Chapter 6: Advances in Manufacturing and the Supply Chain inside the Maker City

The U.S. is Starting to “Think Different” about its Manufacturing Capabilities.

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Maker City Book

35 min readJun 9, 2016

Manufacturing is experiencing a kind of renaissance inside our cities, driven by changes in attitudes towards Making and changes in technology that enable small firms to produce high quality, high-value products and take advantage of emerging local and increasingly distributed supply chains.

The implications of this renaissance can and will be profound. Our competitiveness is on the rise as higher-value, more on-demand manufacturing becomes more common. Well-paying jobs are being created, often with new and more technical skills as a requirement. The converse is also true: older, lower-skilled jobs are going away due to the rise of new forms of automation.

Along the way, industries such as fashion, furniture manufacturing, textile production and even electronics are being reclaimed and reimagined in the Maker City.

Local economies in particular stand to gain from new forms of goods that are not mass-produced but instead made locally, in relatively small batches, often with advanced materials and customized to better fit what people truly want and need.

The economics for manufacturing in the U.S. has shifted to the point where manufacturing, particularly high-value manufacturing, can be economically viable and happen “onshore” as opposed to “offshore.” This is a marked departure from the 1990s when the United States effectively gave up most of its manufacturing prowess and process know-how to firms in China, the former Yugoslavia, and elsewhere.

In fact, urban manufacturing jobs in this country grew approximately ten percent each year between 2011–2015, after many years of decline.(Source: Brookings Institute, 2016.)

Assembly Lines aren’t Coming Back Any Time Soon

What is coming back is jobs in manufacturing that take advantage of advances in both hardware and software to add value. Smaller-scale manufacturing companies are also on the rise. The reasons for this are based on four distinct trends, according to the Deloitte Center for the Edge writing about the Future of Manufacturing in 2015:

Consumer tastes are changing. Luxury goods. Niche products. Limited Editions. Products created as platforms, that can be customized by the consumer or business buyer. All of these reflect the changing dynamics in tastes, changes that favor domestic production.
Nature of products. Products have stronger software, technology, and R&D inputs, which makes for more frequent development and update cycles. Hardware products are taking on characteristics we associate with web services: continuous change rather than defined long-term product cycles. This stresses overseas manufacturing and favors local supply chains. Rapid technology changes also mean we replace products more frequently. The plain old telephone (POTS) is the poster child for this; Americans used to purchase (or rent) a phone for ten years or longer. Now, we update our mobile phones much more often, with some people paying extra for the right to update their phones with each new model which can mean updating one to two times per year.
Economics of production. Both the software and hardware used to support the manufacturing process have evolved to the point that they have dramatically changed the economics of production.
Economics of the value chain. It used to be that much of the value in manufacturing came from the assembly process itself. Today, much of the value comes from anything but assembly, from advanced materials to novel production processes. Increasingly, manufacturers are delegating the nitty gritty of assembly to a network of suppliers, controlled by cloud-based software and manufactured using a network of loosely coupled equipment and operators available on demand. (Think of this like Uber, but for manufacturing. Why own a factory if you can manufacture your product on demand using other people’s software and hardware?)

The Importance of Clustering around our Strengths
These factors are leading to a resurgence in manufacturing of all types, shapes, and sizes in U.S. cities. It is still the case that manufacturing capabilities inside U.S. cities are spread out, without the density one sees in a city like Shenzhen, China.

To build lasting competitive advantages, we believe it is important to pay attention to density, to build manufacturing resources not just in a city but also in the surrounding region. Regional clustering is important to enable fast cycle time so that Makers can create a design, see it produced, and iterate to perfect that design for its intended use and for manufacturability.

This idea, that clustering leads to competitive advantage, is not a new one. It’s been around since at least 2009 based on the pioneering work by Professor Michael Porter at the Harvard Business School.

In their book, The Smartest Places on Earth: Why Rustbelts are the Emerging Hotspots of Global Innovation, authors van Agtmael and Bakker (2016) argue that the era of cheap is over and that we now compete in the era of smart.

Likewise, Deloitte believes that the kind of advanced manufacturing the U.S. needs to develop in order to build lasting competitiveness will come from relying on predictive analytics, the internet of things (sensors), and advanced materials. In other words, the products we manufacture here will have relatively complex technology inputs.

Keep this in mind as we talk through the examples below. At the end of the chapter, we’ll talk about the future of advanced manufacturing inside the Maker City.

Changes in Consumer Tastes

Today, when consumers show a preference for products that are Made in America, they do so for quality reasons, but also because products made locally can meet the specific tastes and needs of U.S. customers in ways never before possible.

As a result, Makers are stepping in to invent niche products, posting them on crowdsourcing sites to judge demand in advance, and then building the products in micro factories established inside the Maker City.

The Rise of Micro Factories: Nomiku Wifi Sous Vide Cooking Device

A micro factory is just what it sounds like: a complete factory executed in a relatively small footprint and run by only a handful of people thanks to the fact that most of the machines are computer controlled.

Lisa and Abe Fetterman were determined to try making the Wifi Nomiku, the world’s first wifi-connected sous vide device in the United States, so they moved back to San Francisco. (Sous vide is a method of cooking vacuum-sealed food in a controlled low-temperature water bath. This type of cooking is taking off as a way to get to a flavorful result without having to be physically present in the kitchen.)

