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Made in the USA: Manufacturing Equipment

Profiles of two American trade suppliers

By Shawna Kulpa

Editor’s note: Since this series began in 2012, we’ve periodically profiled U.S.-based jewelry designers and manufacturers for whom “Made in the USA” is not just a label but a call to action. Employing a mix of creativity, technological prowess, business savvy, and good old-fashioned drive, they have met the challenges of competing in a global market, and they continue to satisfy consumers who value jewelry made in America.

This month, we’re going a little further back in the process, with case studies of two U.S.-based companies that supply some of the equipment used by those designers and manufacturers. Both LaserStar Technologies Corp. and Rio Grande share the same challenges faced by suppliers throughout the industry, from global competition to high taxes, strict regulations, and a shrinking pool of talented labor, among others. Yet they’ve succeeded in maintaining their “homegrown” status—and as they’ve discovered, there are benefits to being able to tell customers that their products have been designed, engineered, and built in the United States.

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All In

LaserStar Technologies Corp. in Riverside, Rhode Island, has a long history of making its products in-house. The company, originally known as Crafford Precision Products Co., got its start in 1957 manufacturing a line of chain-making and -linking machines. In the early 1990s, looking to expand its product line-up, the company formed a partnership with a German laser company. Under the arrangement, Crafford bought the German-made laser systems in kits and then assembled them at its facility in Rhode Island. After parting ways with its partner in 1998, the company decided to focus its efforts on offering its own laser-welding, -marking, and -engraving machines. And for President and Chief Operating Officer James E. Gervais, there was never any question as to where their laser systems would be made.

“I spent five years in western Europe in the early ’90s, and I watched so many German and Italian jewelry companies experience pricing pressure that didn’t allow them to be competitive due to lower overseas manufacturing costs; hence they moved their facilities to other places in Asia and eastern Europe,” he explains. “It devastated the regional jewelry economies and workforces in cities such as Pforzheim and Vicenza. I saw the same thing in Providence when fashion jewelry manufacturers moved production overseas. Overnight, the industry disappeared.”

As the company transformed from Crafford into LaserStar, a global supplier of laser sources and systems, Gervais was determined to keep the design, engineering, and manufacturing of all of the company’s laser systems in the United States. But it hasn’t been without its difficulties.

“I think the biggest obstacles for manufacturing companies trying to survive in the Northeast are the elimination of the R&D tax credit incentive programs, higher taxes, availability of skilled engineering labor, high cost of living, and the difficulty in attracting talent to the region,” Gervais says. And he doesn’t see any quick fixes on the horizon. “It’s going to be challenging for state governments in the Northeast to try and improve many of the above factors in the near future.”

Over the years, the company has opened sales and service centers in Arcadia, California, and Orlando, Florida, to better serve its customers. “Many of our clients want to do business with someone ‘right around the corner,’” says Gervais. “Plus, we’ve learned that you can’t be successful selling in the West Coast if you don’t have an office there.”

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Opening an office in Florida proved to be a fortuitous move.

A major challenge the company has faced in trying to keep manufacturing in the U.S. is labor, and the lack of a talented photonics engineering labor pool. How serious is the problem? In 2012, when the company found itself struggling to attract the right talent to its facility in Rhode Island, Gervais decided to expand the office in Florida to include a manufacturing facility. 

“We moved to Florida because it is the hub of the laser industry in the U.S. in terms of education and training,” he explains. “There are four major schools there that offer [engineering degree] programs [in subjects such as lasers and the study of photonics]; these are students specialized in our field.” In the past, the company tried to lure graduates from the area up to Rhode Island, but Gervais says that it was often a hard sell because of the colder weather, cost of living, and higher taxes. Instead, he brought a manufacturing facility down to them.

Gervais credits NASA and companies such as Lockheed Martin and Northrup Grumman for embedding themselves in central Florida and asking local schools to offer these specific areas of focus. “The schools are producing excellent graduates in laser disciplines,” he says. “They have the laser know-how that we were lacking in the southern New England region. Sometimes you have to go to where the talent is if you want to survive.”

