Small Business Labs

America's Factory Boom

Recent Census data shows that construction spending by US manufacturers more than doubled over the past year. 

The chart below (click to enlarge) is from Axios' A manufacturing investment supercycle is starting. It shows "spending on manufacturing construction — new factories — is tracking at a $189 billion annual rate, triple the average rate in the 2010s ($63 billion)."

According to Axios, the main driver of this boom is incentives provided by recent federal legislation - the Inflation Reduction Act, the Infrastructure Law, and the CHIPS and Science Act. Key quote:

".. there are billions flooding into large, expensive megaprojects to manufacture batteries, solar cells, semiconductors and much more."

Another factor is the reshoring of manufacturing. This is a longer-term trend accelerated by the pandemic and trade issues with China.  

America's factory boom will not just benefit the owners of manufacturing megaprojects. Small manufacturers will also benefit from the incentives - as suppliers to the new megaproject manufacturing facilities.

And once the factories are built, manufacturing output and  employment will increase, which is good for the overall economy.

Is Reshoring of Manufacturing Finally Happening?

The Wall Street Journal's U.S. Companies on Pace to Bring Home Record Number of Overseas Jobs covers data from the Reshoring Institute showing that American manufacturing firms are shifting jobs back to the U.S.

Key quote:

"American companies are on pace to reshore - or return to the U.S. - nearly 350,000 jobs this year, according to a report expected Friday from the Reshoring Initiative. That would be the highest number on record since the group began tracking the data in 2010."

Reshoring is a trend that has long been forecast to happen. The New York Times 2010 article Is Manufacturing Coming Back to the U.S. reads much like the recent Wall Street Journal article.  

And while the four words most wrong in forecasting are "this time it's different," this time it seems different.

The pandemic exposed the weaknesses and lack of resiliency in global supply chains.

And the war in Ukraine, coupled with geopolitical strife between the U.S. and China, has countries worldwide looking to become more self-reliant - or at least not reliant on countries not viewed as close friends.

This may lead to a world with two major trading blocks. Key quote from Foreign Affairs' The End of Globalization?:

"But it now seems likely that the world economy really will split into blocs—one oriented around China and one around the United States, with the European Union mostly but not wholly in the latter camp—each attempting to insulate itself from and then diminish the influence of the other."

So it does appear that reshoring - and the related trend of nearshoring - may finally be happening.  

Amara's Law and 3-D Printing

Amara's Law was coined by the noted futurist Roy Amara. It states:

"We tend to overestimate the effect of a technology in the short run and underestimate the effect in the long run."

We immediately thought of Amara's Law after reading the New York Times article 3-D Printing Grows Beyond Its Novelty Roots, which suggests that "3-D printing could be poised to play a major role in manufacturing."

The reason we thought of Amara's Law is the New York Times 2010 article 3D printing is spurring a manufacturing revolution said pretty much the same thing.

So did the 2015 Harvard Business Review article The 3-D Printing Revolution. Key quote:

"Here's what we can confidently expect: Within the next five years, we will have fully automated, high-speed, large-quantity additive manufacturing systems that are economical even for standardized parts."

3-D printing was invented over 40 years ago.  

And according to many futurists and analysts, 3-D printing has been five years away from fundamentally changing manufacturing ever since.

But it hasn't because 3-D printing is an example of how long new technologies can take to mature and reach mainstream use.

It also nicely illustrates a truism of technology forecasting – new technologies are easy to spot, but getting the timing right around when a new technology will become mainstream is extremely hard.

This, coupled with the incentives futurists, analysts and companies have to overstate the near-term importance of new technologies, explains the first part of Amara's Law.  

However, we agree that after 40 years of development, 3-D printing is becoming mainstream.  

The recent NYT article covers the 3-D printing firm Vulcan Forms. 

As the picture below shows, Vulcan Forms 3-D printers are huge.

And they use a wide variety of materials to deliver high-quality, high-volume printed parts at competitive prices.  

Technology forecasting is hard. Yogi Berra was right when he said “It's tough to make predictions, especially about the future.”

And we've made our share of forecasting mistakes – especially around timing.  

So, when you read about exciting new technologies that are about to change the world, keep Amara's Law in mind.  

See McKinsey's recent article The mainstreaming of additive manufacturing and our Small Manufacturing section for more on 3-D printing

3D Printed Houses Cementing Their Place in the Housing Industry

3D-printed houses offer the potential to reduce the cost and increase the efficiency of the home building process.