“In China, we set up our own line, and engineered our line. We had to build our own things anyway, ” said Lisa. “The first 100 Nomikus were touched by Abe.” They lived right next to the factory. “It was the only thing we did, ” said Lisa. “We lived in basically dead farmland.”

She found it exasperating.”You have to be there for every single step and watch. You trust but then you have to verify everything, step by step, all the way. We thought if we have to do this anyway and it takes so much time, why can’t we do it in the United States?”

While Lisa continued working on marketing and sales, Abe began researching how to set up their own production line. Trained as an astrophysicist, Abe learned to solder at a Makerspace, practiced by building kits, and eventually felt confident enough in his soldering skills to set up an assembly line with workers who would do the soldering for him.

While he was in China at the factory, Abe saw opportunities to do things better, more efficiently. “In the back of my head, I was always questioning ‘why am I here if I can’t make things better?’” He had read articles about how the production system in China is so great because you can go visit the factories. “They said everything was within like two hours, ” he told us.

“But then, you realize, that’s a nice theory. The truth is it’s not like anything is less than two hours away. There’s so much traffic, it’s hard to get around.

“Once we needed a specific washer, and were told that nobody makes that washer within two hours of the factory. So we took a boat to Hong Kong, found a shop that had the washer, bought the washer, took the boat back, and then brought it to the factory, because there was no more efficient way to get that washer. That’s a ridiculous thing to have to do in order to get your product made. If I was in the U.S., I could go on the internet and order it, and have the part delivered overnight.

“One thing I took away from China is that people there are really good at making things that they have already made, but you have to be the expert in making your product [if it’s new and different]. Nobody else is going to be the expert in that. So what our goal has been is to rely on China to make things like our pump heaters. They make millions of them. But nobody makes Nomiku. By doing it on our own, we have more opportunity to take advantage of new processes and new ideas.”

Abe also wanted the engineers and sales teams to be in the same space so they could work together closely. He had seen how MakerBot had its engineering in China and everybody else back in Brooklyn and the two teams had trouble syncing up. Instead, each group blamed the other one for delays. “You need to have your engineers in the factory or else you have this disconnect where you don’t know what’s going on and you’re not controlling it and someone else is making your product. You shouldn’t do that if you’re a startup. Your entire company depends on that product.”

The most expensive part in the Nomiku is the printed circuit board — its electronic brain. They ended up having that made in China. The plastic casing and other parts required tooling for injection molding. They ordered a tool that would be made in Taiwan and then shipped to their San Francisco office.

At the end of 2015, Nomiku started with five people on their assembly line and that number might grow to ten. Abe said that it was hard finding people in San Francisco to work in production. “People aren’t really used to doing this in San Francisco. It just seems that turnover is high or you have to pay a lot.”

It wasn’t easy but Lisa and Abe now have a small factory ready to make a sous vide cooker in the U.S.

Abe Fetterman teaching himself to solder

“When we started to manufacture in the U.S. we said, why not?” said Lisa. “We’re already so crazy for doing all this stuff, it just adds another layer of crazy. Let’s see what happens.” (Source: Dale Dougherty, Free to Make, Fall 2016)

Lisa and Abe used the crowdfunding site Kickstarter in 2014 to raise over $750K from 5,538 backers; another entrant in the sous vide category launched just before they did on Kickstarter and raised over $1.8M from 10,508 backers.

How Crowdfunding Works
Crowdfunding is a win for both Makers and consumers. Makers get immediate feedback on whether their product ideas have merit. Consumers get early access to unique products that are typically not available in stores.

Maker gets idea for product.
Maker creates a prototype and figures out whether the prototype can be manufactured, perhaps using a system like Plethora (discussed below).
Maker creates a video explaining the product, its benefits, and why the product can be manufactured
Video gets posted on a crowdsourcing site. Indiegogo and Kickstarter are two examples. With crowdfunding, the community decides what products get made, by voting to back a particular product. Many of the products promoted on these sites are little more than prototypes.
Product reaches its funding goal and gets funded. With funding comes the obligation to move from prototype into manufacturing mode.
Product gets manufactured, possibly using a system like Fictiv (discussed below) to source component parts, and ships to consumers in a matter of months. Note that some more complex products can take years and/or may never make it to consumers.

Changes in the Nature of Products

Products are becoming platforms, co-produced with the consumer, taking advantage of crowdsourcing in a different way, one that encourages Makers to create products in response to a crowdsourced challenge.

GE FirstBuild, based in Louisville, Kentucky, operates as a joint venture between General Electric (#8 on the Fortune 500 list) and Local Motors, a company you’ve probably never heard of.

According to Venkat Venkatakrishnan, Director of FirstBuild, GE typically spent $40M-$50M to create a new consumer appliance which took about four years. So lengthy was this cycle time that by the time the new appliance came to market it had only a 50 percent chance of success.

To cut spending and reduce cycle time, FirstBuild relies on an open innovation model which encourages Makers and others to submit their designs in response to a specific challenge.

