Manufacturing Mavericks

We launched Manufacturing Mavericks in Late 2023 to tell the stories of people who aren’t afraid to shake things up and stand out from the crowd. We’ve had three fabulous guests so far with many more in the pipeline for 2024:
To close the year, here is a highlight reel of their best insights and advice for growing a business. Enjoy!

Highlights:
  • Just pick up the phone and make friends with your competitors because there’s so much work to go around. (01:03)
  • You have to be willing to get rid of some customers. (03:19)
  • Without your employees, you can’t make money. (04:16)
  • The value is in shortening the cycle or reducing the wasted motion. (04:59)
  • Put the deal right on the shop floor. (05:18)
  • Invest in technologies that will make an impact. (07:47)
  • Technology that talks to each other is incredibly helpful. (11:14)
  • Invest in digital technologies early on. (12:18)
  • You can’t scale on tribal knowledge. (13:31)
  • Understand your ROI. (14:53)
  • Identify your costs and rightsize your pricing. (17:34)
  • The supervisor is NOT free. (20:17)
  • What you need to do to meet your profit margin. (20:44)

Links Referenced:

Creators & Guests

Host
Greg McHale
Greg founded Datanomix, a company delivering game-changing production insights and intelligence to manufacturers of discrete components. Datanomix was founded on the premise that the 4th industrial revolution would require turnkey products that integrate seamlessly with how manufacturers work today—not clunky workflows that depend on human input or complex data extraction. He brings enterprise data skills to a market ripe for innovation. Greg has held engineering leadership positions at several venture-backed companies and is a graduate of Worcester Polytechnic Institute.
Guest
Dave Capkovitz
Principal / Owner, EBITDA Growth Systems
Guest
Hernan Ricaurte
Owner, Ricaurte Precision
Guest
Jack Russell
Owner, Rolar Products

What is Manufacturing Mavericks?

Manufacturing Mavericks aren’t afraid to shake things up and stand out from the crowd. They are embracing the best tools and technology to showcase world-class American manufacturing and grow their business.

Join Greg McHale, founder of Datanomix, as he sits down with these exceptional people to hear their stories and explore the important lessons they learned along the way. Listeners can gain valuable insights they can use in their own facilities to improve their bottom line.

Greg: Welcome to Manufacturing Mavericks, a podcast where we showcase and celebrate exceptional people from across precision manufacturing who are boldly embracing new ways to improve their processes, grow their bottom lines, and ensure American manufacturing will thrive for generations to come.

Greg: We launched Manufacturing Mavericks in late 2023 to tell the stories of leaders in manufacturing who aren’t afraid to shake things up and stand out from the crowd. We’ve had three fabulous guests so far with many more in the pipeline for 2024 that I’m very excited to be speaking with. To close out the year, here’s a highlight reel of their best insights and advice around growing a business from our favorite Manufacturing Mavericks. Hope you enjoy.

Greg: So, you realized that you needed to expand out the CNC side of the business and you literally just took a grassroots approach to that: pick up the phone?

Jack: Yep. Pick up the phone. We still don’t have a sales force or a salesperson. I’ve got some guys hunting for work that I’ll pay them, you know, if they land something, but virtually all of the new orders are by word of mouth or connections through even competitors. I mean, I’m a firm believer in you can’t have too many friends in the business, so my biggest competitors, I know well and they know us.

They’ve been through our plant; I’ve been through theirs, and they say, “Hey, we can’t handle this. It’s a really good customer, we trust you guys, it’s not our wheelhouse. Why don’t you call them?” So, and you know, we do the same thing to them. So, you know, some work, you know, for those people starting a shop or whatever out there, sometimes call your competitors.

Greg: Right.

Jack: There may be things they don’t want that they’re doing, and if you’re just starting out, and you go, “I’d love to have that work,” you might be surprised how many times people will go, “Well, I’ve got a job for you.” And it’s your competitor. So, that’s a good hint, you know, to people to another way to find work.