A leader in this field, ICONN, recently announced a commitment to build the largest community of 3D-printed homes to date using ICON’s robotic 3D printer (see the short video below).

 

The current plan is to build 100 houses in Austin, Texas, and the project will break ground in 2022.  Lennar, a large homebuilder, is partnering with ICONN on this project.

ICONN recently raised $270 million to fund their growth, and according to Tech Crunch's article on the fund raise, they have plans beyond single-family homes.  Key quote:

ICON’s list of future plans include the delivery of social, disaster relief and more mainstream housing, Ballard said, in addition to developing construction systems to create infrastructure and habitats on the moon, and eventually Mars, with NASA.

ICONN isn't the only 3D house printing company.  

As Axios's 3D-printed houses poised to go mainstream points out, multiple companies are pursuing this opportunity.

Which is good news, because housing is an industry in need of innovation.  

3D Printing 2.0

Desktop Metal, a leader in 3D printing with printers than can build metal parts, is going public. 

Supporters of the company claim this is the beginning of a much more successful era for 3D printing, which they're calling 3D printing 2.0.

As the Crunchbase article 3D Printing Investment Going Vertical As Big Exit Looms points out, 3D printing has been around a long time and, so far, has not lived up to its hype.  Key quote:

Transformative technologies often get massively overhyped at the early stage. In the case of 3D printing, the breakout moment was supposed to be 2012, when a new generation of desktop 3D machines hit shelves. Soon, they were to be nearly as commonplace as smartphones.

Needless to say, that futuristic vision didn’t pan out.

But as we pointed out in our 2017 article 3D Printing Moving Past Prototyping to Large Batch Manufacturing, even in 2017 3D printing had become an important vertical market manufacturing technology. 

The reasons supporter of 3D printing claim it's turned the corner and will quickly expand are fairly straight forward.  They say the technology has reached the point where it can effectively compete with traditional large scale manufacturing systems.  And systems like Desktop Metal's that allow the printing of metal parts greatly expands the market.

3D printing is actively used in a lot of industries to manufacture things.  Again, from the Crunchbase article:

From jet engine parts to teeth straighteners to lab-grown chicken nuggets, startups and established manufacturers alike rely on the technology to create new products and add efficiency and customization to production of existing ones.

And everyone is forecasting that 3D printing will continue to grow rapidly.

The phrase "this time it's different" is well known as the phrase most likely to be wrong when used in forecasting.  

But sometimes this time really is different.  And after many false starts, this appears to be true for 3D printing.

3D Printer Homebuilder Raises $35 Million

Iconn, a developer of advanced construction technologies, recently raised $35 million. They're best known for their giant 3D printer that builds houses and other structures.

So far Iconn has mostly worked with non-profits on affordable housing in Mexico and other locations.  But they've also built the first permitted 3D printed house in the U.S. (pictured below). 

They have a big vision, which is disrupting the way houses and buildings are built.  Key quote from the VC investing in Iconn:

“I believe we will see an evolution of the entire home-buying value chain, especially when integrated with other technologies like digital transactions and augmented reality,” Constance Freedman, founder and managing partner at Moderne Ventures, said in a statement. “Consumers will be able to order, build, design and purchase a brand-new home in a matter of days — something that is truly innovative and truly disruptive.”

The video below shows Iconn's 3D printer in action and being used by a group of U.S. Marines to quickly build a storage facility. 

We've long covered the ups and downs of the 3D printer industry.  And while there are plenty of examples of 3D printing having an impact, the hype around 3D printers has generally exceeded the reality.

But developments like the Iconn printer show the reality is catching up.

Video: 7 Tips to Start Small Scale Manufacturing

7 Tips to Start Small Scale Manufacturing - Business Ideas for Product Makers is a fun and interesting video designed to help makers and other small manufacturers build their business.

The video, below, is from the YouTube maker video channel from the highly energetic Evan and Katelyn. Their series of videos is targeted at amateur and hobby makers, amateurs who want to be professional makers and micro and small manufacturing businesses.

As we pointed out in our article Are Makers the Future of Small Manufacturing?, small and solopreneur manufacturing firms are a rapidly growing small business segment. This video does a nice job of explaining why.

See our Small Manufacturing section for more on this topic.