For example, one challenge asked Makers to submit their designs for a cold-brewed coffee machine. Designs are submitted to FirstBuild, which reviews them; acceptable designs are posted to a crowdsourcing site called Indiegogo where consumers can pledge to fund the project and get access to the “first build” of the product.

“Design the aesthetic and interaction of a device which cold brews coffee in minutes rather than hours.”

Source: Example of a FirstBuild design challenge

Dr. Anthony Townsend is a Senior Research Scientist at New York University’s Rudin Center for Transportation Policy and Management. He talks about a virtuous circle as a kind of “well-functioning cultural production system, ”

“One that starts by figuring out trends, what people like, and what is authentic, then it packages all of this up in neat ways, then figures out how to make it cost-effectively, then determines how to market it to people, and get it to them. And it’s working.”

This virtuous circle enables FirstBuild to co-create new consumer appliances with their consumers. It has cut the time required to build a new consumer product from an average of four years to an average of four weeks. Creating a typical new product now costs only $50K as opposed to $40M-$50M. Most of this money is spent on a promotional video posted to Indiegogo and for prizes that go to the winning design team(s). Design teams can be made up of consumers with very little specialized knowledge, just the willingness to “hack” an outdated appliance to make it better fit their needs. Because consumers vote with their wallets, FirstBuild knows that the winning products meet consumers’ needs.

The products that come out of FirstBuild are low-volume projects compared to mainline GE appliances; they are experiments in production that yield invaluable market knowledge, considerably reduce new product risk, and school the appliance division in manufacturing innovation.

So successful is the FirstBuild system that it has extended this co-creation model to the design of the parts that get built into its appliances. When FirstBuild needs to create a new part for one of its consumer appliances, it puts out a challenge to engineering students at the University of Louisville who often produce responses in a matter of hours with designs for the component parts. The winning design gets funded and often FirstBuild brings the student into its lab to refine the design, so as to smooth out any hiccups in the manufacturing process.

The meta problem that FirstBuild solves for GE is that a brand that has traditionally appealed to late adopters, is now being helped by and appealing to early adopters. Thanks to FirstBuild, GE now has access to a steady flow of ideas and innovations that can lead to entirely new product categories plus the ability to prototype these ideas and manufacture them onsite, meeting the immediate demands of early adopters before they move on to the next great thing.

When you visit FirstBuild, you are struck by the sense that something new and radical is happening there. Entering the premises is almost like walking onto a giant soundstage with different sets, each for a unique scene in a motion picture. To the left is a “showroom” of hacked, one off, and prototype appliances. Inside the showroom is an oven, which has been (safely) modified to become a 900-degree pizza oven by having its self-cleaning safety mechanism safely modified.

“Our customers kept doing this, so when a team of cooks and Making enthusiasts came to First Build to do it themselves, we watched them, helped them, and then helped bring this thing we’d never thought of to market, “ explained Mr. Venkatakrishnan.

Next to the pizza oven is an oven in which the rack automatically slides out as the door is opened. Next to that stands a refrigerator with a raft of USB connectors inside so developers can write to the refrigerator as a platform. This is because the team at FirstBuild believes that an appliance should be viewed as a platform that consumers and developers can add to, much as is done with smart phones or computers. To the left of the appliances is a GE test kitchen that also serves as the front of a gathering place and auditorium for presentations and conversation.

Down the hall behind giant doors is the real action: a three-story tall 3D micro factory, one of the most complete Makerspaces we’ve seen.

GE is leveraging Maker technology to improve its flexibility in manufacturing, its responsiveness to consumer trends, and its ability to create unique IP for defensible advantage.

Changes in the Economics of Production

Manufacturing at Point of Sale
Thanks to 3D Printers, Makers are now inventing products to be manufactured at point of sale, which reduces inventory carrying costs and end-of-season returns.

Aly Khalifa is the founder of LYF Shoes based in Raleigh, North Carolina. Lyf shoes is an experiment in how technology can be applied to create completely customized shoes, built for the exact dimensions of each of your feet, taking into account that your left foot and your right foot have different measurements.

“If you want to talk seriously about re-shoring production in the United States, then you have to talk about completely changing the game. This means designing for decentralized manufacturing, ” says Mr. Khalifa.

Khalifa envisions distributing manufacturing as a way to significantly reduce inventory carrying costs for shoe retailers. “For a $250 shoe, a retailer would need to stock $6K in inventory for one style in three colors. Also, an enormous amount of cost in fashion goes to markdown. In the shoe industry, you might lose 40 percent of the shoe’s value to markdowns just because you didn’t sell a particular size in a particular color that season.”

LYF sees the cost of industrial 3D printers coming down to the point where it is practical to manufacture customized shoes at point-of-sale so as to reduce inventory-carrying costs. Right now for LYF, “point of sale” means over the internet but could eventually mean turning local shoe retailers into manufacturers.

LYF takes advantage of American’s desires to purchase a product that is fully customized to their needs versus mass-produced products, which are “one size fits all.” In this, LYF is a lot like Timbuk2, a maker of messenger and other bags based in San Francisco, California. Consumers select their options through an ecommerce site, submit their order, and in a matter of days the product arrives.

