Why We Manufacture in the USA

December 28, 2013

First some background on the importance of manufacturing to the US economy.

1. “Each manufacturing job generates 5 others in the economy. The shrinking of the manufacturing base in the US has undermined that multiplier effect.”  -NY Times, Sept 10, 2011: Is Manufacturing Falling Off the Radar?

2. Innovation often originates in manufacturing, frequently in research centers near factories, which aid in the creation of products and the tweaking of them on assembly lines.        -NY Times, Sept 10, 2011: Is Manufacturing Falling Off the Radar?

3. “The reality is that Fortune 1000 firms in America have not created one net new job in more than 30 years….small business create more than 90% of the net new jobs, employ 1⁄2 of the private sector work force, are responsible for more than 1⁄2 the GDP, and 90% of US exports.”          -Loyd Chapman, Huffington Post – Data from the US Census Bureau.

Light and Motion’s guiding principal is encapsulated in the following quote by Kim B. Clark & Takahiro Fujimoto, authors of the book Product Development Performance.

“Companies that consistently develop successful products – products with integrity- are themselves coherent and integrated. … this coherence is distinguishable not just at the level of structure and strategy but also, and most important, at the level of day-to-day work and individual understanding. Companies with organizational integrity possess a source of competitive advantage that rivals cannot easily match.”

We believe product integrity is the key principle that must be thoroughly demonstrated throughout our company if we are to achieve deep customer loyalty.We do not believe we can effectively demonstrate this vision of product integrity if we let someone else build our product. A commitment to domestic manufacturing may be swimming against the mainstream (and unique among our bike light rivals).Our reasons derive from our guiding principle: An internal drive for product and organizational integrity which yields the following benefits:

– Co-location of everyone involved in bringing a new product to life promotes collaboration and problem solving leading to a better product outcome.

– Manufacturing a high quality product requires us to truly understand it better than anyone else. This investment in intellectual capital is funneled into the next product, continually deepening and expanding our knowledge base.

– Vertical integration more than halves the product development time. We can rapidly prototype design concepts within a few days on our own equipment where it would take months working with a factory overseas.

– Design for manufacturability. If engineering understands how the parts will be tooled and the product assembled, they can significantly reduce labor costs with a smart design.

– Practicing lean manufacturing enables us to build faster with lower scrap rates. The manufacturing culture of the factories in China and other outsourcing countries follow the traditional command/control management structure.

They batch their production causing build up of WIP inventory, inefficient workflow, re-work, and higher scrap rates, all culminating in lower productivity. While hourly wages in these countries remained unbelievably low the poor productivity rates didn’t matter. Now that labor rates are climbing in China these operational inefficiencies are making them less competitive.

– A vertically integrated manufacturing culture is a richer, more satisfying place to work. We are a community of people dedicated to hard work, integrity and accomplishment through teamwork. We can measure our team success and recognize how everyone in the company’s four walls contributed to it.

– Providing a wide range of jobs for our community is personally and economically meaningful.

– Finally domestic manufacturing creates a smaller footprint and is more efficient with our resources.

So just how “domestic” are we? Currently the in house/domestically manufactured content is between 50% and 80% depending on the product. The majority of our PCBs are fabricated in Silicon Valley. We retain the benefit of volume purchasing and 1 week order to delivery lead times for our shared circuits reducing the amount of cash we need to tie up in our supply chain. ALL of our Bike, Dive and Outdoor products are assembled here in our new Marina, CA factory. As we grow, we intend to bring more parts in production in house.

What are the largest challenges as a domestic manufacturer? “ The United States today is alone among industrial powers in not having a strategy or even procedure for thinking through what must be done when it comes to manufacturing”  – Thomas A. Kochan, Industrial Economist at MIT.

Lack of effective regulations: Oddly enough, for all the political talk, effective regulations can allow domestic manufacturers to thrive. In Germany, one of the most regulated markets in the world, 30% of workers are involved in manufacturing, versus less than 10% in the US. German companies are leaders in many fields from machine tools to cars and green energy. In poorly regulated markets like bike lights, we are flooded with cheap imports that do not meet basic product safety standards and lie openly on their packaging about run times and lumen output.

The other challenge is finding qualified candidates who are trained and experienced in manufacturing. Because the US lacks a coherent industrial policy, we have allowed and encouraged the technical jobs such as tooling design, automation, production planning, and plant management to migrate overseas. These careers are not promoted or even offered at community colleges. Four year colleges avoid anything to do with working in trades, working with your hands and actually making stuff. Instead schools promote the get rich ethos of computer games and social network sites, or pivot to banking and venture capital over the old fashioned ideas of creating value through craft and design.

Some of the obvious reasons for domestic manufacturing are:
– Avoiding loss of quality control – unauthorized material substitutions, inconsistent assembly.

– Long lead time/batch orders means if there is a single flaw in manufacturing or assembly it is likely that the entire shipment is flawed and you won’t know it until it arrives at your dock months later and is too late to fix or order replacement products.

– Your product is knocked off by your supplier and enters your market at rock-bottom pricing. Afterall, they’re using your tooling and design investment and you’ve already invested to build the market.