The cost of that labor is also a challenge that comes along with manufacturing in the U.S., but Gervais notes that it’s been a minor one for the company, which has managed to keep its labor costs down thanks to the modular design of its machines. “We do a very good job of making lasers efficiently,” says Gervais, who notes that the cost of assembly is only about 15 percent of total costs. But he also says that as the cost of benefits (such as healthcare) continues to rise, the company is always looking for ways to improve and reduce other costs, such as those of materials.

“We live by one major principle: We will cannibalize our own products before someone else can,” he says. For Gervais, this means that the company must always strive to improve its technology and find ways to make its products more affordable for a larger share of its marketplace, all while maintaining a high level of quality.

“We have a group of engineers that every 24 to 30 months will look at existing products and give them a major overhaul to see if we can get another 10 to 20 percent out of it,” he explains. For example, the company was able to save money by taking advantage of LCD technology to design a lower-cost view shutter versus the older mechanical design.

In addition to the jewelry industry, LaserStar sells laser sources and systems to the automotive, dental, medical device, electronics, aerospace, tool and die, and firearm industries, and Gervais notes that many of its customers across all industries like to know that they’re dealing with “an American company that has direct control over the design, engineering, and production of the product.”

While he admits that manufacturing its products in the U.S. prevents the company from offering the lowest price in the marketplace, Gervais says he looks for other ways to enhance the value of their products, such as offering a high level of training, service, and application development support.

“We’ve taken a global approach, trying to not make it just about the cost of the machine, but about the total package the client receives and the services provided,” he says. “We’re never going to be the cheapest machine on the market, but we feel we bring excellent value and strive to exceed our customer’s expectations.

“We’re seeing tremendous competition from Europe, or at least European-branded machines that are made elsewhere,” he continues. “There’s a lot of product coming from China today. Clients have to weigh the value of paying a premium.”

The company offers customers the option of visiting a LaserStar Learning Center at any of its three facilities, or of having applications engineers come out for one-on-one onsite training. During training, customers are encouraged to bring their toughest repair jobs so that by the time training is complete, they’ve not only learned how to use their new machine, but generated revenue as well.

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LaserStar also has service technicians at its offices to provide telephone support and who can travel out to customer locations to help troubleshoot and fix any problems a customer encounters with a machine. In addition, the company has eight full-time applications engineers who are available to collaborate with customers. “If a customer isn’t sure which ma-chine will accomplish her goal, she can request an application feasibility test or rent the use of the applications laboratory,” Gervais says.

“There are many companies that prefer to work with a U.S. manufacturer for education and support reasons,” he adds. “We offer different levels of support that foreign competitors don’t often have the domestic staff to do. It’s nice to know if something goes wrong, they can always reach LaserStar to achieve a solution.”

While all of this effort has made the cost of doing business higher than it would be if the company moved some of its production overseas, it’s all worth it in the end for Gervais.

“We’ve talked about moving production overseas, but fundamentally it is not our philosophy. It’s not how we want to continue to grow and be successful. We’re all in on America.”

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Staying Local

In today’s global world, it’s become easy to find and contract with a company located on the other side of the planet to manufacture your products. Industry supplier Rio Grande takes a different approach. Instead of looking around to find the best place to have a new product produced, the company first looks inward to determine the feasibility of producing it in-house.

“When we’re looking at bringing out any new equipment, the philosophy at Rio is always, How can we manufacture it here?” says Michael Quinn, vice president of manufacturing at Rio.

In addition to producing a large number of findings in-house, Rio manufactures about 400 different tools and pieces of equipment, including its entire line of Neutec casting machines, at its facility in Albuquerque, New Mexico.

One of the primary reasons the company prefers to keep as much production work in-house as possible is its ability to maintain quality control.

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“The control you have over the processes is easier to maintain when doing it in-house than when relying on someone else to do it,” says Quinn. “We’re pretty staunch believers in the people and technology that we have in-house and their ability to produce the quality we want. It would be difficult to replicate that elsewhere.”

But manufacturing equipment in-house does come with some obstacles.