Greg: Right. And I mean, obviously in that case, you’ve got similar types of machines, if you can both handle the work, so on paper, you’d say, “Oh, you know, they’re a Swiss house, and I’ve got Swiss, and you know, they’re not going to want to give any work to me.” But it’s a gigantic market, right? That’s the point.

Jack: Right.

Greg: There’s so much work to go around.

Jack: There is. And you know, I visited a shop last weekend and the shop, in its heyday, had done really well. And they never upgraded equipment, they’ve never changed their customers, they’ve been doing business with the same customers for years and years, and a lot of those products have aged out, and that company will just disappear. And their comments were, “Boy, our work is just down. How’s your work? Ours are just down. We’re, like, a third of what we were, and slowing down even more.”

Like, I don’t wait for that to happen, you know? You have to always be out there looking for where that next job is or evaluating what customer is good and what customers are just overall—you know, there’s a P&S factor, right—Pain and Suffering factor—with different customers. So, you have to be willing to get rid of some, too, you know, or at least have a hard conversation to say, “I can’t keep doing it this way.” You know? In the day when I didn’t have any work, it was valuable, but now it’s keeping me from doing other more valuable things. So, that’s a decision everybody’s got to make on their own, too.

Greg: So, you start out those three employees, a few 100,000 in sales. How many employees today, Jack? What’s the size of the shop?

Jack: We’re right about 40 employees. The original building we were in was about 16, 17,000 square feet, one loading dock, you know, offices up front, kind of typical shop. And then along the way, I bought two other companies. My wife tells me you’re not doing another one, every time I say, “Hey, I’m going down to visit a company,” she goes, “You’re not doing another one.” Like, “Okay.” I guess if I want to stay married, I have to keep doing that. But.

Greg: But it’s worth asking every time, right?

Jack: Yeah, that’s right. You know, we all as owners want our employees to help us make more money. We all say that. Our employees—a lot of people talk about, our employees are the ones that make us the money and without them, we can’t make any money.

And I’m a firm believer in this is, if you expect your employees to help you make more money in your business, if they don’t understand how your business makes money, why are you asking them to help you? Because the only thing they’re going to think when you say, “Hey, we got to do more. We got to make more money,” the only thing they think is that they need to just push that green button faster. And then they’re going to go, “I can’t go any faster. It’s as fast as it can go.”

And the value is not in making cycle; it’s in shortening the cycle or reducing the wasted motion. That’s where the value is.

Greg: Definitely.

Jack: You know, it’s taking that touch time out. So, we spend a lot of time trying to educate our people on how this company makes money. So, we put our POs out on our manufacturing floor and our employees know how much we charge.

Greg: You literally put what you’re making on every part out on the shop floor?

Jack: Yep. We put the cost, we put the deal right on the floor so people can look. When’s the PO due, and they know the price.

Greg: Wow. That’s not something you see every day [laugh].

Jack: No. Most owners go, “Well, I don’t want anybody to know what I’m making,” right? Or, “How much I’m charging for that part.” And I’m okay to let them know how much I’m charging for that part because what I’m charging is not what I keep. And that’s the piece they have to understand, right?

They realize that cycle time is money, you know, and shortening that cycle time and reducing the scrap and what is scrap costing, what is shipping costing, what is that material cost per foot, per pound, the more they understand that, the more they understand what control they have. And if they can improve their portion of the business, the business will improve. And without that, they just have a job. They just push a button and make a number. They’re not part of something.

Greg: They’re detached from the mission.

Jack: Yep. They’re not part of it; they work at it. And there’s a difference.

Greg: There’s a massive difference. Man that is—you know, this has been a fascinating discussion so far from, you know, career wasn’t anything close to a straight line, lot of zigzags, but you picked up unique skills along the way, which ultimately put you in the position to be broad enough to become an executive, to become a business owner. You know, you never lost sight of your care and core values for people and empathy for your people and wanting them to feel a connection to what they’re doing. Some parenting advice, you know? I’m going to use the, “State your case,” with my kids.

