A recent article from The Small Business Times in Wisconsin titled "The Boomerang Effect" (by Eric Decker, who did a fantastic job) is significant to small and mid sized manufacturers in mature markets for 2 reasons:
- It shows conclusively that machining and manufacturing work can be - and is being - won back from China.
- It points out 5 lessons that you can use to compete - and win - globally.
To effectively compete, many Wisconsin manufacturers have transformed their operating models using the principles of lean manufacturing, automation, quality assurance and control, just-in-time delivery, innovation and technology, said Mike Klosinski, executive director of the Wisconsin Manufacturing Extension Partnership (WMEP), a private, nonprofit organization dedicated to the growth and success of Wisconsin manufacturers.
"Many Wisconsin manufacturers have not sat still (in recent) years," Klosinski said. "Putting in place lean (principles) has been the biggest strategy. And by taking on more services around their product, understanding their customers' customers and being more innovative and creative about developing new products, they've turned into value suppliers. As a result, those companies' large customers are electing to source with someone they can trust instead of sourcing overseas."
The stories and roadmaps presented by the 4 companies in the article aren't new. You've seen and heard them trumpeted on MFGx, in publications, at conferences, and from other sources. Some of you have embraced these tenets. But many of us have whined or wrung their hands, blaming cost and the government and the invisible hand.
Look at what successful U.S. manufacturers have done to grow in these uncertain times, and be inspired. (Highlights are mine.)
Signicast Corp., a manufacturer of investment castings, has invested heavily in automation, robotics and cutting-edge technology at its Hartford (WI) headquarters, where its main manufacturing operations reside.
The company's investment has paid off. In the last three years, Signicast has seen significant work increases, said Robert Schuemann, executive vice president. And much of that work is coming back from China.
"We are definitely feeling the boomerang effect," Schuemann said. "The playing field is changing. Many of the rebates given to Chinese manufacturers have been taken away. The yuan (the Chinese dollar) has gone up, and labor costs have gone up there. You're seeing the people that went there for price coming back for quality, delivery and price."
Signicast has grown its revenues every year since 2001, Schuemann said. The company had $130 million in revenues in 2007 and forecasts about $140 million for 2008.
... Signicast's use of automation and ... four different (cellular) manufacturing modules enable the company to respond quickly to new orders and to requests for changes. That speed and flexibility give Signicast a significant edge over foreign competitors.
Lesson 1: Invest in technology
Like Signicast, Plastic Components Inc., a manufacturer of injection molded plastic components based in Germantown, competes directly with the Chinese and other emerging markets. The company produces components that are used in a wide variety of manufactured products and has customers around the globe.Lesson 2: Automate
"We can go head-to-head with any molder in the universe with our universe," said Thomas Duffey, president of Plastic Components. "When we started the company in 1989, the concept was a fully automated plant. The idea was to take human involvement out, and taking cost and variability out."
Also, like Signicast, Plastic Components relies heavily on automation and technology to keep its parts price down.
"Our tag line is, 'Low Cost at Home,'" Duffey said. "We try to tell people to change their mindset, that they don't have to go to the Third World to buy parts at competitive prices. They can get them in Germantown, Wis."
Lesson 3: Get the word out (market to customers and prospects)
Barton Precision Components is a precision machining shop. The components it makes are machined from rolled steel and aluminum, destined for the hydraulic, oil drilling, pump and value, aerospace, medical and munitions industries. Barton Precision Components also holds several contracts with the U.S. Department of Defense.
(It) is competing and winning against Chinese manufacturers with both automation and by making components that have higher tolerances than Chinese competitors can produce.
"We're talking about tolerance on a hole that is .0002 of an inch," said Valerie Hron, president of the company. "That's like one-tenth of a piece of hair."
"We had a large OEM (customer) with a volatile schedule that makes hydraulic components," she said. "Before, if they called on Jan. 1 and said they needed 30,000 pieces, it would take five months to complete the run at 80 hours a week. Now we can do the same 30,000 pieces in 10 days with eight people instead of 14."
Barton's enhanced capabilities have won it jobs that previously would have gone to China and other emerging markets, (Raymond) Batista said.
"We had a big customer that didn't get a delivery on time (from China)," he said. "We were able to take it to our machines that could make their parts in 10 to 12 days. More and more situations like that are coming up.
Customers in the U.S. are getting tired of the situation. And we're promoting our product that way."
Lesson 4: Move up the food (supply) chain to provide better quality and value
Instead of trying to compete on price, Reich Tool & Design Inc., a tool-and-die manufacturer based in Menomonee Falls, is working to develop niche manufacturing capabilities in aerospace, medical and energy exploration - areas it believes that Chinese manufacturers cannot compete.
Reich Tool & Design is pursuing AS 9100 and ISO 13455 certifications to make components for the aerospace industry and medical fields, certifications that foreign manufacturers will find difficult to obtain, Fritz Reich (president) said.
About 70 percent of Reich Tool & Design's business is in automotive, appliance and consumer products, Fritz Reich said. The other 30 percent is in aerospace, medical and energy products.
Reich Tool & Design already has built components for the International Space Station, and its medical components focus could add significant sales to the company, Brett Reich (vice president) said.
"The medical work has the potential to double the sales of the company," he said.
Lesson 5: Move into other markets to ward off competition and diversify
A dear friend of mine - and one of the smartest people I've known - once said to me, "There are no bad business conditions to a good businessman."
Here are 4 examples that prove he was right.
