Author Topic: Is it viable to start a small scale manufacturing operation?  (Read 3677 times)

Kroaler

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Is it viable to start a small scale manufacturing operation?
« on: November 02, 2017, 08:25:48 AM »
My wife and I both work in automotive manufacturing at different supplier tier levels in technical roles.

It appears the barrier to entry for some tier 3 items is very low, with room for substantial improvement in quality control.

We are not planning anything at this time, but I've always hoped to leverage my career in automated manufacturing for my own personal gain one day.



So just for discussion, has anyone started any manufacturing operation or known anyone who has done it without multiple millions in start up capital?
I would especially be interested if anyone knows of a story on the internet or in a magazine where someone was able to start any kind of automated manufacturing processes tailored towards the automotive segment without the large investor pool for startup capital.


And just to get the thread hopping, does anyone else out there have a desire to manufacture a product one day?

plantingourpennies

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #1 on: November 02, 2017, 11:09:43 AM »

And just to get the thread hopping, does anyone else out there have a desire to manufacture a product one day?

No. Most types of manufacturing are capital intensive, low profit margin, easily relocated to China/Vietnam/Malaysia, with a low "switching" cost on the part of the buyer. I couldn't create a worse business model if I tried. Yes, there are types of manufacturing that don't fit this mold (ha-ha!), but by and large this not a great business to grow from scratch. Hell, ask Elon Musk.

Why not turn your expertise into selling a service (consulting) or another type of intellectual property (courses, information subscritiption or databases)? These are high margin, very scalable, and slightly less apt to be outsourced.

I've heard that during the gold rush more money was made selling picks and shovels than finding actual gold.

Fishindude

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #2 on: November 02, 2017, 11:25:26 AM »
Yes this is doable.
There are countless rags to riches stories where the owners of large manufacturing operations started out in their garage with not much more than some ideas and a strong work ethic.

The little town I live in has always had a strong metal stamping industry due to two large manufacturers Rockwell & Essex setting up here a long time ago.  Stamping requires lots of tool makers and there are now several rather large privately owned metal working operations in the area that were started by tool makers who learned their trade with those big outfits, then took off and started their own operations.

I hope you pursue your idea, best of luck.

Kroaler

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #3 on: November 02, 2017, 12:07:17 PM »

And just to get the thread hopping, does anyone else out there have a desire to manufacture a product one day?

No. Most types of manufacturing are capital intensive, low profit margin, easily relocated to China/Vietnam/Malaysia, with a low "switching" cost on the part of the buyer. I couldn't create a worse business model if I tried. Yes, there are types of manufacturing that don't fit this mold (ha-ha!), but by and large this not a great business to grow from scratch. Hell, ask Elon Musk.

Why not turn your expertise into selling a service (consulting) or another type of intellectual property (courses, information subscritiption or databases)? These are high margin, very scalable, and slightly less apt to be outsourced.

I've heard that during the gold rush more money was made selling picks and shovels than finding actual gold.


Honestly, after being in automotive manufacturing I find it nothing short of amazing that Elon Musk was able to enter the space of established automakers.   Regardless of the fact that Tesla is not achieving hardly any of their targets, mad credit goes to the man just for entering.

I cant believe Tesla has survived this long without a strong dealer network in place. I honestly looked for them to partner with distressed Fiat to gain that needed dealer network, but it hasnt happened yet.

But I agree with what I think is the point of your post about starting large scale manufacturing operations.   I also agree that my time would be well compensated as an automation consultant.   ( I keep telling myself ill get around to it. Obviously fear is holding me back even as I see opportunity)
« Last Edit: November 02, 2017, 12:08:56 PM by Kroaler »

MsSindy

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #4 on: November 02, 2017, 12:57:55 PM »
You lost me on all the tier 3 stuff....

But like any good business, find a niche and/or an area not being served well and exploit.  I did an intern at a seal company (the kind that goes on spaceships....not swim in the ocean) and they were having all kinds of rejects of parts because the pieces supplied had to be to exacting precision.  There was one lone local guy who had the skills and equipment to do this and his parts were always accepted - problem was, it was him and one other person so only so much business could go to him.  But he charged a higher price and had all the business he could handle or want - I don't think he was looking to scale, but rather just provide himself with a good living.  But it was a definite gap in the marketplace.

I'm setting up apparel manufacturing for my product.... starting really small and then scaling up.... it's been an education, for sure.

