With access to the right resources, starting a manufacturing business in the U.S. is not only possible. It’s also a profitable venture with promise of growth.
In the recent past, many manufacturing startups in the U.S. contracted with international manufacturing operations.
However, outsourcing manufacturing is no longer the obvious choice for aspiring entrepreneurs.
Increasing overseas labor costs, declining product quality, shipping delays, and new import tariffs are making outsourced manufacturing less appealing and profitable. As a result, more business owners are transitioning their manufacturing operations to U.S. soil.
Though starting a manufacturing business may seem intimidating, advances in technology and infrastructure have made the business model much more attainable (and profitable). Keep reading to learn more about how to build your manufacturing business.
Best Practices for Starting a Manufacturing Business
Whether you’re producing skincare, household products, or automotive vehicles, manufacturers follow a common roadmap of best practices.
- Conduct Market Research
Before getting started, thoroughly research your product and the market. Successful manufacturing is based on understanding your market’s needs and behaviors. Take some time to learn about your product niche and the manufacturing industry in general.
First, decide on which products you’re interested in manufacturing. What materials will you need? How many SKUs will you offer?
Next, identify your target customer and any gaps in the market. In order to make a profit, you’ll need to identify a product that your target customers currently want or one that solves a problem.
If it’s a product currently in the market, you’ll either need to make it better or sell it cheaper than competitors to stay competitive. Understanding your target audience will guide your ideation and decision-making.
After you identify your products and validate market gaps, it’s important to think through your business model. What distribution channels will you utilize? Will you sell direct to consumers or contract with third-party retailers?
- Learn about Manufacturing
Understanding your product niche and target customers isn’t enough. It’s also imperative to fully understand the manufacturing business.
You’ll need to keep up with changing manufacturing technologies, customer needs, supply chain operations, and regulatory requirements. The manufacturing industry is vast, so you’re education will likely be broad.
Many entrepreneurs decide to go the traditional route and acquire a college or university degree. Suitable degrees include industrial engineering, product design, mechanical engineering, computer science, or other engineering and technology areas.
Any formal education in engineering, computer science, or technology will give you a decent foundation for further learning. However, business or marketing degrees can be similarly valuable.
Although formal education is helpful, it’s by no means required. Many great manufacturing empires were built by inventors with no formal degrees. For example, Hewlett and Packard started their electronics company from their garage, and Patagonia originally sewed clothing in a makeshift workshop in a chicken coop.
Ultimately, hands-on experience is the best teacher. Look for programs or certifications that offer access to maker spaces where you can begin prototyping and refining your ideas. Additionally, there are many manufacturing apprenticeships and internships available to aspiring manufacturing entrepreneurs.
After you acquire the basic foundational knowledge, you might consider applying to business incubators and accelerators that provide access to mentors in your field.
- Pitch Investors
Any business has some startup costs, and manufacturing is no exception. For most products and business models you’ll need some cash on hand.
Many manufacturing startups pitch investors, trading a stake in their company for money. You might also solicit friends and family, depending on how much money you need.
It’s important to thoroughly understand the business and your niche before seeking investors. Investors will want to understand the nuances of your financial estimates and budgeting.
- Find a Location
While it may come as an afterthought, the site of your new manufacturing facility is an important decision. When selecting a location it’s important to consider:
- Proximity to target customers
- Access to supply chain infrastructure
- Regulatory and trade agreements
- Operating expenses such as real estate, employee wages and benefits, and utilities
- Tax rates
Additionally, it’s pertinent to consider soft costs, such as:
- Cost of living and quality of life
- Local government transparency
- Industry clusters
- Plan and create an efficient line
While OPEX and CAPEX expenses are important considerations, a large portion of profits are derived from efficiency. In order to remain competitive in a highly saturated market, modern manufacturing plants need to drive productivity, quality, and efficiency.
There are many different manufacturing approaches. The most popular include Lean Manufacturing, Six Signa, and just-in-time methods. Many manufacturing approaches are derived from Japanese car manufacturers.
Before filling your plant with machinery, it’s important to take the time to plan your lineup. As part of the planning process, you’ll also be able to identify opportunities for automation.
While many may infer that industrial automation is exclusive to enterprise businesses, it can be a game-changer for small and large businesses alike.
Automation benefits include:
- Better quality
- More reliability and consistency
- Higher precision and accuracy
- Savings through reduced inventory
- Lower unit cost
- Higher productivity
For smaller businesses, automation is exceptionally effective at:
- Improving production speed: Automation can reduce errors and improve efficiencies. Software can support scheduling, inventory management, and monitor workflows. Automated production equipment can often complete tasks faster than people and reduce risk of injury.
- Reducing downtime: Downtime is very costly in manufacturing. When production is halted, the company is still liable for the same operating costs, without any revenues. Therefore, decreasing downtime is a top priority. Utilizing automated devices to monitor materials and inventory and equipment run-time data which can be used to improve workflows can reduce downtime.
- Minimize lead time to customers: Real-time data provided by automated monitoring helps manufacturers understand lead times and give more accurate estimates. Machine learning algorithms can also use the data produced to create prediction models that drive better decision-making.
Starting a manufacturing business is more attainable than it seems. The basic steps to start a manufacturing company are foundational to business. However, it’s important to learn about the manufacturing industry and create efficiencies where possible to remain competitive.
Buy and sell with HGR
HGR has over 20 years of experience serving local and international customers looking to buy industrial tools, robots, parts, and equipment. Our 500,000 square foot facility in Euclid, Ohio carries thousands of items with truckloads of equipment coming in every day.
Plus, we purchase used surplus from warehouses across the United States so our vendors can clear out their facilities while recouping part of their initial investment.
Visit HGRinc.com to view the latest additions to our marketplace, save big on used industrial parts and equipment, and sell your surplus to us.