4 August 2006
Mr. Plastics Lands on the Cover of East Bay Business Times!

Surviving Change - Company Weathers Booms and Busts
East Bay Business Times - August 4, 2006 by Mike White

Ten years ago, Dana Cloutier, a newly divorced single parent, was laid off from work two weeks before Christmas. Responding to a job advertisement, she interviewed with Mr. Plastics, a custom fabricating company. A decade later, she still works at that same small firm and has something that is perhaps just as important as a paycheck -- a second family. "When my friends ask me, 'Do you still work for that small plastics company?' I say with pride, 'Yes, I do,'" Cloutier said. In business since 1985, Mike Adelson's San Leandro company has survived several economic downturns, including the most recent one that sank some of his high-tech customers. Throughout, he has wrestled with decisions that would make or break his company, including whether to expand and what to do about rising employee costs, including heath care.

Mr. Plastics is a survival story of a small manufacturer that has weathered booms and busts. Many East Bay manufacturers have moved or gone under, but those that have remained have relied on their expertise, market knowledge and, in some cases, luck.

In the case of Mr. Plastics, the 16-person company has survived in part because of the loyalty of employees and customers alike, said Adelson, a UC-Berkeley graduate who started the business after working for larger plastics companies.
The stream of loyal customers began with one of his first clients. He bid on a large project and won it because the company's manager said Adelson knew more than the others about plastics. The problem was, he needed to raise a quick $30,000 to order the materials - which he did.

That one order allowed him to establish credit with the material supplier, so he would not have to pay for all of the materials before receiving them. At the same time, it created a loyal customer who returned for several projects before moving to Pennsylvania, a state with a less expensive business climate.

Adelson started the business with a van and a garage, but an increasing number of clients allowed him to open a succession of small manufacturing facilities. The fifth and last move was in 1999, when he relocated to his current 24,000-square-foot facility on Alvarado Street in San Leandro and more than doubled his previous space.

His employees, who make between $10 and $25 an hour, work on a variety of projects, producing from one unit of an item to thousands. An example of a smaller project is the small plastic house he is creating for a real estate company. It will be used for potential clients to drop their business cards into.

On a larger scale, he created custom-built holders for spec sheets for engineers at the NUMMI auto plant. Toll workers on the Bay Bridge carry cash holders, one of 350 such items created by Adelson's company. They are special - and expensive to produce - because each is fire-retardant.

Although such specialized work requires expensive machinery, Adelson saves money where he can. Instead of paying $70,000 for a milling machine that could be operated by computer numerical control, or CNC, he bought an older one for less than $10,000 and upgraded it so that it could decipher current computer languages.

In spite of his efforts to keep costs under control, expenses have risen significantly over the years, as they have for most small and large manufacturing firms in the East Bay and California. Some firms have decided to leave the state or simply go out of business. A few of Adelson's employees have come from companies that closed shop.

The largest problem areas for Mr. Plastics has been rising electricity and workers compensation costs. Because Mr. Plastics delivers its products and has a full-time driver, fuel costs also have shot up. In addition, since plastic is a petroleum-based product, the cost of Adelson's base product has increased.

Adelson has never seriously considered leaving San Leandro or California, however. "We want to stay here, but it is expensive," he said.

Many manufacturing companies facing difficult business decisions turn to Bruce Kern, executive director of the Economic Development Alliance for Business, a public-private partnership that seeks to retain and attract businesses to the East Bay.
Others visit consultants such as Brent Meyers, CEO and president of the Corporation for Manufacturing Excellence. He advises clients that while the business climate may be difficult, and that while their concerns may be valid, they can take measures to improve their businesses.

During the 1980s and 1990s companies could make money "almost on auto pilot," Meyers said. "It created a level of complacency. You could make a lot of mistakes and still be profitable. Now, you need to get smart."

To find out how to become better, managers should consider their options from the perspective of a customer. Could the company offer new products to better meet the needs of current and potential customers? Could they create a joint venture with another company that creates value for customers?

"We don't help clients move away," Meyers said. "We help them find out how they can become more successful." Meanwhile, Adelson's hard choices came a few years ago when many of his important high-technology companies shrank or went out of business. He used to pay most of his employees' medical expenses, but he dropped health insurance as his client base declined.
Employees can still sign up for group medical coverage, but they have to pay the entire premium themselves. It was a tough decision, but it helped avoid layoffs. As far as he knows, no one left because of his decision on health care, Adelson said.

The health care issue was difficult, but a decision he looks back on with fondness is the move to his current location. Before the move, his offices were located separately from the warehouse. He suspected that some items were being removed from the warehouse without his knowledge and he's happy now that it is all under one roof. He leases his current facility but also owns his former office building. By renting it out, he has another source of income.

One decision he looks back on with regret was taking on a large project by an entrepreneur seeking to create a specialized computer tray. The businessman negotiated to pay one-third down and the rest upon delivery. This meant that Mr. Plastics paid for all the materials to begin the project and took the loss when the businessman disappeared. "I should have gotten a larger down-payment," Adelson said.

Businesses such as Mr. Plastics, however, give both entrepreneurs looking for one custom plastics project, as well as large companies looking for thousands of pieces, a place to go locally. Some think this is a reason that manufacturing will not disappear from the East Bay or California.

"There is a place for the Mr. Plastics of the world," said Richard Wahl, the company's sales and marketing manager.

Mr. Plastics
Business: Plastic distribution, fabrication and manufacturing
Headquarters: San Leandro
Founded: 1985
President: Mike Adelson
Employees: 16
Address: 2757 Alvarado St., San Leandro 94577
Phone: 510-895-0774
Web: www.mr-plastics.com

White is a contributor to the Business Times. (link to article on EB Business Times)