It is an opportune time for SME manufacturers to upgrade their operations by investing in new software and manufacturing innovations. The reasons include pressures on OEMs to build more resilient supply chains and to regionalize production and the falling cost and increasing ease of use of new technologies. This article describes six steps that SMEs can take to adopt these technologies.
The post-pandemic push to make supply chains more regional and resilient is creating growth opportunities for many of the domestic small and medium-sized enterprises (SMEs) that large original equipment manufacturers (OEMs) rely on. These SMEs survived the waves of offshoring in the 2000s, often because they made lower-volume or costly-to-ship parts for automotive, aerospace, or industrial equipment sectors. But it was challenging for them to invest in new equipment or facilities when there wasn’t much growth. Now some of the growth is coming back, and there is an opportunity for these SMEs to adopt new software and manufacturing innovations, and rethink how to improve the efficiency and productivity of their operations.
Over the last three years we have talked to numerous SMEs, trade associations, and U.S. government-supported manufacturing extension partnerships (MEPs) across the midwestern United States. The MEPs were set up by the National Institute of Standards to help SME manufacturers and are in all 50 states and Puerto Rico. One of us (Ali Shakouri) has also worked extensively with SMEs across the state of Indiana, which at 28.6% has the highest share of gross state product devoted to manufacturing in the country. We have found that these firms are often quite conservative vis-à-vis the adoption of new technologies for several reasons:
- They are reluctant to change existing processes that work and that have served them well for years.
- They have a limited appetite to invest in the face of growing demand or constraints on their production capacity because of continuing cost pressures from their customers and foreign competition.
- Or they find digital technologies daunting because of the need to learn new skills or develop new ways of working.
This often means they have not kept up with technologies that are altering the competitive landscape. During the offshoring boom in the 2000s, many manufacturers moved much of their high-volume production overseas, and investments in the newest tools and technologies went there as well. This was evident, for example, in the metal castings industry, as new factories, equipped with the latest tools, were set up in low-cost countries. In the investment casting sector, new Chinese and Indian factories got the latest production tools, while U.S. factories were left with older ones. It’s easy to invest in the latest technologies when you are growing; when you are not, it’s easier to stay with what you have.
That’s the wrong way to look at it now — these are actually moments to invest. Here are six ways to get started.
1. Leverage new simulation software tools.
Computer-aided design tools have been with us for decades, and they revolutionized all branches of engineering — the design and analysis of everything from mechanical parts and chemical processes to electronic products and semiconductors. What has been striking, though, has been both the increasing sophistication of these tools as well as the investments software developers have made in making them easier to use and more affordable. Yet adoption among SMEs has been slow.
Simulation modeling tools can be a shortcut to improving operations. They allow firms to model and understand their process flows better, which can reveal bottlenecks and constraints, leading to new ways to operate. These tools have come a long way over last decade in terms of their ease of use, and many are cloud-based, have simple drag-and-drop interfaces, and provide building blocks that you can incorporate to make models easy to build. More sophisticated packages offer the opportunity to build a digital twin — a lifelike digital model of your operations that includes not only machines and material handling systems but even the people working there.
A great example of a company where simulation tools have made a difference is Pelco Products, an Edmond, Oklahoma-based manufacturer of traffic and utility products such as streetlights, poles, and pedestrian push buttons. As it grew over the years, its production processes had sprawled and slowed production. To improve them, Steve Parduhn, son of the founder, brought in the Oklahoma Manufacturing Alliance (OMA), the state’s MEP. Parduhn got help in building a digital simulation model of parts of the production processes using software from Sketchup and Simio. This allowed Pelco to test new scenarios virtually before it started moving equipment around. It was even able to simulate new technologies and equipment before bringing them on site. The increased capacity in the factory led to $1 million in cost savings and $5 million in new sales.
2. Put data and new analysis technologies to work.
SME manufacturers often collect a lot of data from their operations, but most haven’t leveraged new artificial intelligence (AI), including machine learning (ML) tools, to gain fresh insights from the data. This can be intimidating to firms with no prior experience, so the key is to start simple and learn.
Working with Purdue University’s AI-Commons team, TMF Center, a company in Williamsport, Indiana, installed inexpensive power-consumption sensors to determine usage patterns across its complex parts-machining operations. This helped it start classifying activities and develop real-time dashboards of shop performance. Kirby Risk Manufacturing in Lafayette, Indiana, is experimenting with sound sensors and ML to detect quality issues during operations, which would allow it to identify and fix problems much more quickly.
