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Made in America?

June 15, 2012
What it takes to competitively manufacture in the U.S.

Authored by:
Leslie Gordon
Senior Editor
Key points:
• Custom manufacturing is hot.
• Offshore facilities may not be competitive when it comes to complex machinery.
• Manufacturing is the iron backbone of the U.S.
Omax Corp.

Salem Design & Manufacturing LLC

For more information on the issue of U.S.- based manufacturing go to:

No doubt, the economy is global. But there are companies in the U. S. that believe strongly in the mantra “Made in America.” In fact, they base their corporate mission on this theme. Some companies are actively trying to bring back the manufacturing base from overseas. They want to make money, sure. But these companies also see manufacturing in the U.S. as a patriotic duty. Why? Because it has become evident that manufacturing is really the iron backbone of our economy and, without it, we are doomed as a nation. The interesting questions are, is this a profitable endeavor, and how did these companies remain afloat during the recent downturn?

Complex, custom manufacturing
Completely onboard with “Made in America” is in Hoboken, N. J., a recent start-up. The online marketplace for manufacturers targets custom manufacturing. The company focuses solely on the U. S. economy and market. It has no suppliers outside the U.S.

“We don’t handle maintenance, repair, and operations (MRO) or commodity products,” says CEO Frank Russo. And that is for a specific reason: The sourcing and procurement process for complex machinery is quite involved and demands a lot of information. The company has built an online platform to handle complex transactions.

Says Russo, “We feel ours is the right model for today as we try to bring back the U.S. manufacturing economy. “Specifically, the suppliers are relatively small companies with diverse specialties and they are located all over the U.S. The companies are typically so focused on specific manufacturing processes and expertise that they do not have a lot of marketing power, resources, or outreach.”

This lack of marketing power makes it hard for buyers to find potential suppliers that are capable and have the specific kinds of expertise and machine capacity needed, says Russo. “This is where we fit in.”

Examples of capabilities manufacturers might look for include machines with a specific capacity for making parts with unusual diameters, says Russo. “Companies might also be looking for suppliers, say, that can handle large or unusually heavy parts. Many machine shops typically have weight-limited capabilities in terms of overhead conveyors and cranes.” decided to restrict suppliers to those from the U.S. because it saw a good market potential in doing so. “Also, we feel strongly about bringing manufacturing back to the U.S. because the strength of our country depends on it. We don’t see the market space as billions of dollars. Instead, we see it as providing great quality leads for suppliers, connecting them to good-quality buyers.”

Russo also says that people have done a great job in the past few years of educating buyers and suppliers on the total cost of ownership. “Even some of the larger companies are beginning to see that offshored products do not necessarily translate to larger profits.”

Additionally, recent news has described the rising middle class in China. Labor costs there are, thus, going up, contributing to the total cost of ownership. “And it seems there are always quality issues,” says Russo. “Therefore, just the largest corporations that are currently basing their procurement decisions only on price will continue to do so,” he says. “But we think there is a large custom manufacturing market here in the U.S. that is vastly underserved. Even smaller job shops have now invested in high-quality machines and CAM equipment. So they can compete if given the chance to find the right buyers.”

Target a critical market
In another example, Salem Design and Manufacturing LLC (SDM) in Salem, Ohio, designs and builds custom manufacturing equipment along with gaging, eddycurrent and ultrasonic testing machines to inspect safetycritical parts. Says President Phillip R. Warga III, such parts might be something like a ball joint, which if not heat treated properly could cause a catastrophic accident. The company remained successful even during the downturn because manufacturers that make safety-critical parts must invest in equipment to inspect them, to ensure they don’t have a lawsuit down the line.

Says Warga, our machines don’t build parts cheaper or make parts faster. The machines are an insurance policy. “Let’s say you are making automotive spindles and one of them is fractured,” he says. “It could go into a car and cause the wheel to fall off, which could result in the car hitting a school bus full of kids. Huge liability. So we sell equipment whenever a company has had a problem regardless of how their business is doing.

This means that our sales don’t fluctuate as much as the others as the economy goes up and down.