Ironically, urban manufacturing firms can charge more for a highly customized product. Kate Sofis, of SFMade, explains:

“From a supply chain point of view they can; the minute you start customizing anything you can significantly mark up the price beyond the actual real incremental cost. It costs Timbuk2 no more to make a bag with customized panel colors than it does to make a bag where you haven’t specified colors and they’re just doing it to stock. Yet they can charge more.”

Higher prices for customized goods can be offset by taking the cost of assembling the product and shifting that burden to the consumer. Consumers can either save some money by assembling the product themselves in the privacy of their own living room or work with Task Rabbit or a similar service to pay someone to assemble the product for them. Either way, with this type of distributed, highly-customized manufacturing there’s no assembly line. As the U.S. looks to onshore manufacturing, its focus is on higher-value products rather than on the kind of low-value, mass-produced products that are better manufactured offshore.

Precision Manufacturing Using 3D Printers
Another way the economics of production have shifted is due to low-cost, fast, and highly precise 3D printers. This enables industrial concerns to iterate more quickly, as needed, to optimize a part or component for a particular use case.

Industrial-class 3D printers enable industry to move beyond merely prototyping a part but to actually manufacturing that part locally. This cuts shipping time and costs, and supports rapid iteration and optimization. This is having a transformative effect on the manufacturing prowess of this country.

Aerospace in Portland, Oregon
Patrick Dunne, Director of Industrial Applications for 3D Systems and Maker of 3D printers, gave us one example.

An (unnamed) aerospace manufacturer based in Portland, Oregon is using 3D printing to rapidly iterate and optimize a critical part, iteration and optimization that can only happen when a 3D printer is fast enough to support numerous iterations in a very short period of time. This aerospace manufacturer accrues a significant competitive advantage through a better, more energy-efficient part, one that is two percent more energy efficient than the old. While two percent doesn’t sound like much, it matters a lot to the airline carrier that will buy and operate the plane on highly competitive routes. Moreover, the aerospace manufacturer is building up process know how. This creates a virtuous circle:

Other industries that can benefit from this virtuous circle include health care (prosthetics), transportation, energy production (power plant optimization), and aerospace. In short, any industry that depends on highly precise component parts.

Custom Prosthetics via an Open Source model
Another application where it pays to be highly precise and to iterate multiple times is in the creation of custom prosthetics.

A sculptor and designer in Paris, Gael Langevin bought a 3D printer for his work studio. He saw the potential of 3D printing to create objects for his commercial customers. “Some people think 3D printing could only produce little rabbits or Yoda figures, “ said Langevin “but I had in mind that it could be used in a more practical and engineering way.”

A big French car company asked him to make a bid to create a futuristic prosthetic. However, even when the job didn’t happen, Langevin decided to design the prosthetic hand anyway in his free time. “I always liked hands, my workshop is full with hands, made in all kinds of materials, some were molded with plaster on my own hands when I was 12 years old,” he said.

After designing and printing the first hand, he decided to post the digital file on Thingiverse in January 2012 under a CC-BY-NC license, a type of license popular with the Open Source community.

“Sharing the parts with the Open Source community was a logical route for me

The first hand he posted on Thingiverse in January 2012 was the first “possible” prosthetic hand design — a 3D printable hand actuated with tendons and motors using Arduino.

Since then, many 3D prosthetic hand designs have been released over the internet, based on Langevin’s design or just inspired by his work. BionicoHand, RoboHand, OpenBionics are some of them. Langevin continued on to design an open-source 3D printed robot called InMoov.

There are communities sharing 3D printed designs and helping not only to improve the designs and customize them but also helping to make the prosthetics for others. Jon Schull from Rochester, NY started the E-Nable Foundation to help coordinate the activity of a worldwide community of volunteers. The amazing thing is how the technology and a community willing to share have empowered people to create custom prosthetics that they could not afford to buy, or didn’t even exist at all.

We see this work at Maker Faire. A father from Cincinnati taught himself to use a 3D printer to create a custom prosthetic hand for his young son. His son had chosen colors and a Star Wars logo for the hand. A group from Calgary called Make Fashion incorporated 3D printed prosthetics into a fashion show where women were able to wear prosthetic legs that were not just functional, but beautiful. Lisa Marie Wiley, a veteran who lost her lower left leg in an IED explosion in Afghanistan, was uncomfortable with the fit and feel of the prosthetic limb provided to her. As a petite woman, she realized that the prosthetic was not designed for women, especially not for someone her size. She was able to work with others to design and print a prosthetic that really worked for her.

Changes in the Economics of the Value Chain

It used to be that manufacturing was limited to those who could afford to rent a large space, then purchase and set up a slew of complicated, big, and expensive equipment. This is no longer the case in the Maker City. In fact, much of the value chain in manufacturing is shifting.

Manufacturing-as-a-Service
Imagine a virtualized factory that is less defined by specific hardware; but rather defined by cloud-based software that runs hardware owned and operated by others, connected together into a loosely coupled network. This model is called “Manufacturing-as-a-Service”.

Traditionally, in a software-as-a-service (SaaS) company like Salesforce you “rented” the software you needed on a monthly basis versus owning a piece of software that you installed on your own hardware.

Companies that compete in the Manufacturing-as-a-Service segment take the SaaS business model a step further. Not only do you rent the software capacity when you need it but also you tap into the logistics and equipment network these companies provide, potentially eliminating the need to set up your own factory or lines of production.

