As the 21st century began, China loomed as an ominous threat to manufacturers in Wisconsin and across the United States. The common refrain was that American manufacturers could not compete with China’s low-cost labor and lack of environmental or labor standards.
Countless seminars were held on the topic. News articles and television programs amplified it. Best-selling books were written about how domestic manufacturers can outsource jobs to Chinese suppliers.
Indeed, many Wisconsin manufacturers lost market share to Chinese competition. Others closed up shop, saying they were unable to deal with low-cost global competition.
However, many manufacturers in southeastern Wisconsin are not only dealing with global competition, but they are they’re beating it. 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.
To effectively compete, many Wisconsin manufacturers have transformed their operating models using the principles of lean manufacturing, automation, quality assurance and control, just-in-time delivery, innovation and technology, said Mike Klosinski, executive director of the Wisconsin Manufacturing Extension Partnership (WMEP), a private, nonprofit organization dedicated to the growth and success of Wisconsin manufacturers.
“Many Wisconsin manufacturers have not sat still (in recent) years,” Klosinski said. “Putting in place lean (principles) has been the biggest strategy. And by taking on more services around their product, understanding their customers’ customers and being more innovative and creative about developing new products, they’ve turned into value suppliers. As a result, those companies’ large customers are electing to source with someone they can trust instead of sourcing overseas.”
Speedy solution
Signicast Corp., a manufacturer of investment castings, has invested heavily in automation, robotics and cutting-edge technology at its Hartford headquarters, where its main manufacturing operations reside.
The company’s investment has paid off. In the last three years, Signicast has seen significant work increases, said Robery Schuemann, executive vice president. And much of that work is coming back from China.
“We are definitely feeling the boomerang effect,” Schuemann said. “The playing field is changing. Many of the rebates given to Chinese manufacturers have been taken away. The yuan (the Chinese dollar) has gone up, and labor costs have gone up there. You’re seeing the people that went there for price coming back for quality, delivery and price.”
Signicast has grown its revenues every year since 2001, Schuemann said. The company had $130 million in revenues in 2007 and forecasts about $140 million for 2008.
Investment castings are metal components made by pouring molten metal into molds, which have been made from individual wax castings. The technique is capable of producing highly complex components with few errors.
Signicast operates a five-module, 500,000-square-foot facility in Hartford. Four of the five modules work as independent manufacturing facilities, and all feature extensive use of automation, robotics and cutting-edge manufacturing technology, Schuemann said. Signicast has about 650 employees, who run its plant 24 hours a day, seven days a week.
The extensive use of automation in its production allows Signicast to produce parts quickly and at low costs.
One of the company’s proprietary automated systems uses a robot arm to pour molten metal into castings, a process traditionally done by human operators. By using a robot, the pour is faster and more accurate, Schuemann said.
“Labor is no longer as major a part of our cost structure, which allows us to compete with Asian sourcing,” he said.
More importantly, 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.
For example, Signicast was able to make a last-minute run of parts for Milwaukee-based Harley-Davidson Motor Co. when Harley needed an engineering adjustment on a major component used in its six-speed transmission. The motorcycle model that needed the part was already in production, and Harley believed it would need to shut down production for weeks, Schuemann said.
“On a Friday afternoon, they gave us the final change and go-ahead,” he said. “We made the change that night and ran samples over the weekend. We got a five-day process done in two days and got (samples) to them on Monday. They tested (the samples), and we were able to go into production, and three days later, we finished the production run.”
Signicast’s extensive use of automation and robotics have enabled it to produce high-quality parts at low costs, but the company’s true advantage is speed, said Todd McDonald, vice president of sales.
“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.”
Since 2003, McDonald and his sales staff have been telling clients about the company’s abilities and the potential perils of outsourcing to China.
“In 2003, we lost a lot more (to China),” he said. “We don’t lose very much now.”
Automation and volume
Like Signicast, Plastic Components Inc., a manufacturer of injection molded plastic components based in Germantown, competes directly with the Chinese and other emerging markets. The company produces components that are used in a wide variety of manufactured products and has customers around the globe.
“We can go head-to-head with any molder in the universe with our universe,” said Thomas Duffey, president of Plastic Components. “When we started the company in 1989, the concept was a fully automated plant. The idea was to take human involvement out, and taking cost and variability out.”