Jack: Yeah [laugh].

Greg: That’s fantastic. I mean, this is a full-service show now. We go from manufacturing to parenting.

Jack: There you go. Yep.

Greg: And then, you know, putting the POs on the floor, man, that’s an interesting one. That might be one that I have to ask every guest, you know, from here on out because I could see that one being an interesting, you know, hot button, and what are the perspectives on that? But I think you said it perfectly: if you want your people to help the company make more money, don’t they need to know how the company makes money?

Jack: Yeah. It’s that simple.

Greg: You mentioned investments a few times as well, digital technologies, some machining technologies. I know you’ve got those nice Matsuuras in the back, you know, palletized, lots of automation. How did you make some of the, you know, investment decisions that you did, and what are some of the biggest impact investments that you’ve seen in the last year or two?

Hernan: On the mill side, we went from, you know, three-axis machines—three plus two, so four-axis machines—all the way to the big jump forward in a 32 pallet in a 320 tool station big Matsuura automated system. And we did that, the machine came in, and we got it running one month before the Covid shutdown. So, our plan was that we had, you know, a handful of parts that we can run, but the plan really was to fill up that machine as best we could by pursuing opportunities that we’re trying to line up. But Covid came. We were able to offer very aggressive expedites because of that machine and ramping up of higher volume because of those machines. That, in a way, helped us significantly and helped us differentiate from everyone else we’re competing with here locally.

Getting that worked out so well that we bought another one. And [laugh] so, you know, wherever we can automate, we will automate. You know, and similar on the lathe side, as well. You know, some, you know, 12-foot bar feet, you know, twin-turret machines and things like that. On the other side, you know, with buying the big, pretty machines, and you know, it makes the shop look very sexy, but you need training, you need the discipline that goes along with it, you need process procedures.

And then how do you keep all of that information and scheduling and data tracking and everything organized? Well, that’s where the digital technologies and digital technology partners come into play. So, for us, you know, our digital ERP system, ProShop, has been, you know, a significant help to us, the backbone of what we do, keeping everything as digital as possible, you know, helping to drive efficiency and transparency in what we’re doing and who’s doing what, so we can hold people accountable. So, you know, with that, with Datanomix, which is fantastic for us because again, you can’t have eyes and ears everywhere, and if you’re able to educate and train your team to appreciate these technologies, they start finding ways of using the technologies, and also turning to you and saying, “Look. Look what I did. Look how successful we were this time as opposed to the last time we ran these parts.”

So, things like that is just, you gain a momentum, a positive momentum when you bring everyone together, and you try to get these guys involved and shift them from being, you know, complacent and committed to being compelled and being a part of the successes with all of these technologies.

Greg: That is, you know, fantastic. Like, I mean, how about—that’s another great way of celebrating the wins is, like, “Look at how we closed it out in ProShop. Look at what, you know, the Datanomix monitoring data says: we did 10%, 20% better this time.” And, you know, if you’re tying that revenue, and investments and things, the opportunity that creates inside the company for you to do more, right, to continue to invest in technology.

Hernan: Yeah. And what’s awesome is that you guys are talking to each other, you know? When the technology talks to each other, it is just so incredibly helpful and seamless. So, you know, we’ve got, when we do our programming, we make sure that we have a little bit of additional text in there to make sure that ProShop is recognizing the Datanomix data so that it is automated and seamless for us so that we have the data coming in from Datanomix into ProShop and everything is captured. We’re able to avoid unnecessary steps and allow our employees to focus on what they’re doing as opposed to, you know, taking extra steps and trying to make things work or make things link together.

Greg: If you think about going back in time to when you first jumped into the shop, coming at it really without that manufacturing background, what do you know today that you wish you could tell that version of yourself?