Kroaler

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #5 on: November 02, 2017, 02:18:17 PM »
You lost me on all the tier 3 stuff....

But like any good business, find a niche and/or an area not being served well and exploit.  I did an intern at a seal company (the kind that goes on spaceships....not swim in the ocean) and they were having all kinds of rejects of parts because the pieces supplied had to be to exacting precision.  There was one lone local guy who had the skills and equipment to do this and his parts were always accepted - problem was, it was him and one other person so only so much business could go to him.  But he charged a higher price and had all the business he could handle or want - I don't think he was looking to scale, but rather just provide himself with a good living.  But it was a definite gap in the marketplace.

I'm setting up apparel manufacturing for my product.... starting really small and then scaling up.... it's been an education, for sure.

Here is a link to a basic supply chain with tier examples:

http://businesstheory.com/wp-content/uploads/2011/03/automotive-supply-chain-REV2.gif

Niche for sure!    This is an excellent example. And the startup capital to manufacture seals isn't overwhelming compared to end product iPhones or automobiles, especially if purchased second hand as used industrial equipment.

Another specific item I have interest in is formed hoses / tubing. So radiator hoses, ran through an oven in a form and Bam!  Brake lines or high pressure diesel fuel lines also represent items that can be manufactured with low startup capital and nice margins *if* you can tightly control quality.   

While cheap items to manufacture , a hefty markup can be charged by anyone who can manufacture to strict quality targets.
« Last Edit: November 02, 2017, 02:40:11 PM by Kroaler »

OkieM

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #6 on: November 02, 2017, 10:29:46 PM »
I think this is the dawn of such an exciting time for small manufacturers. Computing power and some of these gains in electronics/robotics are coming together to make it viable to automate smaller and smaller runs. Sure, things like the Baxter robot look more like a toy today but they are improving fast. Like you say with Tier 3, often availability and quality trump price. No one wants to have their entire supply chain in shipping containers for weeks. Itís just so obscure most people never think to get into it. In my neck of the woods the industry is related to oil and gas and I know plenty of tier 3 type guys southern engineering together basic Automation for really basic products and making a killing. Itís fun to watch them because they will disrupt some niche then grow so fast their working capital needs explode and itís one those ďnice problems to haveĒ situations.

Kroaler

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #7 on: November 03, 2017, 07:58:45 AM »
Thanks for the reply!  Yes I agree it's very exciting.  The majority of the automation R&D cost has already been absorbed by the big players and that enables small operator s to benefit at a much lower price. 

Universal robots is a company that's doing great things at their price point. And they are so simple any kid that's does nerd things like Minecraft could integrate them without extensive automation knowledge.

Basically every level of industrial automation/ controls has a product line targeted at small operations.

Fishindude

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #8 on: November 03, 2017, 08:51:51 AM »
A couple friends of mine (brothers) had relations with a large manufacturing company and subcontracted some specialty grinding and machining work from the big company.
These two brothers set up a little 5,000 square foot operation right down the street with a pretty small investment, provided great service and quality better than the big company could do it in house, and made out very well income wise for 15-20 years.   They are both semi retired early now.

Michael in ABQ

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #9 on: November 20, 2017, 12:03:00 PM »
In college I was in a program that teamed up engineering students with entrepreneurships students. We got to visit a bunch of local businesses and some in Silicon Valley. One of the local companies made a product that produces wood veneer. Basically it's a giant lathe that you stick a log into and it will peel off a layer of wood that can be used for veneer. The owner got started by charging 50% up front and using that money to build the first machine. I don't know if that's the whole store but he was 100% owner and didn't get any outside investment or loans.

Another company got government grants to develop their products and then once developed sold them to the government. I think their first product was a cooling system for a special black box that contained classified instruments for a spy plane. Obviously a pretty small market but one where they could get very high margins since so few people would even be trying to compete on something like that.

ChpBstrd

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #10 on: November 21, 2017, 04:08:00 PM »
Manufacturing is cheap. The problem is that cheap = garbage when it doesn't necessarily have to. Brands are willing to pay a lot to firms that can obtain both the low prices of Asian manufacturing and high quality. Figure out a solution to that problem and the world will beat a path to your door.

