Manufacturers compete in an expanding global economy where a small, virtually unheard-of factory in Central Pennsylvania has to best the cost and quality of large factories on the other side of the planet.
With many small manufacturers being job shops, making parts for other manufacturers, they’ve had to develop their own products and embrace new technologies to compete, executives said.
“It’s a classic case of, if you fight it, you’re going to have a lot of blowback. But if you embrace it and build your business around it, you’ll benefit,” said Eric Blow, president of Lancaster County-based Astro Machine Works Inc.
Astro builds custom machines for other manufacturers, telecommunications companies, government agencies and medical facilities, including hydraulic, pneumatic and electronic components. The company had about $16 million in sales last year, which has doubled since 2006, Blow said.
Small manufacturers must adapt or die, he said. That means moving to just-in-time production instead of stocking inventory in the off-chance a customer will need a future order, he said.
Market diversification also is important. In the past, small manufacturers derived 80 percent of their business from one or two large
customers, but that’s not possible any more, Blow said. Astro grew its sales every year since 2006 by attacking market share in new sectors.
“Amongst the negatives, there are certainly positives,” he said. “In this day and age, the opportunities are better than ever.”
Sid Ege, president and founder of S E Moulding Inc., is familiar with similar issues, especially since his company makes injection mold plastic parts for shoe inserts, child-safety seat belt restraints, medical devices and even scratching pads for horses.
The Cumberland County-based manufacturer had 2011 revenue of $500,000, but it could soon top $1 million, Ege said. The company’s sales are growing steadily and last year it launched a branded product. Grey Beard Pumps are small, 12-volt fluid pumps with multiple applications, from clearing water from a boat to changing the oil in an engine.
Selling your own product can hedge a small company against slow orders from clients, but developing it isn’t easy, Ege said.
“It can be expensive and turnaround will take years,” he said. “But you have something to sell, and it makes it easier.”
Small companies should emulate large manufacturers and keep those products coming, said John Lloyd, president and CEO of Mantec Inc., a York-based manufacturing resource center that helps companies adapt to the changing business climate.
All products have growth, plateau and decline phases, he said. Companies must prepare for a product’s decline as technologies and product demands change, he said.
“Companies must have a pipeline of new products that are coming online in that growth phase,” he said.
A branded product won’t solve other issues. Large clients stall on paying for products that have already been delivered, executives said. That’s a problem because suppliers want payment in 30 days, yet some clients are pushing payment beyond three months.
“Bigger companies are stretching their cash flow by relying on (small) companies to carry these projects,” Blow said.
Technology has become a key friend in the fight to stay relevant, he said.
Orders for manufacturing equipment and new technology have been rising steadily during the past year as companies upgrade their factories for greater efficiency, companies and trade groups have said.
Globalization presents companies with increased competition, but technology helps small manufacturers improve their products in design phases and sell them, Ege said.
“The great thing is the website,” he said. “Ka-ching! Ka-ching! The sales just are nonstop there.”
Many small companies were in a three-year survival mode during the recession, but when they emerged, it was time to start growing again, Lloyd said.
“There is no question the world is changing with great haste,” he said. “(Companies) need to step back, be more strategic and look over the horizon to see how the world is changing.”
Small manufacturers don’t have dedicated staff for that, so owners need to take it upon themselves, he said.
Many of the problems manufacturers see today are spinoffs of the recession, Lloyd said. Sales growth from the rebound requires more materials and additional workers, yet many manufacturers are dealing with high prices and finding fewer skilled workers to fill their needs.
“They’re the good kind of problems to have because they’re related to growth, but they’re real problems nonetheless,” Lloyd said.
No matter what the changing environment brings to small manufacturers, they keep doing it because it’s gratifying, executives said.
“There’s a certain amount of self-reward,” Ege said. “You’re making something someone needs, or you’re employing someone.”