This makes “Manufacturing-as-a-Service” more like Uber or Lyft, the popular car-sharing services. Instead of purchasing, maintaining, and operating a personal automobile, someone who needs transportation can depend on a logistical network in the cloud that routes a car and driver to their location on demand.

Similarly, with Manufacturing-as-a-Service, someone who wants to manufacture a product can depend on a logistical network that exists in the cloud to route their manufacturing request to the equipment and operators most suited to take on the work. Suitability can be determined based on a myriad of factors including: equipment, capacity, pricing, quality, and proximity to the buyer so as to reduce shipping costs/time.

This lowers the barrier to entry so that any Maker with a good idea and design prowess can become a manufacturer.

Plethora: The Network-Based Factory in the Cloud
Of course, first the part itself has to be designed and designed in such a way that it can be manufactured with ease. Enter Plethora, a startup based in California that focuses on the design process.

Nick Pinkston is the CEO of Plethora, a company that wants to make creating a custom part from a design as easy as the push of a button.

Plethora operates as a plug-in to CAD/CAM tools like Autodesk. While learning CAD/CAM software can seem daunting, many Makers have at least a basic knowledge (if not mastery) of this type of software. A Maker can design a component part inside the Plethora system and get immediate feedback on the feasibility of that design from a manufacturing perspective. This cuts weeks or months out of the process required to take an idea from design to prototype.

If you are a product designer in San Francisco, you could sit at your computer and design a part, get feedback from Plethora’s software as to whether the part can be made or not, and then press a button to send a design file over the internet to Pinkston’s Plethora factory, where it will be directed to a machine. After the part is machined, it will be sent by courier to you.

As a designer you’ll have your part in your hands, possibly within hours. Pinkston believes that he can automate the order taking, the validation and testing, the interface that controls the machines, and the set-up for the job. If he’s successful, his factory would be replicated in many places around the country or the world. If that happens, he would put many of the machinists currently working out of business, as well as the job shops they work in.

“There are 35,000 job shops in the United States. Who knows how many overseas? You go to those places. You call them on the phone. You send them your files. That’s how it happens. It’s basically just way slower and more expensive to do that. What we’re trying to do is to bring the like Amazon Prime experience where you’re just like ‘Hit a button’ and it shows up.”

Why have your own machines or a machine shop when you can get access to one? Certainly, this has been part of Mark Hatch’s idea about TechShop. You get access to any machine when you need it, for a monthly membership fee. Nick Pinkston is going one step further. You don’t need to go to TechShop or a fablab to access local machines.

When the Plethora factory is scaled up, it will be full of sophisticated machinery but employ almost no one.

As Nick sees it, he’s taking manufacturing to its logical conclusion by automating it. There aren’t robots exactly in this factory; what happens is mostly in software that controls the machines. To be clear, it’s not the ability to send design files to a manufacturer that is the innovation here. That has been happening for quite a while. One can send a design file directly to a factory in China, if it is prepared to do the work. Nor is it automation per se. It’s relatively easy to automate a process to create the same object over and over again. It’s much harder to automate a process when the objects are different with each job. It’s flexible manufacturing. Pinkston’s software makes flexible manufacturing a reality for more Makers, by dramatically bringing down the cost of retooling the line. (Source: Dale Dougherty, Free to Make, Fall 2016).

Fictiv: Compressing Cycle Time to the Bare Minimum
Dave Evans was one of the first hires at the Ford Innovation Center which the company decided to strategically locate, not in Detroit, Michigan but in Palo Alto, California. Dave spent a lot of time at Ford looking at the hardware development cycle and how best to compress it.

The development lifecycle for a car is four to five years, seven to eight years if you are talking about the more exotic ones. But if you think about consumer electronics, it’s a life cycle measured in six to eight months, not years.

“So imagine, when you buy that 2016 Ford Fusion, the reason why that touchscreen feels like a second generation iPhone is because it is. It was developed in 2010, 2011, ” said Dave.

So in 2013, Dave quit his job at Ford to found Fictiv with the idea of changing hardware manufacturing for the better, making it faster and more democratic in the process, so that anyone could design a part, see it produced, and iterate quickly, without first having to buy an industrial-strength 3D printer.

“There are other players that do this of course, like Shapeways, but none really are suitable for precision applications, where getting a part “right” requires that you iterate multiple times.”

Fictiv excels at both fast turns and highly-precise manufacturing applications using 3D printers and other CNC machine tools (lathes, mills, cutters, and the like).

Before Fictiv, a designer would create a design and ship it off to get 3D printed or produced at a job shop with computer-controlled tools. It would typically take two to three weeks to get a part back. This doesn’t sound like a lot of time — until you consider that it typically takes three iterations to get the part right.

Suddenly a process that was built on the premise of two to three weeks cycle time turns into a three-month process.

“Now, imagine, which is what we do, you get the part back in 24 hours. Then all of a sudden, you can do four revs in a single week. What does that do to innovation, right? It completely changes the way that you build physical products.”

Fictiv’s secret sauce is software and a network that enables distributed manufacturing, where parts are intelligently routed to available machines. To the company’s way of thinking, this results in faster parts, fair prices, and focused innovation.

