Depending on who you ask, American manufacturing is either: the way out of our financial mess, or it’s dead. Whatever you think, there’s no denying that manufacturing has changed. That’s the story of Thogus Products in Avon Lake, Ohio.
One thing I kept hearing over and over again reporting this story is that there’s this big misperception about manufacturing. The popular image is of dirty smokestacks and factories filled with workers repeatedly pulling the same lever. Matt Hlavin has a very different idea for the company he runs.
“I wanted to create a Google of manufacturing environment so it’s young and vibrant and balanced between youth and experience,” Hlavin says.
Walk around the factory floor at Thogus Products, and you begin to see what Hlavin means. It’s clean and organized. Young staff use iPads and computers to keep an eye on each product line. Robots do most of the labor, churning out highly engineered plastic parts for medical devices and the food and beverage industry.
“I don’t consider us a manufacturing company anymore,” Hlavin says. “We’re a technology and services company.”
This has been a big transformation for Thogus. It used to be companies would come to them and say: “we need 20,000 switches made, can you do it?” And, Thogus would quote a price and make them. It was a volume business. Then, at the end of 2008, Matt Hlavin took over the company from his late mother.
“Worst time to take over a manufacturing company,” he says. “The economy is in shambles. The stock market is crashing. Banks are a mess.”
But Hlavin saw this as a time to reinvent the company. Volume was no longer the answer. It was now about skill and technology. Hlavin cut half Thogus’s staff. Those remaining were deemed on board with the company’s mission, and were given ten percent pay hikes. He invested $5 million in new equipment. But most importantly, the jobs changed.
“We hired our first engineer right out of school,” Hlavin says as he walks around the factory floor. “James was a plastics processing engineer. I brought him in to be the first of my new engineering team.”
In just two years, Thogus went from having no engineers on staff to 15. Instead of just making whatever part a client wants, Thogus now helps design the product. The engineers range from biomedical to civil. Hlavin sees the company now as more of a full service consultant.
“It’s a Burger King economy,” he says. “It’s have it your way, right away, mass customization, not mass production. India and China are built for mass production.”
If you’ve ever looked at a graph of manufacturing employment in the US over the past few decades, it’s scary. It points straight down. As I walked around Thogus, I kept wondering: is this the future?
“I’d like to see it be the future of manufacturing in America. I don’t think it’s automatic,” says Sue Helper, an economics professor at Case Western Reserve University. She says it would be great if more factories went this way, instead of cutting wages, but it’s hard.
“And it’s particularly hard for individual companies to do it,” she says. “I salute this company. I think it’s a very brave and skilled entrepreneur who was able to make these coordinated investments. He did a number of things all at once.”
She says it’s only a small minority of firms that are undergoing this kind of change.
But it’s working for Thogus. In just the two years of its transformation, its revenues have more than doubled, but it’s done so with a smaller staff.
“Transactional labor is going away,” Matt Hlavin says. “You don’t walk out of high school or wherever you went to school and walk into a factory and get a job. You’re going to have to work on a skill set.”
And for those who don’t? “There’s always food service,” he says.
By the way, Hlavin says his company is installing equipment to let the factory run overnight unattended. Look for a story about “lights out manufacturing” next week from Changing Gears reporter Kate Davidson.