Robert Nichols, an experienced businessman and former mayor of Jacksonville, Texas had retired. One afternoon he took a grandchild to the emergency room for a minor injury. While they were waiting for the doctor to return, one of the nurses knocked over a glass collection jar. The jar struck the floor, shattering into a hundred pieces and spraying the surrounding area with blood and body fluids. The nurse was angry. “That happens all the time,” she complained as she scraped up the mess.
“Could they be made out of plastic?” Nichols asked.
“I don't know,” the nurse replied.
Nichols went home and did some research. Sure enough, there was no reason surgical collection jars could not be made from plastic. It seems no one had ever thought of it before.
Nichols found an empty building in Jacksonville, suitable for what he had in mind, bought plastic extrusion equipment and a set of glass collection jars. He hired a design company to create molds for plastic versions of the jars that could be used in place of the glass ones. He raised capitol, rented the building, hired a crew, a bookkeeper and a salesman and began manufacturing plastic collection jars in his hometown. A few years later Nichols sold the operation for millions to Johnson & Johnson who took the product nationwide. Nichols, himself, later served on the Texas Highway Commission and ran for and won a seat in the Texas senate. Entrepreneurs don’t like to retire.
Manufacturing is supposed to be dead in America, a casualty of the information age. According to the 2006 US Census, however, more than 12.9 million Americans work in manufacturing making more than 757 billion dollars in annual wages. Many of these jobs are created by the newest member of the manufacturing industry—the agile manufacturer. These small, lean entrepreneurs can jump on an opportunity in days instead of taking months or years to tool up to make a new product. They set up flexible operations capable of delivering small, medium and even large runs of goods quickly and economically. Agile manufacturers like Bob Nichols challenge the notion that America is out of the manufacturing business.
Starting a manufacturing business is as much about keeping your eyes open as it is about raising capital and buying the equipment to get started. Manufacturers get their start from an idea. Someone needs something and someone else figures out how to make and sell it. As with any business, it all starts with an idea and a plan.
Develop a Business Plan
Developing a detailed business plan is essential, especially if you don't have the cash to fund the startup and need to convince a banker to fund you. Most people have an idea of what they want to make before starting the planning process. Here are the steps you will need to take in order to develop a thorough, well-developed business plan:
- Research your market to determine whether there is an adequate market to support your product.
- Determine the cost of manufacture, the amount of equipment you'll need, whether you should buy or lease the equipment and find a location for your plant. Make sure your plant is near a pool of workers from which to hire. It should also be close to transportation and shipping resources as well as phone, Internet, power, fuel and whatever else you will need to produce your product.
- Produce prototypes of your product and test market the prototype to determine the potential market. Use focus groups, forums, surveys and testing to work out any problems with the product. You don't want surprises if these products are going to be the first off the line of your new manufacturing business.
- Develop a network of vendors and providers and develop a cost of manufacturing estimate. This will help you determine the price you will have to charge for your product and what kind of you will need to support your manufacturing and admin costs, power and communications, advertising and sales..
- Develop a three-year project budget that gives potential investors or funders a clear picture of your company's financial position, potential sales, cash flow and available collateral.
- Document your personal experience or your company's ability to make money.
- Get help from a business startup consultant, the Small Business Administration or the Service Core of Retired Executives (SCORE) if you've never done a business plan before. It needs to look good and make a convincing argument for the feasibility of your project.
Once you've put together your business plan and gathered the money that you and investors are contributing to the project up front, it's time to visit the bank or begin trolling for venture capital. The quality of your business plan will help convince funders that you are a worthwhile risk.
Setup the Shop
Lease or buy your manufacturing facility. Work with engineers, designers or architects to help you design efficient systems, create materials and product flow lanes and develop manufacturing and safety protocols. Take bids and hire contractors or maintenance staff to set up machines, assembly lines, equipment and materials storage according to your design. Set up a maintenance shop so you are ready to react quickly the first time anything breaks down. Consider designing using agile manufacturing principles particularly if you are starting out small. Agile manufacturing offers these advantages:
- Short times-to-market
- Modular design/less down time
- Fast product design and plant retooling
- Quicker modular assembly
- Fast order processing
- Ability to customize individual orders quickly
- Ability to make products to order even on relatively small runs
- Reduced reliance on high volume/high quantities of salespeople
- Ability to quickly develop a higher mix of products you can make and sell
- Configurable manufacturing components
- Faster delivery from suppliers
- Shorter lead and cycle times
- Flexibility and responsiveness of processes, machines and equipment
- Quick changeovers between product runs
- Smaller space requirements
- Collocation of machines and people
- Utilization of high tech computer driven equipment
- Employees trained in multiple skills
- Empowerment of front-line employees to initiate adaptive responses to problems
- Shorter payment cycles due to quicker product development, manufacture and delivery
- Ability to deliver just-in-time shipments to customers.
Order Manufacturing Supplies
Order your materials for initial production runs so they are delivered at the same time your equipment and machinery comes on line for initial testing. This is the time to test your materials suppliers ability to deliver on time and in adequate quantities.
Hire and Train Workers
Develop a hiring plan so that as systems come on line, you have employees trained and ready to take their place on the assembly line. Have a clear plan for ramping up operations and don't forget to put support staff into place. Train workers before beginning machinery and assembly line testing. Hire salespeople early in the process and get them out on the streets collecting orders as you ramp up the plant. Offer customers special deals and discounts for orders that inaugurate new products.
Crank up the Machines
Once you have completed manufacturing systems testing, successfully, it's time to fire up the plant in earnest. This is the time to pay attention to the folk on the manufacturing floor. When so many people are new and the equipment is being run-in, accidents are more likely to happen. A proactive supervisory team can help reduce problems and increase safety. Once the plant is producing, follow your business plan closely. Adapt where necessary. Resist the urge to over-reach if things go well at first. Wait till your team is comfortable with your systems and your management style before springing big, high-pressure projects on them.
Photo courtesy of qousqous via Flickr