Fictiv tags vendors based on their expertise, vets the contract manufacturing/job shops involved for both speed and quality, and catalogs them to make for a kind of virtual supply chain. Suddenly the supply chain that used to be available only to very big companies is available in a much more democratic fashion, to anyone with an idea and access to design skills.

Scale Up through Urban Manufacturing Centers

As a result of the changes in both the distribution and manufacturing processes, there is a resurgence of interest in manufacturing inside our cities. This is only possible because U.S. factories of today are smaller, employ fewer people, and are environmentally sensitive, so that they can be located adjacent to housing and schools.

Fremont: Tesla Motors
Fremont, California is famous as the home of the Tesla Factory, where the next generation of fully electric cars are manufactured using a combination of humans and robots.

Source: Tesla website. The Tesla Factory takes advantage of the $50M Schuler Press, which is the hydraulic press in North America. It’s seven stories tall and is responsible for stamping out Tesla’s aluminum body panels.

Tesla built its factory on the site of a defunct GM assembly plant that closed in 1982 after 20 years of operations. The plant was reborn again in 1984 as NUMMI — a joint venture between GM and Toyota — only to be shut down permanently in 2009. Tesla purchased the land and facilities for pennies on the dollar in 2010.

Today, the Tesla Factory is the very picture of a modern factory at scale. The Tesla Factory started out employing 899 people and now employs 14,000 people in 5.3M square feet, relying on robots to do the “heavy lifting” as well as the low-value assembly work.

Fremont has remade its city around the needs of factories like Tesla. In late 2010, news broke that 160 acres of vacant land surrounding the Tesla Factory was on the cusp of being acquired by Union Pacific Railroad. UPRR was determined to utilize the plot of land as a repair center for its trains and a distribution center for shipped goods. Neither use fit the city’s vision of itself as a tech hub with a focus on advanced manufacturing.

Mayor Bill Harrison and other city leaders went to work, wasting no time in trying to reverse these less-than-ideal plans. What emerged from this crisis was an Innovation Zone purposefully built to allow advanced manufacturing firms to thrive in Fremont. The design and zoning of the city is mixed use, with housing and manufacturing plants located in close proximity to each other. Multi-modal transportation allows people to get around with ease. (Source: Route Fifty, 2016)

A similar transition is happening today in San Leandro, California which is a city of 85,000 about 24 miles north of Fremont. San Leandro has something that’s at a premium in the Bay Area: space. When many of San Leandro’s factories shut down in the ’70s and ’80s, they left behind underused space, places like The Gate, a former Plymouth auto plant that combines a Makerspace, a co-working space, and space for urban manufacturers who can start small–say in 1,000 square feet–and scale up to 10,000 square feet.

Once a manufacturing concern outgrows the space available at The Gate it can move into freestanding space. In 2015, Kraft announced it was closing its sprawling complex in San Leandro. City leadership is confident they can find a new tenant for the plant:

“We have been attracting more technology companies,” said Jeff Kay, San Leandro’s business development manager. “A lot of them have a focus on advanced manufacturing, the industrial side of tech manufacturing.

(Source: San Jose Mercury News, 2015)

Defining the Future of Manufacturing

If you read the popular and technology press, the future of manufacturing is coming in the form of robots that will replace humans on the assembly line. The future is almost certainly more nuanced than this, in no small part because robots are everywhere and have been for years. Robots include mechanical devices guided by AI and are fed data not only by sensors but also by software bots and process automation.

Robots provide an economical way for manufacturing firms to grow and reach their full potential in markets where human capital is prohibitively expensive and/or where there simply are not enough workers to meet demand.

The Tesla Factory illustrates this perfectly. Over 325,000 people put down deposits for the Tesla 3, an electric car priced at $35K (base) or $60K (fully loaded). To put this number in perspective, know that Tesla just finished selling approximately 50,000 of its electric vehicles in 2015, produced around 15,000 units in Q1 2016, and expects to ramp to 500,000 units by the year 2020. At Nissan’s Sunderland factory in the UK, it took 28 years for the site to hit a production level of 500,000 units annually. (Source: Inside EV, 2016).

This means that to meet existing demand, Tesla will need to hire humans and deploy lots of robots. Robotics itself is a growth industry for the U.S. Robots will enable manufacturing plants here to reach economies of scale earlier and with greater speed.

No one knows what the future holds and how–exactly–the rise of robotics will reshape the workforce and change factories. What we can tell you is that the future belongs to those cities that are relentless about experimenting with what works, iterate constantly, and display restless curiosity about how to deploy technology for the better.

San Francisco: Flex Innovation Lab

San Francisco is famous as home to thousands of startups, many of them founded by Makers intent on producing the next consumer appliance, consumer wearable, or drone. This has created a demand for manufacturing innovation, to bring design closer to manufacturing, and find ways to make small production runs more cost effective.

Flex (formerly Flextronics) operates one of the leading experiments in this field; it recently opened a factory in downtown San Francisco, a few blocks from City Hall and in proximity to mass transit. Flex is the second largest contract manufacturer in the world, behind only Taiwan’s Foxconn. They are known for building industrial and consumer electronics products at scale in factories from China to the U.S. and Mexico. Flex is the very definition of a large, global, outsourced electronics manufacturer.

