In the 54 years it has been in business, New England CNC has overcome many challenges. Nowadays, despite the rise of reshoring, the movement of manufacturing offshore, along with its effect on business and pricing. is still one of the major issues with which the small machine shop has to contend.
The co-owners of the machining company in Hamden, Conn., Lawrence Carrignan, president, and Ron Krutz, vice president, say offshoring began affecting their business in 2001, when many customers outsourced production to China to take advantage of low manufacturing costs. The movement affected many machining businesses besides New England CNC.
Last week, ThomasNet News looked at how a small shop such as New England CNC has been able to weather business storms since its start in 1960. It is only since the turn of the millennium that the company has had to cope with offshoring and downward price pressures.
Krutz recalled that when business began going to China, New England CNC was looking at expansion. Instead, the company had to cancel its plans to add machinery and plant size, as well as reduce its machine operators from 23 to 10. And it had to start looking aggressively for new business.
Offshoring "crushed manufacturing in Connecticut," Krutz said. New England CNC was producing 22 million parts for one company in Pennsylvania, and even modified a machine to raise throughput to 1 part per second, when the customer moved the production offshore. Many companies underwent similar experiences and then went out of business. In nearby Waterbury, once known as "Brass City" for its foundries, four plants that produced brass, steel, and copper rod closed.
In an ironic twist, some of the new business New England CNC picked up consisted of repairing low-quality parts made in China. But even this didn't change the mindset of companies that went offshore.
"Thirty percent of the stuff they made [in China] was no good," Krutz said, but despite that, "companies took the 70 percent that was good, threw out the rest, and still made big profits."
The business partners don't want special treatment when it comes to foreign competition; they just seek a level playing field. "Then our skills and performance will determine our business success," Carrignan said.
Neither man has seen the trend toward reshoring, the much-ballyhooed relocation of manufacturing from low-cost countries to the United States. "This is happening in spurts," Carrignan remarked, "usually when there's a time factor involved in delivery. Otherwise, no."
Top photo credit: Salvatore Vuono at FreeDigitalPhotos.net
Offshoring, along with the Great Recession in 2008 and its aftermath, also affected pricing. Companies want the lowest prices possible from vendors now and are prepared to "beat them up" over product cost, the co-owners maintain.
"There was a time when a customer would give you a job, say they needed products in two weeks, and tell you to just bill them," Carrignan recalled. "Now, being competitive is cutthroat, especially when it comes to price. In many cases, customers know they have you over a barrel. You are competing with other companies that do the same work, and customers expect you to cut prices almost to nothing."
This is not how it was in 1988, when Carrignan and Krutz bought the company from their boss at the time. Back then, "work poured in," Carrignan noted. "Running the business was fun - hard work, but fun."
Adding to the challenges of doing business today is the difficulty of finding qualified people when the company wants to hire an operator. Carrignan and Krutz agree that there is a skills gap in manufacturing, a problem that is compounded by their small size and relative resources.
With the economy still slumping, Carrignan and Krutz expected it would be easy to line up job applicants for a recent opening. Instead, young people who applied had no skills, and the company couldn't afford to train them for a year much less two. Older workers who lost manufacturing jobs had the experience but wanted the type of compensation (in salary and benefits) they had received from previous - and larger - employers.
The two men are doing everything they can to develop business and keep customers. They occasionally use reps to canvass for machining jobs, rely on word-of-mouth, and make calls themselves.
But even that has changed. There was a time when they could phone a prospect and speak directly to the right person. Now everything is voicemail, e-mail, and other degrees of separation from decision-makers.
They realize, meanwhile, they are not grooming anyone in their families to take over the company.
"I wouldn't want my kids in the business," Carrignan admitted. "Twenty years ago, it was a gold mine. There was [a lot] of work, and you could charge the going rate like everybody else. Now, all that has changed."
Carrignan and Krutz, nevertheless, remain enthusiastic about the work and their shop. The challenge of the work and pride of business ownership beckon both Carrignan and Krutz to maintain their focus and keep their efforts firmly directed toward the future.
"We plan to do anything we can to make this company better," Carrignan said. And, perhaps, in the process, they can start prepping the way for a centennial anniversary.
READ PART 1 OF NEW ENGLAND CNC'S STORY HERE
Paul Carrignan (left) and Ron Krutz have been running New England CNC for 26 of its 54 years in business. Credit: Pat Toensmeier