Local machine shops are more important than ever
For the past 1.5 years, the talk of the manufacturing world has been the CHIPS Act (Creating Helpful Incentives to Produce Semiconductors).
Interestingly, we at Phasio have found that this excitement has extended far beyond it’s target domain of semiconductor manufacturing. More and more we are seeing small machine shops attempting to ‘verticalize’ their business by purchasing more manufacturing capabilities internally.
There is a general sense not just in the American manufacturing industry, but broadly across the Western world, that local manufacturing is returning. But what does this mean in practice?
Forks and spoons aren’t coming home
Despite all this talk about bringing manufacturing home, we are unlikely to see low-added value products, like forks and spoons, made in Western countries anytime soon. The main reason for this, is that the added value of the product does not exceed the cost of labour required to fund a local factory for that product.
We shouldn’t fret though, because we don’t necessarily need Australian forks or American frying pans. What we need is local manufacturing knowledge workers which can help design and manufacture the next generation of high-value products.
Practically speaking, that means we need small, cross-functional teams who are able to effectively carry an idea from nothing, to a prototype, to a short-batch run. Those teams need to be outfitted with reliable machinery which plays to the same strengths as the team itself, namely, being flexible and high-quality with a lightening-fast turnaround time.
Western Manufacturing in the Asian Century
At Phasio, we find ourselves serving more and more manufacturers like this. They are small companies (1–20 staff) who serve as manufacturing consultants, advisors, prototyping partners and short-batch manufacturers for their local clientele.
A common combination of technologies that our manufacturers adopt is HP’s Multi-Jet Fusion, a few CNC machines (mostly 3-axis but occasionally 5-axis) as well as offering design and post-processing services for the parts they make.
It’s my assessment that this is driven by the demands of a market that wants hardware to move at the pace of software, but generally runs short of the prior experience and funding (especially VC funding) needed to develop these new products. It is good to know that many of the large software giants are also operating hardware prototyping facilities now, but it’s not at nearly scale that is needed in order bring hardware into line with software.
This only makes it more important for us to support local machine shops. If you apply systems-thinking to their role in Western countries, they are essentially the only thing keeping us in the hardware game.
Let’s work through an example of why they are so important today:
John is an electrician in Australia. He’s designed a new kind of tray for his utility truck which allows him to store more cable than normal along with all of his tools. As a result, he gets called to commercial jobs and doesn’t need to do any back-and-forth like the other electricians and therefore finishes the job in 70% of the time that his competitors take.
John’s electrician friends all want one of these trays and they tell him to start selling it online. But John made the tray himself at home, it took him 3 months and he doesn’t know how to make it affordably at scale. What to do?
Well John calls Raj, who runs a local machine shop. He visits him and shows the product to him, explaining how he made it. Raj makes the assessment that he could manufacture the tray using sheet metal and his 3-axis CNC drill & cutter.
After a week or two, Raj has the prototype ready, which John sells immediately because everyone wants one. They take some feedback from the first customer and modify the design slightly before Raj gets back to work making the first short-batch of 100 trays. Meanwhile, John puts his tray onto an online store to see if people are interested.
Before the trays are even ready, John’s online store sells out. They realize that they need to scale up production. Raj calls in some favors from other machine shops and together they are able to fulfill John’s orders on time and to-spec.
While all of this was happening, Tradespeople Manufacturing Ltd was watching online. They love John’s idea and want to stock the product in stores globally. This is way over John’s head and he asks Raj to take part in the project. Raj, being an experienced manufacturer and CNC operator, is able to guide the manufacturing team at Tradespeople Manufacturing Ltd, who start producing the tray in their global mass-production facility.
This story illustrates the importance of local machine shops in the Western world today. Raj is a real hero in this story, it simply wouldn’t have been possible for John to bridge the huge knowledge gap himself. There were 2 inflection points —
- How to turn the idea into a product
- How to make that product at scale
This is exactly the what the local machine shop is there to help with.
While this story is fiction, it is not too far from the truth of many products which we see today. Innovative new products are almost always locally relevant in the beginning. You need people who have that local context and also have the breadth of manufacturing knowledge to make the vision a reality.
The New Manufacturing industry
Manufacturing is not a zero-sum game. Local manufacturers have a unique place to fill that cannot be filled by large scale, overseas manufacturers. An increasing number of local manufacturers will mean an increasing number of new products being launched to market. This will grow the pie for everyone, as these products eventually need global scale.
Increasingly local manufacturers are buying fewer, higher quality machines. This is creating an incentive for machine makers to make their machines as ‘set-and-forget’ as possible, as we see with the business model behind machines like the Multi-Jet Fusion (MJF).
As a result, those same local shops can do a broader range of work for their customers. They take on the role of consultant, manufacturer and business partner for many of their clients.
The sheer volume of work related to juggling these hats can be huge. Manufacturers spend a huge amount of time double booking invoices into accounting and quoting systems, reviewing emails to see where requirements changed. It can be overwhelming for them as they don’t have the same systems in place that a multinational manufacturer might have. That’s what Phasio helps with.
If you’re a local manufacturer looking to get new customers, or to grow your footprint with existing customers, you should reach out to us at Phasio. We’re here to help companies like yourself become the manufacturer of choice for your region.
