Small Business Labs

Niche Manufacturing in Brooklyn

A trend we've been following is small manufacturing firms competing successfully through strategies built around niche markets, customization, automation, flexible systems, design services, and delivery speed. 

The New Yorks Times article In New York, No Crisis for Niche Manufacturers provides several examples of this trend.  It also talks about the growth of niche manufacturing companies in Brooklyn.  Key quote:

"In Brooklyn, the number of jobs for niche manufacturers, which are not only small but also tend to have local clients, rose by 17 percent between 2001 and 2007, said James Parrott, the chief economist of the Fiscal Policy Institute. In the same period, the number for manufacturers making products for mass markets declined by 48 percent.

Desktop Manufacturing For Under $5000

Desktop Factory got a lot of attention last week with their announcement of a 3D printer for less than $5,000. 

3D printers are used for rapid prototyping and turn digital computer aided design files (CAD) into physical models, or even final products. 

Most 3D printers use ink-jet printing technology and spray fine beads of plastic or resin instead of ink.  These beads build up to create freestanding objects. 

According to the Desktop Factory site:

"The Desktop Factory 3D printer builds robust, composite plastic parts that can be sanded and painted, or flamed when desired."

3D printers have already had a significant impact on product design and development.  Prototypes can be built quickly and cheaply.  Users can test and comment earlier and more often in the development process.  And problems can be caught prior to manufacturing. 

3D printers are also used to make final products.  Siemens and Phonak use them to make silicon earbuds for music players and a variety of manufacturers print small runs of plastic and resin products.

Just as laser printers connected to PCs led to desktop publishing, low cost PC driven machine tools such as 3D printers and laser cutters are unleashing a wave of small-scale manufacturing innovation.  This is creating new manufacturing opportunities for small and personal businesses.   

We discuss 3D printers, desktop manufacturing and their impact on small business manufacturing n our New Artisan Economy research report. 

Both the O'Reilly Radar and Ponoko blogs have good posts on the Desktop Factory announcement. 

Shipping Costs, Globalization and Small Manufacturing

The NY Times has an article on the impact of rising transportation costs on globalization.  Key quote on rising container shipping costs:

"The cost of shipping a 40-foot container from Shanghai to the United States has risen to $8,000, compared with $3,000 early in the decade, according to a recent study of transportation costs. Big container ships, the pack mules of the 21st-century economy, have shaved their top speed by nearly 20 percent to save on fuel costs, substantially slowing shipping times."

The article goes on to talk about increased transportation costs and carbon footprint concerns forcing companies to rethink supply chains and move production closer to consumption.  This is a topic we've posted on often in the past and one reason why we are forecasting a resurgence in small US manufacturing. 

Totally unrelated, the APL shipping container shown above is called a "muffler grade stainless steel reefer."  I have no idea why, but it makes me wonder how the APL marketing and PR folks spend their spare time. 

The Dollar, Transportation Costs and US Manufacturing

Got pointed to two interesting articles on the impact of rising transportation costs and the weak dollar on US manufacturing.  The consulting firm Oliver Wyman has a piece titled "How the Weak Dollar is Reviving US Manufacturing" that argues that rising transportation costs and the lower dollar is making US manufacturing more competitive.  Key quote:

"Where’s the business case for making car seats in China, when the cost of shipping them 12,000 miles and the redundant cost of storing and sequencing them for an assembly plant in Indiana will far exceed the savings in labor? Factor in additional savings from leaner inventories, more robust assembly processes, and the agility to more quickly respond to changes in market demand and the case for shifting most of your footprint from North America to China or India become dubious."

Related to this is an article in the Financial Times called "Oil prices force P&G to rethink supply network."  The article discusses the supply shifts P&G are doing in response to higher energy costs.  Key quote:

"Soaring energy prices are forcing Procter & Gamble to rethink how it distributes its products, with the world’s biggest consumer goods company shifting manufacturing sites closer to consumers to cut its transport bill."

The weak dollar clearly helps US manufacturing.  Also, with transportation costs rapidly increasing locating supply close to demand will become increasingly common.  Added to the cost pressure is a growing focus on reducing manufacturing and supply chain carbon footprints.  Combined these trends are helping to drive the increased competitiveness of US manufacturing. 

We've posted quite a bit on this topic in the past and we cover it in detail in The New Artisan Economy research report.

Disclosure:  We've done work for P&G in the past year.   

Small Manufacturing and Exports

Local papers often have interesting stories on local companies.  For example, the Toledo Blade has an article on small local companies exporting.  The article features Cauffeil Technologies, which supplies high quality metal processing equipment.  They are a private, family owned company with roughly $10 million in sales - half of which come from exports.  Key quote from Cauffeil's president:

"Company President Toby Cauffiel said his firm remains globally competitive because the American brand is trusted. Plus, the low value of the dollar and the global use of the English language help exports, he added.  The world is one place now," he said."