Hernan: There’s different stages, I think, Greg, with regard to how I approach things. And it’s probably very different from, you know, other individuals with more technical experience than me, but I think initially, I probably would have invested in the digital technologies a little bit earlier in order to capture more data and organize data from the beginning, a little bit—earlier because that would have allowed us to get a better understanding of what our costs were, you know, are we making money in parts or not, you know, everything from material outside processing, things like that, you know, capturing that data. Because the data is all over the place, right? I mean, in all of our businesses, it’s just, there’s so much data, but how do you collect it efficiently and make good use of it? So, I think that’s definitely one area that I look back on and just think, man, you know, lost opportunities because we weren’t organizing the data well, so we weren’t able to plan as effectively as we should have.

Greg: What a great plug for all those investments that you’ve made that you’re clearly seeing, you know, pay-off at this point in the journey. And definitely, you know, approaching it as you did, maybe without having that, you know, innate, you know, shop floor feel that maybe comes from that old school methodology, that’s actually an advantage, right, because you have to bear it out, and you have to prove it.

Hernan: That’s true. You know, the tribal knowledge stuff has always been super scary to me, you know? It is so dangerous, man, you know? And still, you know, y—guys here [laugh], we, again, it’s not—we call them, sort of, old man stories—

Greg: [laugh].

Hernan: —where you’ve got some guys that are very successful, extremely smart, but you know, they just talk about, “Oh, I can do this,” or, “I used to do this, and you know, this is how difficult this was,” well, you know, if you’re the only one that can do it, then of what benefit is it? Because you can’t scale with that, you know? And it’s not all about scaling, but for us, you know, scaling is super important because, again, we’re trying to grow and be more efficient and take advantage of some economies of scale, but without sharing the knowledge and making it repeatable and automating it, then you know, you’re not going to be going too much further down the road.

Greg: Knowing the margins and the target industries, I mean, what a strategic advantage for any company to be able to benchmark themselves against. In addition to that information, do you guys have insights into ROI of investments that these companies are making, whether it’s automation, machine types, digital technology, software, et cetera? Have you started to compile some insights on that domain?

Dave: Yes, we have. My business partner built an ROI report to dive in and understand when you should buy, what you should buy, and what that yield will be, and we have benchmarks of how long that ROI should be. We pivot off of a lot of financial metrics, by that I mean, debt-to-equity, and we really—our debt-to-assets, and we understand how much burden is the business carrying, and is it ready for more burden, and what’s the trajectory, and what’s in the sales funnel, and what’s happening financially, and what is that—how has that trended? And then we use that backbone of data to generate what would the ROI of this investment be, be it buying another shop and adding on a specific technology, buying a specific technology and software, buying a specific technology in automation or a machine tool. And how do you analyze that?

So, it’s really neat being someone that’s been there 150 million times—I’m exaggerating—but talking to somebody who’s never done an ROI analysis and saying, “Okay. Why are you buying this? How long is it going to take to pay for it?” “Well, it’ll pay for itself somewhat—” No, no, no, no, no. Don’t look at it like I made a million dollars, I’m buying a million dollar machine. Well, that’s revenue. You can’t go to the grocery store with revenue; you got to go to the grocery store with profit.

So, how much profit is that a million dollars? Okay, the profit’s 200,000. Okay. So, if you buy 200,000 machinists, 12-month ROI on that. It’s not a million dollar machine. That’s a five-year ROI on that. You got to understand that you’re buying things with profit. You’re not buying things with revenue. I mean, some people, “Man, I want $10 million in revenue.” It’s like, “Yeah, you make $1 million on $10 million. I’d much rather make $1 million on $5 million in revenue.” You know? Life’s a lot better that way.

Greg: What a superpower to have that data set, that insight from so many P&Ls and, of course, what the companies that are trying to grow are doing and what works and what doesn’t work. Man, if I owned a shop, just spending time on that piece of the model with you would clarify so much for the business about what really do we need to be doing to increase the profits. And then, with those profits, how should we be deploying them to then get to that next—that next level of growth and profit that we’re looking for? Also love the ‘you can’t take revenue to the grocery store, but you can take profit to a grocery store.’ That is a born of experience insight right there.