Steven Heintz is VP of Engineering and General Manager of the Flex Innovation Lab. As we toured the facility, Steve told us:

“We set up this facility to help product teams design for manufacturing and to manufacture your first few hundred units right here in San Francisco. You’ll typically come here after you’ve gone through the TechShop phase. When you come through the doors here, typically you have a working prototype, but it might be some circuit boards duct taped together with some batteries and some sensors, and you’ve got a beautiful picture of what you want the product to look like.

“So here we’re working with you to figure out, are your parts going to be injection molded, cast, or machined? In each case, how [does] the design needs to be changed? How [are} your circuit boards going to be affixed inside? How is the whole unit going to be assembled in a repeatable way? What test or inspection processes are going to be required for repeatable quality?”

On one side of the facility is fabrication, where products are designed and one-off prototypes made. On the other is engineer-assisted assembly lines. Here product developers work together with assembly techs drafting assembly instructions, creating the test fixtures and assembly jigs, working through the manufacturing process all the way to final test and pack out.

Taking the Risk out of Manufacturing
Says Heintz, “[In our San Francisco facility], we’ll build the first dozen to several hundred units here for a customer. We’ll get the process refined, so that then it can scale to a different geography — likely a higher volume site in the U.S., Mexico or China. But by then the risk is reduced as early small builds of products can be field-tested, and design improvements can be made before scaling to mass production.

Heintz spoke of the portfolio of products Flex was manufacturing in San Francisco.

“We mostly do consumer electronics here, so we do a lot of cameras, we do drones, we do a lot of wearables, because wearables are really hard to prototype using old-fashioned techniques like 3D printing. Think about how you would prototype a rubber membrane over the top of a flexible piece of electronics. You can’t do that the old-fashioned way where you order some plastics over here, order your PCBs over there, and get your metal parts bolted all together, clamshell-style. We find that you actually have to be iterating and over molding, using the same techniques that [are] going to be used in production, before you even know if you have a viable product.”

The old model was that a startup would have to make a fairly high volume commitment to a factory site somewhere in the world, committing to tens of thousands of units, before they’d even get the opportunity to make that first real working unit, and then stuck and held to those volumes.

A key small-batch manufacturing approach used by the Flex facility in San Francisco is low-cost 3D printed injection molding. Flex is now able to print a early low-cost injection mold overnight using plastic and start shooting the actual finished parts the next day. These molds are temporary in nature; you use them to yield only a few dozen finished parts, but they are more in line with the true finished product. These injection-molded parts contain all the nuances that will be needed for greater volume production — channels for adhesive, living hinges, even antennas molded into the plastics. They are also made with the actual resins, and colorants — demonstrating the material properties that the mass manufactured product will have. (They import the actual resins that might eventually be used in Mexico or China, to encourage smooth scaling should the product need to move overseas for larger batch sizes.)

Traditional injection molds take a couple months to produce. Now a manufacturer can build eight or ten iterations in the time it would take to get one injection mold.

“Instead of firing out email questions somewhere far away saying, ‘Hey, can we do this or can we do that?’ and getting a yes or no answer back, your product team is going to be able to call BS on that sometimes and say, ‘You know what? We tried a different hold time or a different temperature or a different resin mixture or a different colorant blend, and we were able to get these results.’ You’re able to get tighter, less compromised products this way.

“After the temporary plastic mold is refined, an aluminum mold is machined. This may cost $6K-$10K, still far less than a steel injection mold. That mold can build a few hundred to few thousand early products, all still in San Francisco.”

Removing Constraints and Building Less Compromise into Products

“[The U.S.] went through this phase where everybody thought all of manufacturing was headed somewhere else, and we lost a lot of our ability to understand, iterate, and innovate on the manufacturing process — engineers on our product teams lost some ability to push back. As a side effect, we also lost a lot of our ability to make tighter, less compromised products, because we took whatever the capabilities of whatever factory somewhere far away… happened to have available.

“I see more product teams using new production and fabrication technology to place smaller bets. We’re gonna release a limited-edition this, and we’re only going to make 20,000 units but we’re gonna try these three materials or technology/feature combinations. Another variant might be kind of experimental, so we want to try 10,000 of these. And so now you got a wider diversity of your product mix and SKUs. That becomes hard to do in an overseas kind of model, because it’s now become a series of small batch runs.”

Historically the venture capital community coached and financed startups to go to China and risk scaling production there. Today VCs are among Flex San Francisco factory’s most attentive customers.

“We court the venture community probably more than anything else. A couple of years ago if a VC was going to give a local hardware startup up $10M, that hardware startup would find the cheapest manufacturer in China. They’d blow half their money on steel tools and NREs (non-recurring engineering). And they get their one shot at seeing what the product would look like and you saw so many products that never came to market and they blamed manufacturability issues. Now the VCs coach their start ups to spend a little more per unit and iterate on a product locally so we can all come over, we can all visit, we can all see what’s going on, we can catch things earlier, we can get something to market earlier, and we can fail faster and we can manage that risk.”