The company also serves the nuclear-energy market. It builds equipment used in the manufacturing and inspecting of nuclear fuel-rod tubing.

According to Warga, the company has stayed competitive while manufacturing in the U.S. primarily because it does not build a product such as a small widget. “We don’t have to worry much about overseas competition,” he says. “I would equate us to a home contractor. For example, the Chinese would have a hard time competing on building a house for you. Because China is so far away, trying to meet with companies there periodically to see how your house is coming along would be impractical. That is probably the biggest reason we don’t have any offshore competition.”

Almost paradoxically, another advantage to companies that build machine tools in the U.S. is that the dollar is weak right now, says Warga. So Europeans are looking here because we are a bargain compared to the Euro. “If a business such as ours were operating in Germany, let’s say, machines are going to be more expensive. Labor costs in Germany for machinists or engineers are similar to those in the U.S., so the big difference is which country has the weaker currency. Plus, the world still needs power, even though there is talks of windmills and a lot of other methods, nuclear is not about to go away for a long time. So that market is increasing in size.”

Another reason SDM was able to hold its own during the downturn was because it is fairly lean, says Warga. “We reach around 3 million a year in sales with just six people,” he says. “Over the years, we have found extremely good people — something I put a lot of effort into. We shopped around and went through a lot of individuals and the result is we have ended up with an exceptional crew. We don’t even have a foreman. Everyone just knows what needs to get done.”

The machinery the company manufactures is quite complex. “One of our lines uses a lot of robotics,” says Warga. “In general, companies that build machines and become profitable usually don’t like to customize its products. They will say, “Here is the machine, take it or leave it.’” In contrast, SDM always starts with a clean sheet of paper.

Our strength is we are mostly an engineering service and tackle difficult applications,” says Warga. “This approach is always risky because if we promise a company that we can design a machine to do what the firm wants, should we fail, we are probably bankrupt.”

According to Warga, in the past few months, European nations have been looking internally to find their weaknesses — whether from a natural disaster or a terrorist attack. “One area they discovered is in nuclear-fuel-rod production,” he says. “Fuel rods supply the energy for power plants to make the steam that runs the generator. Fuel rods last a couple of years and then need replacing. Analysts found problems with a certain rod and came to us to see if we could make a machine to produce them. The tubes required an exceptionally tight, specialized chamfer on the OD and ID. The tubes are about 15-ft long, with 0.020-in.-thick walls.”

Cutting the chamfer is difficult because tube diameters can vary slightly, continues Warga. “So we developed a system that uses a laser to find the centerline of the tube down to 5 millionths of an inch. We also developed a mechanism that positioned the cutter to within 10 millionths of an inch. Integral to that, we developed the gaging system that would do a 100% inspection after every tube was chamfered.”

Up until that time, only one European company could make that specific kind of fuel rod. SDM’s goal was to produce machined tubes that would equate to the European tubes, however, the end result was that SDM’s machine produced tubes with accuracy exceeding those from Europe. This type of machinery costs approach 1 million dollars and is quite large.

SDM, in conjunction with an eddy-current company called UniWest, Pasco, Wash., also developed a cost-competitive inspection machine designed primarily to inspect automotive spindles for the proper heat treatment or flaws. The machine includes two robots, one manipulates an eddy-current probe along the surface of the spindle while it rotates. The other robot is used to load and unload the spindles. The probe creates eddy currents in a localized spot, which generates a signal that can be detected should it sense a crack or a flaw. “The technology finds flaws that are difficult to see, even under a microscope,” says Warga. “The machines go in-line for the 100% inspection of automotive spindles.”

SDM has been in business for seven years. “Of course, there have been ups and downs like always,“ says Warga. “But I’ve reached a point where money isn’t really the main objective — I just really enjoy doing the work. And that is true for most of our employees. I think good employees are a huge factor in a company being successful. “We are not slave drivers, the profit just kind of came. Businesses have to make money to survive, but we have never priced things to make a lot of money right now. You can run your profitability high in the short term, but that just opens the door for competitors. So we came into the market at times, about half of our competitors’ price for the same test. I don’t think our competitors will be able to make a similar machine for the price.”

