A few years ago, machine shop Liberty Brass Turning Co. Inc. should have been put out of business by low-cost Chinese imports.
Yet Liberty thrived, thanks to insights gained from CEO David Zuckerwise's first exposure to Chinese competition in 1987. Zuckerwise saw the writing on the wall. Compared with his small shop, China's good-enough quality and very cheap labor gave it an insurmountable advantage in high-volume machining. But Liberty had an advantage, too. It could respond much faster than the Chinese.
"At best, it takes five to six weeks to ship goods from China through U.S. customs," Zuckerwise said. "Using air freight doubles or triples the cost. I can deliver in three or four days. Nobody can come within two weeks of that."
China also didn’t compete on smaller orders and it diluted China's advantage in labor.
To compete in custom manufacturing, Liberty had to reinvent its business. Its milling machines, for example, used cams to control the motion of each cut. Liberty had to cut a new cam for each new part it milled. By retrofitting some mills with computer numerical controls and servos, Zuckerwise could program cuts directly without cams. This slashed setup time by 30 to 40 percent and boosted productivity by 25 percent.
Zuckerwise even invested $35,000 to $45,000 in cost and estimating software. An outsourcing analysis turned a $14,000 loss per run into a $28,000 profit. It showed Zuckerwise one more time that innovation is as valuable as any price strategy.
Elnik Systems, a division of PVA MIMtech LLC in Cedar Grove, N.J., made only about one metal injection molding furnace each month. Technology gave Elnik its edge and encouraged founder Claus Joens to believe he could sell his furnaces to China.
"I think I can convince them (the Chinese) that they're better off getting good parts at high yields than spending years on reverse engineering," Joens explained."
That is because Elnik monitored costs carefully. Equally important, Elnik sourced expensive high-temperature furnace metals and even some components from China. At the time, the deal saved Elnik 30 to 40 percent on the $1 millon to $1.5 million in spending on molybdenum and tungsten a year.
If Elnik outsourced to cut costs, Flinchbaugh Engineering Inc. profited by persuading large companies to transfer entire production lines to its York, Pa., factory.
Flinchbaugh discovered Caterpillar wanted to outsource a 250-part line of clutch pistons it planned to replace and they won the job.
"If you outsource a part you're already making, there's a huge amount of value in the product and plant that you literally throw away," Lehman said. Many products have years' worth of black book modifications that never appear in engineering drawings. Some processes, such as a valve lifter with a hot isostatic pressed tungsten carbide tip that Flinchbaugh makes for Mack, involve specialized process knowledge.
Offshore manufacturers needed to reinvent the wheel with each new outsourced project. Transferred lines included that information, Lehman said. It was especially valuable when manufacturing a large, complex line of products.
To make transfers work, Flinchbaugh needed high productivity. This started with a highly motivated workforce that is halfway through an employee buyout."
The company also revitalized older equipment and was quick to apply maintenance solutions.
Making old equipment more reliable gave Flinchbaugh extra capacity, which it used to bid for other work. "We run 24/7, and since we're not buying all our equipment, we can offer lower prices," Lehman said.
Finally, we mention Donnelly Custom Manufacturing Co. in Alexandria, Minn., who deliberately underused equipment so that machines were available to handle rush orders—the strategy worked.
Yet Donnelly, like so many other manufacturers who have survived the growing onslaught of Chinese competition, still said he bought a significant fraction of molding tools from China. "Working with Chinese suppliers is no different than working with Americans,” he imparted. “Some are good and some bad.”
[Adapted from “Staying Alive,” by Alan Brown, Associate Editor, Mechanical Engineering, January 2006.]
I think I can convince them (the Chinese) that they're better off getting good parts at high yields than spending years on reverse engineering,
Claus Joens, Founder of Elnik Systems
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