A Big Helping Hand for the Little Guy
Applied Solar Energy Corp. is a thriving company that had an annoying problem: Its delicate solar cells, which had come to dominate the rather esoteric market for space satellite power systems, broke too often during production.
That, and other manufacturing glitches, contributed to higher costs than executives at the small City of Industry company would have liked, especially because its primary rival is aerospace giant Hughes Corp.
“Hughes is a great competitor and they keep us on our toes,” said Applied Solar President David Van Buren. “I think we have a technological edge, but they have a scale edge. If we aren’t able to be as good as they are, or better, then we won’t be able to compete.”
So Applied Solar turned to California Manufacturing Technology Center, a low-profile nonprofit consulting group that specializes in helping small- and mid-size manufacturers become more competitive.
“Although we are rapidly growing, sometimes we don’t have the full range of staff and capabilities that a massive company would have,” said Van Buren, whose company sells about $40 million worth of products a year. “They were able to come in here with a wide range of knowledge in semiconductor-type processes.”
CMTC’s staff recommended a series of changes that reduced breakage and shortened manufacturing time, saving an estimated $3 million a year. Since its 1994 encounter with Hawthorne-based CMTC, Applied Solar has seen a sharp reduction in waste. Employment has increased 25% to 250 employees.
“Our mission is to help manufacturers compete better,” CMTC President David Braunstein said. “It’s important because manufacturing is tied to our standard of living.”
CMTC, which employs nearly 50 people in Los Angeles and Orange counties, does a complete audit of each manufacturer and comes up with ways to improve the manufacturing process, reduce waste, improve quality, reduce pollution or lay out a facility better. The center frequently is hired to help a company shop for equipment or improve marketing.
Braunstein sees Applied Solar as his organization’s greatest success story: The annual savings realized from CMTC’s recommendations equal the nonprofit’s entire operating budget, which comes largely from federal and state sources.
But CMTC has plenty of other happy customers. If fact, a study of the nonprofit’s first 51 clients, conducted for a federal government audit last summer, found an average 18% increase in sales per manufacturer, Braunstein said. In addition, the clients reduced costs through an average 11% inventory reduction, $60,000 in labor savings and $146,000 in scrap and rework savings per manufacturer. The clients created an average of seven jobs each.
CMTC has worked with more that 250 companies in its three years of operation. Braunstein estimates that 4,900 jobs have been added to the California economy (using an average of seven new manufacturing hires by CMTC’s clients plus a multiplier effect of three other jobs for every manufacturing job added to the economy). Those jobs generate $4.9 million in state income tax revenue and $12.3 million in federal income tax revenue, Braunstein estimates.
“The return on investment is very, very high,” Braunstein said.
CMTC is one of 40 manufacturing extension centers nationwide that are partly funded by the National Institute of Standards and Technology, an agency of the Commerce Department. About a third of its budget comes from various state sources, and 15% to 20% is generated by fees charged the center’s clients. A second California center for the San Francisco area is being organized and is scheduled to begin operations in the spring.
Congress had slated the national program for elimination as “corporate welfare” in the proposed fiscal budget, but ended up increasing the program’s funding after NIST officials demonstrated that the program was paying for itself, said Chris Holben, deputy secretary for economic development at California’s Trade and Commerce Agency.
CMTC has “really had an impact on the bottom line of a number of companies,” said Holben, who is also a CMTC board member. “They have proven their worth in the three years they have been in existence.”
Another example: The CMTC helped Celesco Transducer Products of Canoga Park buy new order entry terminals so that sales people could directly enter orders for the company’s semi-custom measuring instruments. Previously, a clerk would enter the hand-written orders into the company computer; data-entry errors resulted in the return of many products. The $1,500 expenditure brought $105,576 in the first year.
Helping small- and medium-size manufacturers is crucial to the state’s economic health, Braunstein said.
“When you look at what drives our standard of living, you have to look at productivity growth,” he said, adding that Southern California is home to more manufacturers than an state except New York.
Small-size manufacturers provide more than 95% of all new jobs in manufacturing, but these companies are about 70% as productive as large manufacturers, federal studies show, because they lack the engineering and other staff to solve many of their problems, Braunstein said.
“They have an idea for a new product, but they don’t have the business expertise or they don’t have the manufacturing expertise,” he said. “We become the engineering staff for them.”
The program’s federal funding is due to run out in three years, and its California funding has been termed “fragile” by federal officials because it is channeled through several agencies. Braunstein wants California to allocate the funds as a separate program, as most other states do.
In the meantime, the CMTC is attempting to improve its visibility, which generates more clients and fee income, and improves the center’s chances of survival after federal funding ends.
“We’re a great resource,” Braunstein said. “We’re always being told that we’re the best kept secret in California, and that annoys the hell out of me.”