It’s true that today we design parts digitally and we can send those drawings anywhere in the world to be made, but it’s not quite that simple.
Some would believe that the cost of living and hence our labor costs will never be competitive — but that too is an over simplification. In my own work at 101MFG, I travel throughout California talking with manufacturing executives and helping them to re-discover the opportunities and the benefits of sourcing some of their needs closer to home. What are those benefits?
• Lower per-unit total costs (automation, fewer ‘rework’ iterations, less transportation cost), much faster cycle-times and companies can better protect their proprietary designs;
• Better quality — company designers, R&D and tool-builders, machinists, specialty fabricators can easily meet and collaborate with their supply partners, discover production glitches, audit material quality and take advantage of decades of supplier experiences;
• Flexibility — local suppliers can often more rapidly adjust production schedules;
• Better logistics — reducing the ‘round-trips’ from … initial parts to heat treat back to machine shop to plater to finisher to testing to assembly to finished stock and so on;
• Developing their suppliers — proximity means collaboration in the same time zone, sharing standards and sophisticated metrology/testing, and more easily ensuring the part or the component’s as-produced specifications exactly meet stringent Aerospace, Medical, Automotive and other unique design, safety and reliability goals.
Why is Making It Here Important?
Manufacturers on average invest more in capital assets (buildings, equipment), buy more from local suppliers (materials, services) and pay higher wages than many other industries.
Economists who study regional development call this the ‘multiplier’ effect. Simply, it means that a large manufacturer who may employ 1,000 people directly — may support another 2,000 or even 3,000 jobs –for these other ‘indirect’ supplier and services industries in our economic region.
In rare or exceptional cases (think of Tesla, Keysight, Chevron, BioMarin or a government facility like NASA Ames) the multiplier can be as high as 10 or even 15:1 — meaning for every 1 ‘direct’ job there are another ten software, component suppliers, material suppliers, automation specialists, specialty construction or building engineers, sub-contractors and then the service sector of our economy.
But the equation works the other way around as well.
For larger manufacturers to be competitive and successful in their global markets — they must have easy access to clusters of reliable, highly-skilled, smaller specialty producers like precision machine shops, heat-treat, plating, injection-mold tool builders, testing and literally hundreds of other specialty component providers — commonly referred to as the supply-chain.
The result? While only 10 to 12 percent of our North Bay workforce is employed in manufacturing — and most of them in these smaller firms –they support about one-third of our region’s GDP (gross domestic product), about two-thirds of exports and they account for the largest portion of our local economy’s tax base — after retail sales tax.
The Proof — We Do It Every Day
How many products (besides some of the world’s finest wine, beer and natural foods) do we actually produce here in Sonoma, Napa, Marin or Solano Counties?
Here are just a few examples:
• Aircraft parts and landing gear components for Boeing jets;
• Battery assembly components for Tesla cars;
• Cable assemblies for US Navy radar, Hughes satellite communications, Verizon cell towers and the Stanford linear accelerator;
Dick Herman is President and founder of 101MFG, LLC, a trusted network of over 400 California manufacturing executives whose mission is to promote sourcing, growth, productivity and workforce development.