For the first two years, Swisstech Inc., which was set up in a garage near Nypro's main plant, lost money -- it took operators some time to adjust to the computer-controlled technology, but as workers grew to like the machines, so did Lankton. He replaced 40 of Nypro's 66 molding machines with equipment made by Netstal. "In about four years, we went from an ordinary level of technology to number one," he says.
Unlike the experience with Chen Hsong, Nypro and Netstal share a commitment to using the latest technology. "We've hit it off," says Lankton -- so much so that Nypro and Netstal have taken on two other ventures.
In 1987, they launched a factory in North Carolina. Then Netstal asked if Nypro would be interested in setting up a joint venture in Singapore. Yes indeed, answered Lankton. He turned the Singapore factory, which opened last December, into a three-way deal by bringing in Cosamold, a premier Swiss toolmaker. "It's just another way for us to keep up with technology," he says. "We know what's happening in the world as it happens."
Keeping abreast of technology has been important, but Lankton's joint ventures have taught him some cost-saving, Japanese-style management skills as well. In 1981, an acquaintance who was a principal at Mitsui & Co., the large trading company, told Lankton about a Japanese concern called Enplas that needed a U.S. source for videocassette parts. Nypro agreed to set up a factory with Mitsui in Atlanta to serve Enplas.
Soon, Nypro and Enplas were arguing bitterly over price and quality control. Enplas was willing to pay only 80% of what Nypro wanted for the components. After some "yelling and screaming," says Lankton, Enplas sent its representatives to examine the factory's efficiency. You have twice as many workers as you need, they told Lankton, and your processes should be more automated. "We didn't want the deal to blow up, so we decided to listen," says Lankton. "The crux of the matter is that they were right. By following their prescriptions, we could make the part for the price they wanted.'
Enplas also taught Nypro some hard lessons in quality control. Why did you reject this shipment? Lankton would ask. The label on the box, they would answer, was crooked. "We eventually learned," says Lankton. Now, Nypro's Atlanta plant is its most productive, with sales per employee averaging $2,000. By comparison, most of Nypro's other nine plants hover around $1,250.
Becoming a successful Japanese subcontractor has led to Nypro San Diego Inc., another partnership with Mitsui, and Nypro Iowa Inc., another three-way venture that includes a Japanese pen company.
Joint ventures have also provided opportunities for Nypro's employees. Each of the ventures needs a manager, as well as a board of directors. "We can put different people on the board, and get them exposed to international business," says finance vice-president Aznoian. "It gives more middle managers an opportunity to participate in upper-management decisions." Recently, Lankton even came up with a way to use joint ventures as a lure to keep employees.
Late in 1987, three of Nypro's mold makers told Lankton that they were thinking of leaving to set up their own business. Hmm, said Lankton, how about you stay here and we launch a 50/50 joint venture? They shook on it. The result, NyproMold Inc., is in the same building as Lankton's office. Has Lankton carried his love of joint ventures to an absurd extreme? "All I can say is this," he replies. "I didn't lose those guys, and NyproMold has been profitable every month since it opened last January.'
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SIZING UP A JOINT VENTURE
Five questions you should ask yourself
You'll improve your odds for a successful joint venture if you consider the key issues in advance. For example:
* Are you compatible? It's unwise to form a joint venture overnight. Before signing anything, spend a good deal of time just sitting and talking with your prospective venture partner. Where do its managers see themselves in five years? How does the agreement fit into their long-term strategy? Also, examine the company's past performance by using a reference-checking service or talking to other people in the industry yourself.
* Is the deal structured soundly? This doesn't mean just planning for the worst case by ensuring that one partner can buy out the other should the relationship falter. It also means lining up commitments from your customers before you break ground on a jointly financed manufacturing plant. While it's easy to get caught up in the excitement of taking on a venture, you should still always have a business plan.
* Do you have a fallback position? What will you do if those customers you've lined up pull out at the last minute? Long before the new factory is up and humming, send out a sales team to line up additional prospects.
* Is your manager up to the task? Managing a joint venture takes uncommon sensitivity and communications abilities. Don't hesitate to put your best manager on the job. If you have to hire from outside, screen carefully for these skills.
* Are you ready to open your company to scrutiny? As prospective venture partners, the Japanese are notorious for rattling off questions about your business. What do your 10-year projections look like? What are your personnel policies?
Other foreign partners may not be quite so curious, but you'll still have to open up your company more than just a crack. The best strategy is complete honesty.