Dave: People don’t fully understand their cost. It’s probably the biggest issue we see, even with very substantial businesses. We helped a $140 million company out. They got Mike and us. I’d help them for about 10 months. We created about $35 million of enterprise value in that 10 months for that company.

But it was about understanding their costs and rightsizing their pricing to make sure they’re at least getting the targeted profit margins, right? And then jobs that they’re losing a decent amount of money, they’re cutting those jobs. It’s something that you have to know what your cost is to even understand your profit, to even have a plan to what you’re going to do with your profit. So, it’s probably the biggest gap. And then the other is just understanding the data that’s happening in the shop and understanding how to read that and run a day-to-day operation.

Greg: I obviously love the perpetual use of the word, “Data, data, data, data,” throughout the course of going through that. I think one of the biggest things you see is that data gap. You described the entire quote-to-cash cycle, basically, of data here, data there, data everywhere. And I think one of the things for the manufacturing industry in particular is, what are some of the easiest and best ways to make use of data at different parts of that journey? When you come into shops, what do you see as baseline, state-of-the-art for where people are at, and what do you see as some of the quickest wins to either start getting the data or do a little more with data to get them to that next level?

Dave: Well, we always start with financials because we got to look at the scoreboard. We pull up two or three years of financials, and we look at it in a month-by-month basis to understand the cycles of the business, the sales cycles of the business, the profitability of the business, and then we dive into what market are you in? Are you doing automotive work, agriculture work, are you doing space DOD work, aerospace work, medical work? What kind of work are you doing? Because we work with enough shops around the US that we understand what markets yield what kind of profit margins.

So, we see the market they’re in, we see the financials, and then we walk the shop, and we see—we look for efficiencies. We look for, are you automating anything? Are you paperless? Are you using an ERP system and are you leveraging the ERP system? How are you measuring what’s happening on your machines? What is your yield? What’s your quality look like?

Is your scrap 0.1 percent or is it 12.8 percent, right, or 25 percent? What is your earned hours? What’s your earned hour metric? Are you paying your team 100 hours per se and you’re only billing out 30 hours a week? What’s happening to those 70 hours of indirect time? And we really balance those, and then we boil that down into a costing metric—and you’ll see this coming to our event, right—and we’ll say, “Okay. With this data that you know, what does life cost you on an hour-by-hour basis?” Okay, great. Now, we know our cost.

Now, we can start. And, “Okay, what profit are you quoting?” “Well, I’m quoting 30 percent.” “No. You’re actually quoting two and a half percent because you were quoting all your [unintelligible 00:20:18] costs.” I mean, and just an easy one: we had this, “What’s in it for me,” conference a few months ago, and we said, “Do you ever think about billing for your supervisor? Because your supervisor’s not running the machine all the time, if at all. The supervisor’s keeping all your direct labor moving. Do you have them in your quote? Is that part of your cost structure?”

And then, most people are like, “Oh, wow. You mean the supervisor’s not free?” [laugh]. It’s like, “No, no.” Once you understand your cost, your fully burdened cost, you can take that and say, “What’s the margin we need to make for our goals?” And if the margin’s 25, 30 percent net profit—I’m talking profit margin—then you have to figure out what market bears that.

Because automotive doesn’t bear 25, 30 percent net profit unless you have extreme automation and extreme volume. That’s when you can make money in automotive. Now automotive, short shops, stuff like that’s very difficult to make that kind of profit margin, so you need to be in a very specialized, regulated industry, right? And then we play that game, and we say, “Okay. This is what you need to do to get to this kind of profit margin.”

Greg: Thank you for listening to Manufacturing Mavericks. If you’d like to learn more, listen to past episodes, or nominate a future Maverick to be on our show, visit mfgmavericks.com, and don’t forget to subscribe to and rate this podcast on iTunes, Spotify, Google Play, or your favorite podcast app.