Market volatility can have a major impact on what it costs to make personal protective gloves, and what it costs customers to buy them.
And that volatility can come from several factors, including currency fluctuations, materials price spikes and drops, government decrees, foreign competition, the growing use of robotics by client industries, process automation, and customer demands for advanced-technology products that make working hands safer, more effective, or more comfortable.
What happened late last summer in Malaysia is a case in point. There, the country’s two rubber glove makers – one of which, Hartalega Holdings, is the world’s largest synthetic rubber glove manufacturer – benefitted from the slackening price of rubber and the national currency’s weakened position vis-à-vis the dollar.
Rubber is the primary raw material for these manufacturers, and its softening price – a direct consequence of depressed crude oil prices – lowered per-unit prices. But the companies also sold more gloves, and since most of those sales were exports, the dollar’s recently increased strength against the Malaysian ringgit meant more profits for both businesses.
Automation, cost and price
Markets also are in greater flux, with corresponding economic reverberations for the industry, because higher-tech machines are assuming more of the manufacturing load. The pace of automation in production operations is increasing almost exponentially. That’s been especially true with the major transformation that’s happened in disposable glove manufacturing over the past half dozen years. Increasingly sophisticated and versatile glove applications have resulted from the development of manufacturing equipment that has become more nimble, faster, and quicker.
Indeed, the time- and labor-saving aspect of advanced automation exerts downward pressure on operational costs, while the ability to make a greater volume of gloves in less time allows glove manufacturers to charge less on a per-unit basis. At its state-of-the-art manufacturing complex near Kuala Lumpur’s international airport, for instance, Hartalega’s robotics capability is such that the company can make 45,000 gloves an hour compared to the 10,000 pieces that were possible before full automation. That has slashed overhead costs and dramatically boosted productivity.
Two of the most game-changing evolutions in automation are the move from single-rack formers to double-rack formers, which has doubled the capacity of glove production lines, and replacing manual glove stripping with an automated process to remove the glove from the form. While it took awhile for double-rack formers to be perfected, and the change from manual to automated function doesn’t eliminate the need for visual inspection and testing to assure that qualities like porosity are at desired levels, these and other automation breakthroughs often can positively change the expense and revenue picture for glove makers.
Mandates and market growth
Occupational safety and health regulations, especially on the federal level, play a role in affecting industry economics, too. In 2014, hand protection accounted for 22 percent of the total personal protective equipment (PPE) demand. Noting that mandates from codes and standards organizations are driving a big workplace emphasis on safety, a market analysis by Grand View Research (GVR) predicts that those rules, as well as the huge costs resulting from noncompliance with health and safety procedures, will continue to spur PPE market growth.
Manufacturers are anticipating those mandates and building them into their costs. One such regulatory addition for which glove makers will have to account in their costing is a cut-resistance standard that is coming into effect at the beginning of 2017. The new rule will establish greater international consistency in what’s required in cut resistance testing methods and performance ratings and define more cut level ranges that reflect recent advances in cut-resistant yarns and technologies and make it possible to see how gloves differ within those ranges. It’ll take some time to adjust to the new sales environment that the standard will create and recoup the extra front-end cost needed to make gloves with greater cut-resistant integrity.
R&D, testing and the need for new investment
Getting products up to snuff to meet new standards involves a chain reaction of sorts, with customers who want gloves that comply with the new rules triggering greater investments in research and development (R&D) and the testing needed to turn out next-generation solutions that pass regulatory muster. Glove manufacturers will hire new people to do internal testing and handle third-party certification, as well as to do intensive research.
The new cut-resistance standard, with its more numerous and more exacting cut level ranges, likely will prompt safety directors for glove manufacturers to seek gloves for all of those quality levels and for ranges, like A7, for which very few gloves now exist.
When product demand grows, and manufacturers are racing to keep pace with it, the sale price of protective gloves can follow. But the countervailing pressure is that end users want those better gloves at lower prices, because they must cut costs in order to keep overhead down – including the overhead associated with R&D, testing and analysis of new products. So innovation tends to suffer against the need to make what’s already available more cost-effectively. It also suffers when government-subsidized foreign manufacturers, in places such as China, can create an artificially low price point.
The competition coming from overseas manufacturers that use cheap labor also creates a downward pressure on glove prices. Domestic glove makers, on the other hand, are more likely to invest heavily in production line automation that can hold down labor costs.
Fully integrated manufacturing
Fully integrated glove manufacturers (FIMs) have a few critical advantages:
• FIMs control the production process from beginning to end, from the raw material to the finished goods.
• They can negotiate and lock in raw materials pricing, which lets them navigate economic peaks and valleys.
• FIMs can leverage raw materials suppliers against one another to ensure the lowest possible market pricing. Switching volumes to another manufacturing location creates more cost efficiencies in manufacturing processes, labor and energy use.
Technology that can make a thinner glove that’s more versatile but just as protective as a thicker glove has been an economic boon to the industry, too. Five years ago, the predominant disposable glove was a 4-mil, 9-inch product. But machinery that has emerged since then runs at such fine, precise tolerances that it can create a 3-mil or even 2-mil glove that looks just like the 4-mil variety and doesn’t compromise on safety or functionality. That’s one way to take the cost out of the glove, since all your cost in a disposable glove is in the material.
The trend is to develop new glove designs and materials that improve health and safety protection and provide operating cost reductions for a healthier bottom line. The exception to this is single-use gloves. The introduction of nitrile butadiene as a polymer for this sector has led manufacturers to focus operational improvements solely on cutting product costs and producing thinner gloves. The upshot: a race to the bottom in price.
Everybody is trying to hit a home run with a niche-glove application featuring a unique, proprietary innovation that distinguishes each manufacturer’s brand identity. That comes at a higher cost for the consumer – sometimes.
Adding features doesn’t necessarily mean that you get to pass them along. And some things manufacturers do don’t add a true cost. Or you take something else away to add another benefit.
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