Michael in ABQ

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #11 on: November 22, 2017, 11:02:14 AM »
Manufacturing is cheap. The problem is that cheap = garbage when it doesn't necessarily have to. Brands are willing to pay a lot to firms that can obtain both the low prices of Asian manufacturing and high quality. Figure out a solution to that problem and the world will beat a path to your door.

The list of manufactured items that are junk with no viable high quality alternative is endless. Yes the manufacturer can save $0.05 here and $1.00 there by using inferior materials but the crap just breaks. It's not like you can buy a cheap $20 product that will break after a few months or a year and then spend $40 to get one that will last several years. The more expensive one usually has the same kind of problems and now you've spent twice as much for something that will still break in a year.

hoping2retire35

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #12 on: November 30, 2017, 08:28:36 AM »
Something of a pipe dream of mine. I drive a locally manufactured Z3; I thought after enough time and working on it myself I will find something that keeps causing a problem that the OEM and others haven't really perfected. However, pretty sure Kroaler is way ahead of me on this ;)


Kroaler

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #13 on: November 30, 2017, 09:28:35 AM »
Something of a pipe dream of mine. I drive a locally manufactured Z3; I thought after enough time and working on it myself I will find something that keeps causing a problem that the OEM and others haven't really perfected. However, pretty sure Kroaler is way ahead of me on this ;)

Ive actually hit a road block (haven't really worked very hard at it to be honest).    I cant think of a way to generate a list of in demand niche items.   Your example is excellent, a Z3 usually goes to people with money to spend.   Another MMMer (craiglepaige - a few post up) also discussed how the air cooled volkswagon bug market has the correct kind of buyer able to spend money.

The problem I have is generating a list of what items are in demand (existing or not existing yet) so I can analyse the items manufacturing cost vs potential sale price.    The Best idea so far that I have is to create a website and offer certain widgets at certain prices but not actually let people check out, and document what items are hot (I think I read a similar strategy in 4 hour work week).  -  But even this idea wont produce the kind of results im looking for, I need access to Rock Autos data base or some other large collection of data.


Meanwhile for Lolz, I keep a folder that Ive had since i was like 16 with "ideas".  I was reading through it and one of the ideas was for a service that breaks in footwear, specifically work boots.   IDK about you guys, but I would pay for this service. Breaking in new work boots is awful.  I routinely wear boots longer than I should just to avoid it.   Included is a pic, just for kicks. A simple fleet of automated machines could be constructed on the cheap with air logic and air cylinders.
« Last Edit: November 30, 2017, 09:30:51 AM by Kroaler »

Smokystache

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #14 on: November 30, 2017, 11:35:59 AM »
Something of a pipe dream of mine. I drive a locally manufactured Z3; I thought after enough time and working on it myself I will find something that keeps causing a problem that the OEM and others haven't really perfected. However, pretty sure Kroaler is way ahead of me on this ;)
....The problem I have is generating a list of what items are in demand (existing or not existing yet) so I can analyse the items manufacturing cost vs potential sale price.    The Best idea so far that I have is to create a website and offer certain widgets at certain prices but not actually let people check out, and document what items are hot (I think I read a similar strategy in 4 hour work week).  -  But even this idea wont produce the kind of results im looking for, I need access to Rock Autos data base or some other large collection of data....

Can you use Google Trends or other ways to see how often people search for specific items. Would it be reasonable to suspect that items with frequent searches would be things people would buy?

ChpBstrd

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #15 on: November 30, 2017, 11:40:50 AM »
I've often noticed that people are left without many good options when a mass-produced product has a design flaw.

For example, Ford Explorers from the mid-2000s have a little plastic panel on the lift gate that is prone to crack when pressed upon. I rarely see an Explorer of this generation that doesn't have this crack. Probably costs hundreds to fix at a body shop, and you would then just have another poorly designed part. What if someone produced a $20 custom applique' that owners could stick on top of the broken piece, not have to repaint, etc?

Example 2: In my stupider days, I paid $750 for a plastic motorcycle fairing that probably cost $20 to mold. Motorcycle parts are outrageous, especially for Harleys. Figure out which parts scrape or break when they fall over.

Lots of parts for European cars are also outrageously expensive and there are no aftermarket alternatives.