When we began work on the Maker City Playbook, our biggest question was about what kind of industries were most suited for urban manufacturing. Surely, we thought, there were some industries like consumer electronics where the volumes, the components, the expertise, and the tooling costs all favored manufacturing offshore. Today, we think differently on this topic. Flex has created a kind of virtual factory that starts in San Francisco and spans to other plants in Mexico and China. Within this virtual factory, products can start out in the San Francisco-based Invention Factory and move elsewhere within the Flex network only when they are ready to hit the next production target, and not before. Some products evolve so quickly or replenish in such small batches that it makes sense to avoid the complexity of “mass” manufacturing altogether.

Implications for Cities

To encourage manufacturing in your city, consider the following:

Connect up with the Urban Manufacturing Alliance (UMA) to learn additional best practices and how they can apply in your Maker City.
Compete for funding from the SBA’s (Small Business Administration) Growth Accelerator Fund. The SBA has set aside $3.95M for grants of $50,000 for small businesses that directly support entrepreneurship and small-batch manufacturing. Makers seeking to do small production runs of 500–10,000 units locally in the U.S. tell us they have a particularly challenging time finding financing. Make them a priority.
Use real estate strategically. Deborah Acosta, the Chief Innovation Officer for the City of San Leandro, told us that in her Maker City they give manufacturing concerns “first call” on space over distribution centers. Manufacturing creates more jobs and economic activity versus a distribution center.
Consider subsidizing adaptive reuse projects that will bring manufacturing back to your city. Ideal targets are former shipyards, factories, and industrial space. Legacy space that is larger but still has character is particularly attractive to Makers, but it needs to be cut up into smaller spaces. Look for proposals from real estate developers who are willing to provide rent stabilization to Makers and/or manufacturing concerns. The Pratt Center believes that the best model for adaptive re-use is to put a mission-oriented nonprofit in charge of the effort. To learn more, check out this toolkit.
Think regionally. Link up local Makers with providers of Manufacturing-as-a-Service. The goal here is to give Makers in your city the same access to manufacturing and supply chains that big firms take for granted. Proximity is important to reduce cycle time but so is access to advanced equipment and precision engineering techniques. This type of clustering of manufacturing capacity and supply chain is what once made the Rust Belt great and will make it great again.
Look at ways to encourage advanced manufacturing through regulatory relief, zoning relief, and tax abatement. Zoning relief is a city matter we discuss more in Chapter 7 on Real Estate; · tax abatement typically comes from working with the State to provide relief. By thinking regionally (as discussed above), Maker Cities can make tax relief more palatable at a state level.
Encourage small manufacturing firms to take root. Ask the EDC (Economic Development Corporation) or mayor’s office to do a survey to identify Makers who want to produce their products locally, but don’t believe they have the infrastructure they need for startup manufacturing.
Invest in the right kinds of manufacturing. Manufacturing firms that have the most potential for growth are those that use advanced manufacturing prowess or are R&D intensive, according to the consulting firm McKinsey writing in 2012. Look for firms that can source materials locally to replace items previously purchased from overseas. Also, look for firms that can create a product to export to the rest of the world, due to uniqueness in underlying technology or process.
Encourage manufacturers in your city to get together and share best practices. Manufacturers have a lot they can learn from each other. Bring manufacturers together in small round table settings; curate the meetings with care, so as to make sure that direct competitors are not in the room. This encourages the manufacturers to share process know how in a greater level of detail. We believe this recommendation is key to encouraging more startups to take advantage of custom manufacturing at point of sale (LYF example), crowd sourcing (FirstBuild example), and precision manufacturing of components (Portland aerospace example).
Consider a hardware accelerator model. Product design and manufacturing continue to be ongoing challenges for Makers. A hardware accelerator can help, by providing experienced people to coach and mentor Makers through the process. Some hardware accelerators also provide venture financing, access to a well-equipped Makerspace, as well as co-working space. Hardware accelerators are a relatively new concept and do not exist in every city. Examples include: AlphaLab Gear (Pittsburgh, PA); Lemnos Labs and PCH Highway1 (San Francisco, CA); Playground (Palo Alto, CA).
Activate research universities as partners. As noted above, American cities are particularly good at manufacturing products with strong R&D inputs.
Focus economic development officers on encouraging small manufacturing firms to take root in your city. The old model of economic development in our cities was to focus economic development efforts on landing the “big fish.” The data tells us that most manufacturing firms start out small (approximately 70 percent of urban manufacturing firms employ fewer than 20 people) and stay that way. The economic value when aggregating all these small firms together can be large and have a transformative impact on your city, as seen in the examples from Fremont and San Leandro.
Work with the investment community in your city to create new forms of financing. Many banks have community development goals they must meet. Encourage them to invest their dollars in ways that support manufacturing in your Maker City. Banks may be ideal partners to provide initial funding for a hardware accelerator in your city. Additionally, partnerships with Mastercard, Visa, and American Express may be helpful. Mastercard has a particular focus on factoring, which is when a financial services firm lends money to a manufacturing firm based on the future value of its inventory. Of course, today’s manufacturing firms do not hold a lot of inventory, making factoring less relevant as a source of financing. But we fully expect a new class of financial products to be invented, focusing on the new and evolving needs of manufacturing firms inside our Maker Cities.