Labor Day: Manufacturing is Alive and Well

I was thinking about a Labor Day post and it didn’t take long to develop a topic that I am close to and care deeply about. Manufacturing is alive and well in both the United States and Mexico. Despite the usual challenges of cutting metal in today’s world, Horst Engineering, Horst Engineering de Mexico, Thread Rolling Inc., and Sterling Machine have survived the recession and are growing again.

What does this say about the larger manufacturing economy?

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In my opinion, it says that high technology manufacturing was never dead. Our family’s businesses are concentrated on precision machining and forming for the aerospace industry. Aerospace is a business that was born in the USA and has remained a core part of the manufacturing sector. We supply parts for both commercial and defense applications. As lower precision manufacturing has shifted to Asia, manufacturers have increasingly focused on aerospace, medical, power generation, and other higher technology industrial customers.

When I was growing up in our 67 year-old family business, manufacturing was already in serious decline. The transformation from mass production to a high mix/low volume business model was hard on a lot of small and mid-sized manufacturing companies. The 1980’s and 1990’s were full of bankruptcies. Fortunately, the Livingston’s made the switch. We were early adopters of CNC technology and we focused on our aerospace customers at the right time.

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Our 2013 acquisition of 47 year-old Sterling Machine, another family business, highlights our renewed commitment to manufacturing, particularly in New England. We have added 33 employees to our team, and we are sharing our passion for manufacturing with them. With Sterling, we have expanded our production of precision aircraft engine components. In 2006, we launched a maquiladora in Guaymas, Sonora, Mexico. That business faced its own challenges during the most recent recession, but Mexico has regained its footing as a competitive country for production. We are proud of our manufacturing operations in Connecticut, Massachusetts, and Sonora.

The challenges I speak of are numerous, but business is never easy regardless of what and where you sell. These challenges include the high cost of skilled labor, the need to develop a new generation of skilled workers, the cost of health care, high energy costs, high taxes, and other business costs. We have recently increased our capital investments at all of our business units. Manufacturing technology is always changing and you have to keep up if you are going to stay in the game. The low-interest rate environment has helped, but you can’t buy new machines if you aren’t generating profits on your revenues, and if those revenues aren’t growing.

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Technology is only one part of our two-pronged strategy to remain competitive. The other is continuous improvement. If you aren’t incorporating lean enterprise in your business strategy, then you risk ruin. Our customers’ expectations and the high cost of doing business in North America has motivated us to eliminate waste, improve efficiencies, and develop stronger business processes. Change is difficult, particularly on old companies, but we advocate this approach.

The threat of China and other low-cost countries remains. We pride ourselves on our ethics, business methods, and environmental commitment. Our plants are modern and always improving. We have been hurt by outsourcing, but we aren’t giving up. We strive to deliver a better total value proposition for our customers. We shorten their supply lines, protect their intellectual property, deliver quality parts on time, and all at a fair value. Sometimes it is difficult to convey this and their corporate initiatives result in us losing business based solely on the price of our products. It simply costs more to do business in New England. Even Sonora is threatened by Chinese competition. It’s our job to retain the business and thus keep our employees working and earning good wages. As a family owned business, our investment horizon is long-term. We make decisions years ahead, sometimes decades ahead. That is smart business.

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We are hiring at all of our plants. Manufacturing job growth is critical for our economy. The benefits of a manufacturing job are numerous. There is a  compound effect that makes job growth in businesses focused on production (e.g. manufacturing) better than businesses focused on consumption (e.g. services, consulting, distribution, retailing, etc.). Manufacturers procure raw materials, tooling, gaging, equipment, special processes, and other services. The value of a manufacturing job to the economy is much higher than a lower paying service job. It makes total sense. When products are produced locally, they need an ecosystem of other business services that imported goods don’t require beyond shipping, freight, and logistics. Our businesses export nearly 15% of our production and many of our parts go into assemblies that are subsequently exported. Too much of the USA economy is dependent on cheap imports.

I say that society should change its attitude and embrace high-tech manufacturing. That means that we have to replace college focused education with more technical skills training. We should be educating more machinists, molders, welders, assemblers, toolmakers, manufacturing technicians, and engineers. It wouldn’t take four (or more) years to get many of these folks into good paying jobs and they wouldn’t be saddled with education related debt. The cost of higher education is another topic, but it is worth noting that it is disgustingly bloated. Manufacturing won’t reach the heights of the past, but we can turn things around and gain more control over the production of critical industries like aerospace. I argue that even those who go to college should have a fall back technical skill.

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We need more companies to make high quality stuff. On this Labor Day Weekend, let’s reflect on the skills that built our country into the superpower that it is, and renew our support for the risk taking, innovative businesses that drive the manufacturing economy.

 

Photo credits: Alan Grant, Digital Creations

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