Look for opportunities like these.

hoping2retire35

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #16 on: November 30, 2017, 11:57:54 AM »
Per my example, another car I would get if I had use of a small/medium SUV is the BMW X series. All the suppliers and their employers with their knowledge (and who you could hire away) are all in the area. Buy a used, heavy miles x series and keep putting miles on it, continually check bimmerforums and others for potential problems, find one and then design a fix. See if it is feasible/profitable. Boom

Kroaler

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #17 on: November 30, 2017, 12:21:28 PM »
Per my example, another car I would get if I had use of a small/medium SUV is the BMW X series. All the suppliers and their employers with their knowledge (and who you could hire away) are all in the area. Buy a used, heavy miles x series and keep putting miles on it, continually check bimmerforums and others for potential problems, find one and then design a fix. See if it is feasible/profitable. Boom

I dont know how to quote 2 people in the same post,  so you each get different!   

The logic is sound, but I doubt the x model is the car to do lol.   I believe bmw s lately go to an early grave.  Not because of the car, but generally I think the people attracted to BMWs arent attracted to the frugality of replacing parts that could get  a vehicle to 200k + Miles.

But I  agree with the logic.  Buy x popular item for myself and see what fails while also checking item specific forums.
« Last Edit: November 30, 2017, 12:29:34 PM by Kroaler »

Kroaler

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #18 on: November 30, 2017, 12:26:23 PM »


Can you use Google Trends or other ways to see how often people search for specific items. Would it be reasonable to suspect that items with frequent searches would be things people would buy?



THIS

This is the information that I needed to cross paths with.     Im not dead set on  automotive manufacturing, but I think learning to use some kind of search trend analytic software would enable me to gather the information needed at the exponential rate required.    Im not dead set on tier 2-3 automotive.    Id love to find ANY highly searched item that is profitable and start making it.

On this note, are you familiar with said software / use?     Could you suggest a place / book I could use to educate myself to gain maximum usefulness from search analytic tools already available?

Kroaler

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #19 on: November 30, 2017, 12:34:49 PM »
I've often noticed that people are left without many good options when a mass-produced product has a design flaw.

For example, Ford Explorers from the mid-2000s have a little plastic panel on the lift gate that is prone to crack when pressed upon. I rarely see an Explorer of this generation that doesn't have this crack. Probably costs hundreds to fix at a body shop, and you would then just have another poorly designed part. What if someone produced a $20 custom applique' that owners could stick on top of the broken piece, not have to repaint, etc?



Lots of parts for European cars are also outrageously expensive and there are no aftermarket alternatives.

Look for opportunities like these.

I believe a local junkyard would know exactly what small widget the world has need for.   They make a living knowing.   A good way to get ideas would be going to a local junk yard,  seeing what models they stock the most of, then seeing what parts everybody already took off.    Cross reference that information against the complaints on the internet and I think that would generate a useful list also.

OkieM

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #20 on: November 30, 2017, 06:22:18 PM »


Can you use Google Trends or other ways to see how often people search for specific items. Would it be reasonable to suspect that items with frequent searches would be things people would buy?



THIS

This is the information that I needed to cross paths with.     Im not dead set on  automotive manufacturing, but I think learning to use some kind of search trend analytic software would enable me to gather the information needed at the exponential rate required.    Im not dead set on tier 2-3 automotive.    Id love to find ANY highly searched item that is profitable and start making it.

On this note, are you familiar with said software / use?     Could you suggest a place / book I could use to educate myself to gain maximum usefulness from search analytic tools already available?

Google just has everything free on their website. They have a lot of videos on how to use the tools. You may have to click around a bit at first to find everything, but itís all there.

Smokystache

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #21 on: December 01, 2017, 05:20:43 AM »


Can you use Google Trends or other ways to see how often people search for specific items. Would it be reasonable to suspect that items with frequent searches would be things people would buy?

THIS

This is the information that I needed to cross paths with.     Im not dead set on  automotive manufacturing, but I think learning to use some kind of search trend analytic software would enable me to gather the information needed at the exponential rate required.    Im not dead set on tier 2-3 automotive.    Id love to find ANY highly searched item that is profitable and start making it.

On this note, are you familiar with said software / use?     Could you suggest a place / book I could use to educate myself to gain maximum usefulness from search analytic tools already available?

Google just has everything free on their website. They have a lot of videos on how to use the tools. You may have to click around a bit at first to find everything, but itís all there.