Also, like Signicast, Plastic Components relies heavily on automation and technology to keep its parts price down.
Plastic Components, which started with three machines in 10,000 square feet of space, has evolved into a 42,500-square-foot facility with 42 machines and 58 employees. The industry standard averages five employees per molding machine; Plastic Components averages 1.4, Duffey said.
“There are several survival strategies for guys that are doing well in our industry,” he said. “There are the ones who find a niche and hammer away at it. Ours is low cost, automation and technology with our systems and controls.”
Plastic Components’ focus on automation and technology has kept its labor costs down, which keeps its pricing highly competitive with other molders in China and other emerging markets.
“What we are finding out and what the world is finding out is that there are circumstances where going offshore makes some sense,” Duffey said. “But making cheap parts is not where it does. Half of plastic (parts) cost is in raw materials.”
In 2007, Plastic Components achieved record sales of $11.3 million. The company is off to another record-breaking start to 2008, with first-quarter sales posting 14.8 percent growth over the first quarter of 2007, Duffey said.
The company shipped more than 117 million parts in 2007 and shipped more than 37 million parts in the first quarter of this year.
Plastic Components has found ways to use its low-cost capabilities to market itself, much like Signicast.
“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.”
The company’s marketing efforts are highly targeted at original equipment manufacturers (OEMs) and manufacturers that use pieces similar to those made by Plastic Components. Many of the companies it pitches to use foreign suppliers, Duffey said.
“We’re trying to take the resources we have and apply them to places where we’re going to have the greatest chance of success,” he said. “When we make a presentation, we’ve already qualified that we have good alignment between what they buy and what we do. And when we get them here (to our facility), the close rate is 99 percent.”
Plastic Components has expanded four times at its Germantown facility and has no expansion room left.
“We’re coming to a fork in the road,” Duffey said. “When we get to a point where we are full, we will have to make a strategic decision where to go next.”
The company will have to decide where to build a new facility within the next 18 months, Duffey said.
High-tech solution
West Bend-based Barton Precision Components LLC is competing and winning against Chinese manufacturers with both automation and by making components that have higher tolerances than Chinese competitors can produce.
“We’re talking about tolerance on a hole that is .0002 of an inch,” said Valerie Hron, president of the company. “That’s like one-tenth of a piece of hair.”
Barton Precision Components is a precision machining shop. The components it makes are machined from rolled steel and aluminum, destined for the hydraulic, oil drilling, pump and value, aerospace, medical and munitions industries. Barton Precision Components also holds several contracts with the U.S. Department of Defense.
Hron and her husband, Raymond Batista, the company’s executive vice president, purchased the company from Hron’s father and other family members in December. Before the purchase, the company was known as Barton Products.
In mid-2003, Barton purchased a high-end 66-axis CNC machine named the TT312. The machine is capable of machining 22 parts at a time in 11 different cutting stations, and it drastically cut Barton’s product runs, Hron said.
“We had a large OEM (customer) with a volatile schedule that makes hydraulic components,” she said. “Before, if they called on Jan. 1 and said they needed 30,000 pieces, it would take five months to complete the run at 80 hours a week. Now we can do the same 30,000 pieces in 10 days with eight people instead of 14.”
Barton’s enhanced capabilities have won it jobs that previously would have gone to China and other emerging markets, Batista said.
“We had a big customer that didn’t get a delivery on time (from China),” he said. “We were able to take it to our machines that could make their parts in 10 to 12 days. More and more situations like that are coming up.
Customers in the U.S. are getting tired of the situation. And we’re promoting our product that way.”
In a few months, Barton will add two new high-end, 10-axis CNC machines, which will cut lead times additionally. Parts that now have a three-month lead time will soon have 15-day lead times, Hron said.
The company also recently purchased a laser inspection machine that is capable of measuring parts much more quickly than any manual inspection.
“The old way (manually) took seven hours, and now we can measure dimensions in one-tenth of a second,” Hron said.
While the new machinery is expensive, it will keep Barton competitive in the long run, Batista said. Other Wisconsin manufacturers, he said, need to begin taking similar steps to change their companies.
