston Plastics to do the same.

“I’ve definitely been very vocal with our customers and suppliers by sending out correspondence telling them what we’re doing and encouraging them to follow suit if they are not already,” he said.

“If people aren’t taking precautions and someone comes in sick, who is to say it hasn’t infected their entire plant, whether it’s our customer or a supplier?”