+1

Here are some examples:
https://www.shopify.com/retail/how-to-use-google-trends-to-start-and-run-a-retail-business
https://www.hallaminternet.com/google-trends-introduction-business/

I can see you going one of two ways here:
1) look for the trends that are hot and where you could create a product with high sales and great margins
OR
2) focus on an area that you are already interested in (let's say you already hang out on Harley forums) - and then focus your searches there. The benefit of this is that you likely really know the product and the personality of that community. You could sell as a fellow enthusiast and it might be more fun because it is a product/community that you already enjoy. I personally find it a little intimidating to cast the net so wide as too look at almost any product in any space to manufacture .... I wouldn't even know what search terms to begin with ...

(Random aside: This reminds me when I wanted to replace a rack within my dishwasher. The dishwasher worked fine, but the rack had lost it's rubber coating and was beginning to show rust. I could find a simple rack for less than $150. Wacky stuff.

Good luck!

MightyAl

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #22 on: December 01, 2017, 05:56:30 AM »
I just went to Fabtech in Chicago a few weeks ago and spent much of the 2 days I was there trying to figure out new and exciting ways to manufacture things.  Lots of cool stuff and I was attracted to the 3d wire and tubing benders.  Very cool and lots of applications for manufacturing parts. 

I always wonder if it would be worth trying to get in touch with some of the big manufacturers and find out where their pain lies as a poster above with the seals implied.  Then take the list and do some research and see where the largest opportunity lies whether it be with scaling up or simply investing in increasing the quality of the part. 

I currently live in an areas where it is tough to find fab shops to do custom work.  There is one guy I used quite a bit but he is one guy and a skilled helper.  He doesn't want to scale up because finding skilled people is too big of a pain in the ass.  He tried it once and hated having to manage people that didn't live up to his quality standards or skill.  This is why it would pay to stay small.  Yeah you might be sweeping the floors some days but it is easier to control.

Kroaler

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #23 on: December 01, 2017, 08:19:19 AM »
  This is why it would pay to stay small.  Yeah you might be sweeping the floors some days but it is easier to control.

I think the big money is in being able to scale and control quality. There are VERY effective tools and standards that when applied take care of this.      However most people are unaware of them and they don't come intuitively.


Also to the poster who provided links to some analytics resources - Thank you!      It may take a while, but maybe that will give wings to my manufacturing dreams.   


I wish* there was a way to find the pain points of large manufacturers.   But I think that information stays internal.

trollwithamustache

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #24 on: December 01, 2017, 08:30:48 AM »
how do you actually sell to automakers?   Every industry has its quirks and odd requirements; can you meet those?
 

Kroaler

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #25 on: December 01, 2017, 11:43:37 AM »
There are different ISO standards required for different levels of the process.

Automotive has its own set of standards to ensure excellence.

Fishindude

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #26 on: December 13, 2017, 09:01:09 AM »
how do you actually sell to automakers?   Every industry has its quirks and odd requirements; can you meet those?

Several of my friends in manufacturing tell me that the auto makers are the worst customers out there.  Very demanding, beat you up on price, nit pick quality to death, etc.   Very tough to make money off of them, so many manufacturers have consciously elected to avoid the automotive business.

Shale Butter

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Re: Is it viable to start a small scale manufacturing operation?
« Reply #27 on: December 26, 2017, 03:40:54 AM »
Kroaler, you send pretty excited about your dream and also unsure where to begin. I'd suggest you separate your research into 3 areas, production, business administration and social capital. You will need all 3 to be successful. It sounds like you are familiar with production methods and have ideas for improving on those. That's good. Running a business is an entirely different skillset. Think of this as the business of business. Social capital is relationships; vendors, customers, banks, staff, contractors, etc. For large scale, low margin manufacturing you will need all 3 in spades. If you want to stick to the automotive industry I'd recommend you use your technical chops to find a niche. Even better if you can build a brand.

I know there are plenty of entrepreneurs making parts for all sorts of vehicles that improve on the originals. With customers acquisition costs so low this could be a very lucrative market. Lisle does this with tools. Dorman does it with parts. My company owns Sprinter vans. There are custom turbo resonators, ECM tunes, fan removal tools, brass overflow line junctions, etc. Something to think about.

For a small manufacturer I'd really recommend trying to deal as directly with your customer as possible and building a name with those customers. With the interest in artisanal goods I think you could find some very interesting markets to serve.

I remembered this article when I read your post: https://www.nytimes.com/2017/09/03/us/quillen-small-business-michigan.html .