MakerBot CEO Jonathan Jaglom announced a major shift in the company’s manufacturing strategy: outsourcing.
Here’s how Jaglom describes the move:
We have decided to partner with Jabil, one of the world’s largest design and manufacturing solutions provider, for the production of all MakerBot 3D Printers going forward. Jabil is headquartered in the U.S. with international production facilities.
The implication: they’re shutting down their Brooklyn-based factory, which received much fanfare in the recent past. In fact, this factory was expanded only a year ago. Certainly this means the demise of all factory-related jobs at the facility. Jaglom further explains:
We will transition production from our factory to Jabil over the coming months, which means that we will have to part with some of our talented and hard working colleagues at our factory. I value the commitment and contributions of every single one of them and we will support them as much as possible to find new employment. Taking this step was a very difficult decision, but I believe that it is the right path forward for MakerBot. We will retain key personnel from the factory in-house in the areas of logistics, repair, planning, quality, and operations.
Losing jobs is always distressing for those involved and their families, but for MakerBot the company, this is a necessary step, essential perhaps.
Why? There’s three possible reasons.
First, outsourced manufacturing is can be less expensive than domestic manufacturing, particularly if the number of units is high. However, managing an outsourced relationship of any kind can be very challenging. Last year Solidoodle, another Brooklyn-based 3D printer company, wasn’t able to manage through a transition to offshore manufacturing and essentially folded.
Some of MakerBot’s competitors are already using offshore manufacturing to lower their costs. Taiwan-based XYZprinting and China-based Flashforge are already leading MakerBot in units shipped, and one reason for that might be the differences in costs. Both of those companies offer machines at substantially lower retail prices than MakerBot, making it a much tougher market.
Having in-house manufacturing is appropriate when your company is starting out, or if you wish to obtain some good press by providing local jobs, but when you want to expand and dramatically increase production, you might want to use a large, existing factory.
The second reason for outsourcing is flexibility. Like many companies, MakerBot’s production requirements are variable throughout the year. There are periods when many units are quickly required, such as when a new product is announced. There are other times when there’s a lull, perhaps during a period without product announcements.
It’s hard to maintain a fully ready factory during moments of volume change. There could be a need for rapid hiring or even layoffs.
An outsourced scenario provides significant flexility, as the offshore manufacturer may be quite large and what might be huge shift in volume for MakerBot might be a minor item for the large manufacturer. Such factories can often quickly spin volume up or down as required.
A final reason might be the capability and quality of the local factory. If it’s not delivering units of appropriate quality and volume, and there is no easy way to rectify matters, then outsourcing to a more experienced manufacturing center may be a path to success. I’m not certain if MakerBot falls into this category, however.
But, these reasons aside, it can be incredibly challenging to properly manage an outsourced manufacturing relationship. One might think it’s like having your workers located somewhere else and they need only be managed in the same way local operations require, but that’s definitely not the case.
There is a very significant amount of management overhead required to ensure success: outsourcers do not understand the product in the same way as the originator, and thus all assumptions, processes and specifications must be very carefully tested, agreed to and monitored. Not every company is able to perform this very specialized management work, but it’s very possible MakerBot, with the assistance of Stratasys, could do so, unlike smaller sized competitors. A lack of outsourcing expertise could have been the reason behind several recent 3D printing company problems, including Solidoodle’s.
So it seems quite reasonable for MakerBot to take this move, despite the loss of the Brooklyn factory jobs. But is there even more to the story?
I think there could be. By positioning with an outsourcer, MakerBot is now poised to rapidly deliver large quantities of new equipment, should they announce something new.