Two ways to manage manufacturing risk

Last week I visited two facilities that focused on low- to medium-volume manufacturing. Both customize products to meet customer needs. Both tout quick response and comprehensive customer service. Yet in many respects, the two couldn’t have been more different.

A week ago today I pulled into the parking lot of Atlanta Precision Machining & Fabrication and its parent company, Atlanta Attachment Co., a make-to-order manufacturer in Lawrenceville, Ga. Atlanta Attachment began as an equipment supplier to the apparel industry and diversified into automated machines for mattress-making. The company also fabricates products for the aircraft maintenance market. When business went downhill during the past recession, managers considered the manufacturing technology on the floor--press brakes, lasers, waterjet, painting, rows of machining centers--and had a thought: Why not offer contract fabrication? That’s how, in 2009, Atlanta Precision Machining & Fabrication was born. (Look for an article featuring the company in a future issue of The FABRICATOR®.)

Because the company already fabricates and assembles complete machines for its product lines, Atlanta Precision offers more than just parts. For certain customers it handles the entire manufacturing process. Managers are finding that some OEMs are stepping out of the manufacturing arena entirely, especially for products with highly variable demand.



The strategy makes sense for certain products produced in low or medium volumes. As the Great Recession took hold, product-line manufacturers laid off noncore personnel. Now that demand is picking up, those same managers are thinking twice before hiring again. Instead, they’re keeping core staffers who can add value during good times and bad. If they’re engineers, they can design new products; skilled manufacturing technicians can perform highly specialized fabrication or assembly--critical and perhaps proprietary processes that the firm would never outsource.

As for the rest, they’re outsourcing--but not necessarily overseas. After 2009 some companies have found it too risky to ramp up manufacturing and rehire, so they outsource all standard manufacturing and assembly to local companies like Atlanta Precision Machining & Fabrication. In these cases, quality and quick response are priorities, which mean outsourcing overseas isn’t an option. Even if overseas firms could provide quality, the distance factor remains, and because of the low volumes involved, outsourcing overseas wouldn’t be competitive anyway.

On the other end of the spectrum is TRUMPF Inc. The sheet metal machine tool manufacturer held its INTECH event last week, when it invited customers and the trade press to its North American headquarters in Farmington, Conn. During a tour, one plant manager described how little the machine tool manufacturer outsources. The company, which also has a laser diode plant in Cranbury, N.J., is the quintessential high-tech manufacturer--complete with clean rooms occupied by suited-up workers inspecting precision parts machined and polished to mirror finishes.

Each company is managing risk, just in very different ways. Managers at Atlanta Attachment manage risk by diversifying product lines and by launching Atlanta Precision, a contract manufacturer that itself manages risk for other customers wanting to outsource manufacturing. TRUMPF managers have decided to keep most manufacturing in-house because so much of it--especially the intricate photonics work--is very specialized. Manufacturing the inner workings of a laser isn’t easy.

Businesses thrive and fail in part by how they manage risk--and there’s plenty of it, as the Great Recession proved all too clearly. Now that we’re in an upturn, it seems many manufacturers have found opportunity by helping customers best manage that risk.