 

The Rise of Small "Speed Factories"

According to the Kellogg Insights article How “Speed Factories” Help Companies Adapt to Capricious Consumers, speed factories are:

... a local-market facility designed to quickly pump out products with shorter life cycles and less predictable demand, like apparel sported by Kendall Jenner or LeBron James that suddenly becomes a must-have item.

Speed factories tend to be small, highly flexible and able to quickly adjust to changing, local market demand or new customer requirements. 

Adidas, for example, is using speed factories to quickly get customized sneakers to market.

There are several drivers of the speed factory trend:

1. Overseas labor costs are rising, making local production more cost competitive
2. Transportation and logistics costs are also rising.
3. Markets are moving more quickly than in the past, making time to market an increasing important competitive metric.
4. Local markets are increasingly different and need customized products.

None of these trends are new. One of the first articles we wrote on Small Business Labs back in 2007 covered this trend. 

And while the Kellogg article focuses on consumer manufacturing, but the trends also hold true for B2B manufacturing. 

But what is new are the risks of trade wars, tariff increases and the growing number of countries pursuing mercantile trade policies (including, of course, the U.S.).

These make cross border supply chains riskier and more costly. Which makes locating manufacturing facilities closer to final demand even more attractive.

We expect small manufacturing firms to continue to be beneficiaries of these trends.

Biofabrication - Manufacturing With Mushrooms

Biofabrication is the use of biomaterials such as cells, proteins and organisms as building blocks in a manufacturing process.

Probably the best known example of biofabrication is the use of 3D printers to create tissue used in treatments for damaged joints and organs. This is still in the experimental stage.

But biofabrication is a much broader field with current, commercial applications, especially in the area of manufacturing. 

For example, there's a whole industry creating packaging and other products using mushrooms - more specifically mycelium, which is the root structure of a mushroom. 

The packaging is "grown" by culturing fungi on a medium of husk, hulls and woody biomass of agriculture waste, such as rice, soy and cotton. 

The packaging material produced from this process is light, strong, durable and is naturally biodegradable. It's being used today by a variety of companies, including Ikea and Dell.

And it's not limited to packaging. Mushroom biofabrication can be used to make all kinds of products, with an example being the table shown below.

Ecovate, one of the leaders in mushroom biofab manufacturing, even has a store where G.I.Yers (grow it yourself) can purchase the materials needed to grow their own products as well as a range of already grown products.

Another interesting product being biofabricated is leather.

This is done using colonies of yeast bacteria which grow collagen that is then assembled into a fibrous material. It's then tanned and processed in a similar manner to regular leather.

Modern Meadow makes a biofabed leather they call Zoa. It looks and feels like leather, but can be custom ­designed to be stiff or stretchy, thick or thin, textured or glossy.

Thanks to advances in genetic engineering and biotech, biofabrication has moved from science fiction to practical, real world applications over the past decade. Expect to see more advances and more use of biofabed materials in the near future.

Startup Raises $20 Million to Build an Electronics Manufacturing Plant in San Francisco

San Francisco is not a cheap place to locate a business, especially a manufacturing business. It's one of the world's most expensive real estate markets and has some of the highest labor costs in the U.S. 

But despite these issues, electronic circuit board manufacturer Tempo has raised $20 million to fund the building of a 42,000 square foot plant in San Francisco.

The reason this makes sense is Tempo's target market. 

Tempo is a small batch manufacturer focused on getting quick prototypes to tech firms looking to rapidly iterate on a design. 

Their valued added is making it easier and quicker for hardware companies to prototype circuit boards and evaluate them before they begin high volume production. 

Tempo claims companies can make prototypes in several days rather than weeks, by cutting out the back-and-forth between customers and manufacturers.

Their location in SF also means shorter transit turn around times compared to more distant locations like China. This is especially true for Bay Area firms. 

We first noticed this trend in 2007. Key quote from our article back then on this topic:

Related to this, I've been in several corporate meetings lately where the topic was discussing moving offshore manufacturing back to the US.  Driving these discussions are the high cost of air freight relative manufacturing costs.  The products involved are electronics that are often changed and updated.  This makes using sea shipping too slow. 

These companies also need regular and ongoing contact with the manufacturing facility to for testing, QA, etc, which is much easier if the manufacturing facility is local.   This combination makes manufacturing locally attractive even though the manufacturing costs are higher than having the work done overseas. 

"Speed kills" is a widely used sports term. But it's also become an important part of business strategy.

And the need for speed iscreating new opportunities for small manufacturing companies.