Similarly, Primient, a food ingredient company based in Schaumburg, Illinois, was able to work with Purdue to develop a simple ML imaging application for its Lafayette corn-sweetener factory that helped its operators evaluate its production process for the size distribution of sugar crystals, a characteristic that determines how quickly the crystals dissolve in foods and therefore how sweet they taste. The new application provided measurement precision to a process that previous called for operator judgment — one that was prone to human error and wide variability. The ML application laid the groundwork for it to start using its extensive production data to improve yields and operational efficiency as well.
3. Learn how to implement simple automation.
While many SMEs employ some degree of automation, it is often in the form of pre-set packages such as automated tool exchange systems or automated workpiece loaders purchased as part of expensive add-ons to machine tools. There are often many “dirty, dull, and dangerous” jobs that are still done manually, and automating them would not only improve product quality by reducing variability but also improve the jobs of workers by freeing them to do more productive and desirable work elsewhere in the process. But these are intimidating projects for SMEs who don’t have prior experience. Again, the answer is to start with small projects and learn and get help from organizations such as the MEPs.
Kinnee Tilly, a vice president at the Oklahoma Manufacturing Alliance, described how it helped Rise Manufacturing, a company in Broken Arrow, Oklahoma, that provides manufacturing and assembly services to aerospace, defense, and oil and gas customers. Rise had a surge in demand for its products during the pandemic, which led to bottlenecks in its manufacturing process. “They had a manual polishing process, and human variability was creeping in,” Tilly explained. “We had people who had never touched anything like a robot in their lives, who were very wary of it because they felt they were going to be replaced.” OMA lent it a collaborative robot (“cobot”), a lightweight robotic arm that is simple to program and can safely share a space with workers, to help Rise get the process up and running. The workers saw the benefit. “Once we were done, not only did we not replace the people, we upskilled them [and] got them into a better job,” Tilly said.
4. Get up to date on advances in production tools and methods.
It is important for SMEs to get up to date on the tools and processes that are being used in their industry to speed up production cycles and improve quality. For example, digital casting technology, which encompasses simulation, printed prototypes, printed tooling, and laser metrology, can help lower costs and enable SME metal casters to compete more effectively with offshore production.
All operations, whether dedicated to production or services, will also benefit from better application of methods taught by Toyota. Almost every MEP teaches lean methods, pull systems, visual workplace concepts, and kaizen methods for process improvement. Yet many SMEs would benefit from a deeper understanding of the underlying concepts and a more conscientious application of these techniques. Toyota’s production system is not static and continues to improve, and SMEs would benefit from doing the same.
5. Leverage assistance programs from universities and outside resources.
The MEP programs are designed to help SMEs improve their capabilities and get started on the adoption of new technologies. Purdue, which manages Indiana’s MEP and the state’s Technical Assistance Program, offers a wide range of training and services in adopting new technologies. It even connects SMEs to university faculty and students for up to 40 hours of assistance per year in a wide range of fields, including advanced process control, materials, failure analysis, sensors use and applications, and engineering analysis.
States can also provide direct assistance. Since 2020, the Indiana Economic Development Corporation (IEDC), working with nonprofit Conexus Indiana, has been providing matching manufacturing readiness grants to companies seeking to modernize their operations or integrating smart technologies and processes in order to increase capacity and speed and improve quality. SMEs can apply for up to $200,000, which they must match on a dollar-for-dollar basis. Photon Automation, a 67-employee SME in Hancock County, Indiana, leveraged a $183,000 grant to employ a new laser welding technology for the manufacture of battery products.
6. Leverage peer relationships.
Farm cooperatives played a big role in the adoption of agricultural technologies in the early and mid-20th century through knowledge sharing. SME manufacturers can similarly benefit from informal networking and sharing of experiences.
One example of such cooperation: The Purdue AI-Commons team has been working with a cohort of SMEs to share best practices to implement edge analytics devices and benefit from privacy-preserving data sharing.
An Opportune Time
This is an opportune time for SME manufacturers to invest in their own transformation. The pressures to build more resilient supply chains and to regionalize production afford domestic manufacturers a rare growth opportunity during which they can update their operations and operating strategies. They should not miss the chance.