A main reason for the poor economy is greed, continues Warga. “As a business owner, I do not strive to make a maximum profit every year. I would rather make less money and be patriotic and help this country than I would to make an extra 5 or 10% and end up hurting the country. I think that bigger businesses should consider that going to foreign countries in the long-term is damaging.”

True, some of the components SDM uses in its machine are made offshore. But that is because there is no company in the U.S. it knows of that makes them. But the machine base, guarding, and other components are all made in America.

Make parts only as needed
In another case, H. Laird Parry, senior applications engineer of Omax Corp. in Kent, Wash., says, “We are a small manufacturer that uses its own abrasive waterjets to make parts for abrasive waterjets that we sell to other companies. The nifty thing is we can make parts as we need them. When companies send things offshore, they have to order a big-enough quantity to make economic sense. And then they don’t have the flexibility needed to make a relatively small number of machines. They must purchase large containers of parts and often there is a design change before the parts even arrive.”

Omax is relatively small, with only about 275 employees— up from 150 about two years ago — and it produces different variations on a theme, says Parry. “So as orders come in, we want to be able to make parts for those orders rather than have a whole bunch of inventory tied up on the shelves which may or may not be used that year.”

We held our own during the downturn because our machines complement rather than compete with other technologies such as machining, laser cutting, EDM, or plasma, says Parry. “For example, lasers cannot cut composites,” he says. “Smaller EDM shops can use blanks cut from waterjets then finish them off to close tolerances. And laser shops can’t cut copper or aluminum, but waterjets can. In addition, waterjets are set up for a quick turnaround. Just clamp the material down on the table and away you go.”

Omax also tries to always stay one step ahead of the competition. “One of the big technological advantages we have — although other companies are moving this way — is our control system. The challenge of a waterjet is that the cutting jet itself is flexible. So programming the machine used to involve a lot of trial and error. Now we have a software model that models the behavior of the jet that our programming system automatically takes into account.”

So producing a part just involves entering the CAD file and inputting the part thickness, material, and quality — a rough cut or a fine cut. “The machine basically then programs itself,” says Parry. “The result is great for short runs. The sweet spot for abrasive waterjets is one part to a couple of hundred parts, 0.040 to 4-in. thick. Setup time is almost nothing.”

We have also been successful in manufacturing in the U.S. by always making continuous improvements to the technology, says Parry. “Improvements are more easily done because we make parts as we need them,” he says. “We have everything right here instead of in a long supply chain.”

Another reason Omax is continuing to be successful is its machines also give the company’s customers more flexibility. “Abrasive waterjets are kind of a new technology and take a little bit of getting used to,” says Parry. “So we stand behind the product with training and support. Waterjets are not like cars where you can just hand someone the keys and say, ‘Here it is, go and run it.’”

The machines are useful in that they can cut everything from superalloys to composites, coated materials, hardened tool steel, and really soft materials that are difficult to machine. “This capability lets U.S. manufacturers make better-quality products,” says Parry. “One example is a shop that makes elevator-control panels. Not a really big thing, but our technology can cut the panels after the shop has them all nice and polished. There is no heat situation to cause problems.”

According to Parry, there are abrasive waterjets that are made in China. “But they lack high quality,” he says. “And, above all, the control system that lets us make quick-turnaround parts is just not there. We have seen people bringing over lower-cost Chinese cutting tables — XY tables — and adding their own controllers. But we look at how it is being done and realize that we can actually build high-quality waterjets competitively priced in the U.S. simply by building them as we need them. We keep coming back to the idea that we can do a better job right here with our own people.”

Continues Parry, “The state of manufacturing in the U.S. is encouraging. One thing I am a little distressed about, though, is that youngsters today do not want to get into a trade or be a manufacturing engineer because it seems like manufacturing is all going away. But those of us in our 50s and 60s are not seeing it going away. We are getting smarter about how to stay competitive while manufacturing in the U.S. We must get more young people enthused about making stuff, so we can continue to compete in the future. We can be smart in the way we build and design things and use the latest technology, which offshore manufactures can’t necessarily do.”

© 2012 Penton Media, Inc.

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