“You have to go through all of these steps – a lot of steps that a lot of people in industry haven’t thought of,” he said. “We won’t compete on labor (costs). But we will find ways to compete on automation.”
New markets
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.
Several years ago, Fritz and Brett Reich, brothers who are president and vice president of the company, respectively, felt pressure from foreign competition.
“We felt it enough to take a trip to China three years ago,” Fritz Reich said.
During the trip, Fritz Reich learned what Chinese competitors were doing well, but what they could not do. And that’s where he and his brother have steered their company.
Reich Tool & Design is pursuing AS 9100 and ISO 13455 certifications to make components for the aerospace industry and medical fields, certifications that foreign manufacturers will find difficult to obtain, Fritz Reich said.
“That’s about as high-end as you can get,” he said. “Very few companies have those systems. It’s a big leap to make it happen through the whole company. We’ll be certified by the end of 2008.”
About 70 percent of Reich Tool & Design’s business is in automotive, appliance and consumer products, Fritz Reich said. The other 30 percent is in aerospace, medical and energy products.
“We want to keep the level where it is in the tool-and-die business now,” Fritz Reich said. “And there’s no problem in growing that area. But the big capital investments are more toward the medical, aerospace and energy markets.”
To best serve those markets, Reich Tool & Design built a new 52,000-square-foot facility at W175 N5750 Technology Drive in Menomonee Falls. The company moved into the new building in July 2007 and is in the process of building a 3,000-square-foot medical clean room inside it. The new clean room is expected to be finished by early summer.
Customers in the medical field have already been contacting Reich Tool & Design in anticipation of the company’s clean room capabilities, Fritz Reich said.
“We’ve got customers knocking at our door – they want us to start prototyping right away,” he said. “I could see adding a second clean room in the next two years.”
Reich Tool & Design already has built components for the International Space Station, and its medical components focus could add significant sales to the company, Brett Reich said.
“The medical work has the potential to double the sales of the company,” he said.
Reich Tool & Design had sales increases of 35 and 30 percent in 2005 and 2006. The company’s sales were flat in 2007, partly because of the move and partly because of economic downturns in several industries the company serves.
Orders have picked up in the last several months, and the company believes it will have more than 25 percent revenue growth this year, Fritz Reich said.
“When that medical (clean) room comes on, sales can grow without a lot of customized machinery,” he said.
Reich Tool & Design has 55 employees now. It will need to hire another five or more employees to staff the clean room.
Next-generation manufacturing
Signicast, Plastic Components, Barton Precision Products and Reich Tool & Design are all exhibiting traits of next-generation manufacturing, Klosinski said, and are positioning themselves for future growth.
“One of the elements of next-generation manufacturing is more rapid product development and being innovative in your product and market identification,” he said. “If we’re going to succeed, one of the metrics that will have to change is the percent of revenues that are derived from new products and markets that have been developed in the last three years. Companies that are doing it today are getting a head start on being a next generation manufacturer. There is a better opportunity to preserve your margins, you’re there in a new market and you’re making a product that has not been subject to competition.”
Signicast Corp.
Address: 1800 Innovation Way, Hartford
Employees: More than 650
Industry: Investment castings
Boomerang Strategy: Use of automation and robotics, giving the company short lead times, high accuracy and low parts prices.
Web site: www.signicast.com
Plastic Components Inc.
Address: N116 W18271 Morse Drive, Germantown
Employees: 58
Industry: Injection molded plastic components
Boomerang Strategy: Highly automated plant with short lead times and low labor costs, aggressive marketing campaign.
Web site: www..plasticcomponents.com
Barton Precision Components LLC
Address: 4991 Hron Road, West Bend
Employees: 70
Industry: Precision machining
Boomerang Strategy: Acquisition of high-tech CNC machinery, drastically cutting lead times; focusing on high-precision parts that foreign competition is not capable of producing.
Web site: www.bartonproducts.com
Reich Tool & Design Inc.
Address: W175 N5750 Technology Drive, Menomonee Falls
Employees: About 55
Industry: Tool-and-die manufacturer
Boomerang Strategy: Developing niche in the aerospace, medical and energy exploration markets, which have quality requirements foreign manufacturers cannot compete in. Building clean room inside plant to produce medical-grade components.
Web site: www.reichtool.com