The article also quotes National Federation of Independent Business data showing that 39% of manufacturers do international business.

The Death of U.S. Manufacturing Greatly Exaggerated

In his NY Times op-ed piece The Cognitive Age David Brooks points out that if measured by output U.S. manufacturing is still world class.  Key quote:

"Instead of fleeing to Asia, U.S. manufacturing output is up over recent decades. As Thomas Duesterberg of Manufacturers Alliance/MAPI, a research firm, has pointed out, the U.S.’s share of global manufacturing output has actually increased slightly since 1980."

What has happened, of course, is that U.S. manufacturing employment has fallen substantially over the last 2 decades.  The chief driver of this employment change is not outsourcing but technology.  From the article:

"The chief force reshaping manufacturing is technological change (hastened by competition with other companies in Canada, Germany or down the street). Thanks to innovation, manufacturing productivity has doubled over two decades. Employers now require fewer but more highly skilled workers. Technological change affects China just as it does the America. William Overholt of the RAND Corporation has noted that between 1994 and 2004 the Chinese shed 25 million manufacturing jobs, 10 times more than the U.S."

 

Manufacturing Boomerangs Back To the U.S.

Article in the Wisconsin Small Business Times discussing manufacturing moving back to the U.S. from China and other place overseas.  Quote on the manufacturing boomerang trend:

"Select manufacturers in old-line industries such as investment casting, injection molding, precision machining and tool-and-die making are routinely taking business away from their Chinese competitors."

The companies profiled in this article are using technology and automation to cut production costs, increase their flexibility and speed up their product development and delivery times.  For example Signicast, who make metal components and castings, focuses on speed and flexibility.  From the article:

"Signicast’s use of automation and the four different 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.

"“Speed is everything, and it’s one thing that China can never do,” McDonald said. “Quality is one thing they can improve on. But we can, from conception, to tool up to approval, have a product run in less than nine weeks now. In China, lead time is more like 20 or 30 weeks once they have the tool built.”

Reich Tool and Design is also profiled.  They are using a niche market strategy:

"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."

A third company discussed in the article, Plastic Components, uses a low cost strategy:

“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.”

Despite the boomerang effect the majority of off-shore manufacturing is not going to come back to the U.S. But rising overseas labor and transportation costs, coupled with increased domestic use of automation and technology, is making U.S. manufacturing increasingly cost competitive.  Add to that strategies built around niche markets, customization, flexible systems and delivery speed and a number of U.S. manufacturing sectors are effectively competing with overseas competition.

I saw this on the MFGx blog. 

Instant Manufacturing and Small Business

Wired has an article called Manufacture and Sell Anything - In Minutes that discusses on-demand manufacturing.  The article covers Ponoko, Zazzle and other companies that manufacture products based on user designs.  Key quote on the process:

"Designers upload their blueprints to Ponoko's servers; when a customer places an order, Ponoko's laser cutters automatically trim wood and plastic to create the product on the spot."

The article goes on to say "Thousands are launching instant businesses" and that custom t-shirt companies like CafePress are becoming platforms that small businesses use for production.

This article is one of the first I've seen that picks up on the impact instant manufacturing and new manufacturing technologies are starting to have on small business.  These new technologies are allowing small and personal (one person) manufacturing companies to create and market unique or highly customized products efficiently.  These new capabilities are creating a wide range of new opportunities for small businesses. 

We cover this topic and its impact on small business in detail in section 2 our most recent forecast report.  Frank Pillar's Mass Customization and Open Innovation News blog is also an excellent source of information on this area. 

Shortage of Skilled Manufacturing Jobs

The CBS News blog "Couric & Co." has an interesting blog post on the shortage of skilled manufacturing workers.   The post points out that while the manufacturing sector overall has lost nearly 3 million jobs since 2001, the high skill manufacturing sector has grown 37% in that time frame.  Key quote on the need for skilled manufacturing workers:

"...90 percent of America’s manufacturers say they are short qualified workers."

The death of US manufacturing has been greatly exaggerated.  US manufacturing output is actually substantially higher today than it was 10 years ago.  However, manufacturing has changed.  It is more automated and more of the jobs require skilled workers.  While overall manufacturing employment continues to fall, high skill manufacturing is growing and many small manufacturers are participating in this growth.

Japanese Artisan Manufacturing

According to an article in The Economist, small businesses (less than 300 employees) employ about 70% of the Japanese workforce.   Small businesses also account for about half of Japan's manufacturing output by value.  The article talks about the pressures small Japanese manufacturers are facing, but also says the successful firms "combine technical acument with innovative business practices to carve out niches. 

Interesting quote from a manufacturer of industrial components:

"“We want to do business like a sushi bar: the customer is right in front of you, orders different things, and a highly skilled artisan makes it right away,” says Masahide Satoh, a senior manager at the firm."

Great description of next-gen artisans and mass customization.