Global economy creates opportunity for small manufacturers
On top of global competition and ever-higher customer expectations, small manufacturers face a labor shortage with no end in sight.
But, for those who are willing to meet the challenge, the global economy offers chances to small manufacturers they haven’t had before, says Vince Barker, University of Wisconsin-Milwaukee associate professor of management, and an expert on the dynamics of competition.
The first step is the simple realization that as a small manufacturer, you can tap into the advantages that exist in today’s global economy, Barker says.
“There’s no doubt, doing business is harder today, ” says Barker. “But [small manufacturers] have more opportunities to sell globally themselves, or to sell their goods to those who do.”
Two successful Waukesha County manufacturers which have done just that shared tips not only on surviving, but thriving in today’s world economy.
The first step is to cover the basics, says David L. Bahl, president of Weldall Manufacturing in Waukesha. Zero defects, 99% on-time delivery, and low price are minimum customer expectations today.
“You have to be able to deliver a quality product on time. That’s a given. And price is always a factor,” he says.
Weldall, a full-service metal fabricating job shop, has a 25-year track record. It began as a 250-square-foot welding shop in Wauwatosa. Now housed in a 45,000-square-foot facility in Waukesha, Weldall employs 90 workers, including welders certified to work on carbon steel, stainless steel, and aluminum. It has estimated annual sales of more than $5 million.
Customer expectations about quality have grown tremendously over the past decade, says Bahl. But Weldall has, by necessity, always paid close attention to quality.
“The type of equipment we manufacture – cranes, excavating machinery – has to be done right,” Bahl says. “People’s lives depend on them. They carry high liability.”
To ensure quality, Weldall documents all incoming material and identifies it for traceability. In addition, it requires its welders to be certified.
What’s different today is the need to have your quality verified before you can move into some markets. Weldall’s attention to quality enabled the company to earn ISO 9000 certification, giving it approved-supplier status with major Fortune 500 companies.
The key to staying competitive in quality and price is finding quality workers, says Bahl. That’s his companies biggest challenge.
“The work is out there,” Bahl says. “It’s a matter of finding quality people to do it.”
Bahl hopes to hire 50 additional workers over the next two years. “I could go out and hire 50 workers today, but I need the right ones if I want to keep a good reputation.”
After your own house is in order, then you work on relationships, says Bahl. What you need is a strong base of steady customers.
Weldall depends on one in-house sales person to represent the company to potential customers, and “I’ll make calls myself,” says Bahl. It’s important that your sales person be knowledgeable both about your operation and your customer’s needs, he adds.
To build and maintain strong relationships, both with customers and employees, Bahl says he lives by “two golden rules” that have served him well. First, be honest with customers. Manufacturers today face such turn-around times that “you don’t have time to quote a price. You have to work on a time-and-materials basis. Your customers have to feel confident you’re giving them a good deal.”
To keep customers, you also have to be honest about what you can and can’t do, he adds. “We’ve turned down jobs because the lead time was too tight. You have to be able to follow through.”
His second rule: Treat employees well. “To succeed, you need good employees. When you have them, you want to keep them for a long time. If you don’t take care of them, someone else will.”
Another Waukesha success story, Acme Machell Co., Inc., is thriving on the second tier by supplying precision-molded rubber parts to other manufacturers who take them on the global market. That’s how every McDonald’s restaurant that sells soft-serve ice cream got a machine with Acme Machell parts in it.
Along with Waukesha Rubber Co., Acme Machell is responsible for making Waukesha County the leading rubber-product manufacturing region in the state. Its annual sales exceed $10 million.
Acme Machell serves an increasing number of manufacturers in the appliance, automotive, construction, electrical, food and beverage, machine tool, machinery, oil and gas, and paper industries. Among its world-class customers are Briggs and Stratton and Harley-Davidson.
To be a successful second-tier manufacturer, investing in quality control is key, says J.C. Riebe, president of the company his father founded in 1953.
“The number of vendors our customers use is shrinking,” Riebe says. “They are being more selective.”
Getting ISO 9002 designation has been important in obtaining new business, he says.
“It is a big sales tool,” Riebe says. “Now you have to be an approved-supplier to even get a quote on a job.”
Getting ISO 9002 certification requires a big investment, says Riebe. Not every manufacturer can do it. Riebe estimates it costs most companies between $25,000 to $50,000 to get the necessary quality controls in place.
But that’s not all the verification many large manufacturers need before they’ll do business with you, Riebe adds. “They will do their own quality audit before they give you an opportunity to bid.”
And they don’t stop checking on you after they award a contract, he adds. Major manufacturers send their own teams to do quality audits, many twice a year. Acme Machell hosts quality inspection teams from various manufacturers several times a month, says Riebe.
While quality has gained in importance in the past decade, price is just as much a factor, says Riebe.
“We constantly look for ways to make a product cheaper while maintaining its quality,” he says. “Sometimes you can’t reduce production costs. Then you may want to take a loss in your profit margin, just to keep some customers’ business.”
To sell the company as a high-quality supplier, you need to have the right sales people, says Riebe. Acme Machell uses carefully selected sales representatives.
“You must have knowledgeable sales people to get the word out. They are the first contact,” says Riebe. “They need to know what rubber is, what it can do, how it can meet a customer’s needs …”
Acme Machell uses a team approach to determine a customer’s needs, says Riebe. The firm sends personnel to work directly with national manufacturers for government contracts to supply all branches of the armed forces.
In addition to government contracts, 30% of its sales come from manufacturing high-precision automotive components.
That narrow, financially-rewarding niche has served the company well. “In 10 years, we went from nothing to $50 million gross,” says co-president Kevin Sinnett, who founded IDC with his brother John.
“We’ve been able to establish our little niche. But it’s never good advice to get stuck in one marketplace. There were some years that were pretty lean,” says Sinnett. “But now, it’s paying off.”
Global economy creates opportunity for small manufacturers