Most US manufacturers, finishers, and assorted job shops are being kept in the trough of the smile curve (see my previous blog post). These companies are being pushed down into the trough while new products, services, and processes are being created both to the right and left of this curve and taking all the value with them. As new techniques are spawned to improve performance, cost or quality, these techniques are nibbling away at the definition of manufacturing and leaving traditional manufacturers and job shoppers holding the dregs.
Case in point: Fractory is an Estonian company that bills itself as an on-demand metal fabrication platform, but most of what they do is not fabrication. Instead, they concentrated on digitizing the sales process. They do marketing, they digitize their product offerings, they develop technology platforms to spur trade and minimize friction, they enable transactions, but they do not manufacture. They are classified as a technology company and therefore are at a different part of the smiling curve: a higher value part.
Their valuation is private but last year they raised $9M from VCs to fuel their growth.
Their co-founder proudly states that he knows very little about manufacturing and comes from a VC background. Not that I am knocking this background, but let’s call it by what it is: digital exploitation.
What does this say to the real metal fabricators out there? What does this say to the people who know milling and CNC machining and metal bending and breaking and all that? It says to them, “stay in the trough and toil, we’ve got this.” It says, “you are destined for a life of drudgery and we’ll take the cream off the top.”
And what does that do to your margins? It erodes them. As Fractory farms out more and more jobs, they are learning more and more about their suppliers’ pricing and leadtimes. They are learning valuable insights into CAD files, and they are coding these insights into their pricing engine so that they can improve their own margins at the cost of yours.
What can we learn from this? Don’t sell to Fractory? Don’t sell online?
That would be a mistake. It would be a mistake to turn your back on innovation – that is what staying in the trough means. If you continue to put your head down and pay attention only to your Amada turret punch press and ignore these new encroachments you will be missing out. I suggest that instead of ignoring Fractory you should emulate them.
Emulate them by digitizing everything you can. All good manufacturers, finishers, welders, metal fab shop guys and others are all proud and a bit snooty about sticking to their knitting and concentrating on their primary operation: making things. But adding digital elements around all your business processes allows you to participate in and enjoy the digital revolution. So now you can be a part of this revolution and it can improve your business as well.
How can you digitize and what does that even mean? This post has 17 concrete ideas to get yourself out of the low value trough of the smiling curve.
Taking the smiling curve one step at a time:
R&D
1. Use rapid prototyping and simulation to increase product and process design innovation and decrease time to market.
2. Digitize the design process – use CAD software to create and manage digital versions of your products and processes – making collaboration with others easier.
3. Add intelligence to your products: add sensors, cameras, anything that causes the product to interact with its environment (you or your customer) and increase your product or process’s value.
Manufacture
4. Employ robotics to automate what can be automated to reduce build cost.
5. Use IIOT to gain visibility into your WIP.
6. Investigate outsourcing some parts of your process, take advantage of HeyScottie and increase your margins!
7. Review your shop floor system, build or buy automatic interfaces with all other systems to increase communication.
8. Use the cloud to seamlessly work with manufacturing partners to offer additional services or options to your customers (HeyScottie can help!).
Marketing
9. Run digital marketing campaigns to expand you reach beyond your current borders.
10. Spend as much time on your website as you do with your best distributor/customer to impress all visitors.
Sales and Distribution
11. Use multiple online digital sales channels (including HeyScottie!) to grow your sales.
12. Publish digital catalogs to easily communicate with your distributors and customers.
13. Regularly post on LinkedIn or YouTube – both great for B2B.
14. Offer digital payments to smooth customer interactions.
Support
15. Implement a product tracking system to ensure end to end customer support and compliance.
16. Offer digital subscriptions to increase repeat sales.
17. Use a CRM to nurture customer relationships and to increase retention and customer engagement.
If you take a page out of Fractory’s book, you will be able to crawl out of the trough of the smiling curve and improve your margins, your operations and your future.