“We face the same challenges any manufacturer in the U.S. would face,” he says. “The biggest challenge is costs—the U.S. has a higher cost infrastructure than some overseas countries.”

Although many may think that labor costs here are high, Quinn admits that direct labor accounts for only between 10 and 20 percent of the cost of sales. “In capital manufacturing, labor shouldn’t be the driver behind where you manufacture,” he says. “It’s not the big difference a lot of people think it is.” This is especially the case when it comes to manufacturing large machinery, which often requires less intensive manual labor than making finished jewelry or components does.

Instead, Quinn says that the majority of capital equipment manufacturing costs come from materials and overhead, but he stresses that even those shouldn’t be considered game changers.

“Everyone’s paying about the same for similar quality materials,” he says. “However, the difference between manufacturing in the U.S. and overseas comes into play when considering costs such as health insurance, employee benefits, workers’ compensation insurance, and compliance with environmental regulations. But even with these additional costs, when we’re talking about high-end manufacturing, the United States can still be very competitive.”

To help manage costs, Rio negotiates the price of materials with its suppliers. “For components that are made specifically for Rio Grande, we partner with the suppliers to determine which design requirements drive the most cost,” says Quinn. “We then work together to ensure we are getting the best product for the least cost by not having them provide features that drive cost, but have no benefit to our customer.”

Rio finds many of its suppliers through its network of knowledgeable and long-term employees. “We then have our technical and supply chain teams work with the suppliers to define requirements,” he says.

The company prefers this approach, viewing it as more productive and satisfying than simply looking at the lowest-cost items. “It is more of a ‘total cost’ approach because often the lowest-cost bid is not the lowest cost when you consider product performance, delivery reliability, and field reliability,” he says. “When we consider total cost, our focus is on the long-term customer experience.”

Another challenge that Rio has faced is finding labor candidates qualified for the work.

“Finding qualified machinists and tool and die makers is a very real and present challenge,” he says. “There are fewer and fewer people that have those manufacturing skills. We hope that we can be part of the movement to influence technical vocational schools and students with aptitude to consider this career path.”

Instead of relying only on traditional recruiting and hiring methods, the company has created an internal technical training program to develop its staff for these critical positions. The associates in the program typically come from a machine operations area, but the program is also available to any associate with the required interest, aptitude, and desire. The first phase of the training has associates working with people who are already at a machinist level. Next, they’re trained in die repair work. Over time, the company’s goal is to expand the program to enable someone with knowledge of basic machine operations to become a tool and die maker, if that is his goal.

This in-house training program is possible because Rio is fortunate to have a combination of highly skilled machinists and tool-and-die makers who work together with its Learning and Development team. This collaboration results in a formal curriculum that meets the company’s needs while allowing associates to grow professionally.

Those experienced employees also help to keep down operation costs. “A significant number of employees have been with the company for decades,” says Quinn. “This internal expertise and creative capacity allows us to expand the capabilities of standard machines, improving quality and productivity while reducing the need for additional capital equipment.”

Rather than compete on price, Rio prefers to differentiate itself by delivering quality products along with great customer service. The company offers on-site service for its machines, and it’s happy to send field technicians out to help train customers as well as troubleshoot and fix problems.

In addition to offering on-site service, Rio has in-house technical support available during regular business hours. In the case of its Neutec customers, that support is available 24 hours a day, 7 days a week. Because all the design, engineering, and production of Neutec machines is done in-house, technical support agents have easy access to the machines (and the brains behind making them) to help troubleshoot customer issues.

And, since all of the sheet metal work, metal castings, CNC milling, powder coating, assembly, and other manufacturing processes that go into making the Neutec machines are done in the U.S., the company is proud to be able to mark its products as “Made in the USA.”

“We have built marketing campaigns around our U.S.-based manufacturing capabilities because the source of products matters to many of our customers,” says Quinn. “While quality and performance in general are typically the deciding factors, we are aware of customers who have specifically cited the fact that the machines are made in the U.S. as a reason why they’re purchasing one. I think that there’s a feeling that products made in the U.S. are of good quality.”

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