Rural, and making it: Bringing manufacturing to small towns

Rural, and making it: Bringing manufacturing to small towns

Dec 20, 2016

By Ben Rowley, Rural Business HQ

He charged companies whatever he wanted as a freelance industrial designer, but he left it all to become part of a rural manufacturing renaissance.

It started five years ago, when after 15 years of designing, Jonathan Baker said goodbye to his comfortable career in New England and moved to the Pacific Northwest to design and manufacture his own product in a town of under 1,000 people.

On top of fighting long odds that come with starting a business, in a tiny town no less, Baker started his company in an industry that has been on the decline in the U.S. for decades. He and his business partner set out to create a product and manufacture it domestically, with no outsourcing to other countries. Period.

Nevermind that this goes against decades of conditioning saying it is more expensive to manufacture in America. Nevermind Baker didn’t yet know what he was going to make. For him, this was about more than a product.

“I knew I had to make it here,” he said. “To export all that opportunity to an overseas factory would be missing out on one of the biggest benefits of a successful design – jobs. The government doesn’t encourage this, and the tax code doesn’t either, but it is the right thing to do if you believe in the pride of making things where you live and the profound effect that can have.”

Soon Baker discovered the town of Twisp, Washington, a place transformed over the years by a declining timber industry and an influx of retirees and seasonal recreationalists. There he found a vacant 1920s barn and saw in it the potential for both design and manufacturing to live under one old roof.

Baker loved what Twisp offered – character, originality, a unique economy and proud, self-reliant people.

“When we came into Twisp we saw that history and we felt this sense of place that hasn’t really been influenced by the rest of the world,” he said. “We thought it was a great environment to remove yourself from the influences of the mainstream.”

With “the heritage and beauty of building things in your community” guiding their path, eqpd (pronounced “equipped”) was founded and is now designing, manufacturing and selling totes, utility bags and a new reusable bag, dubbed the “LastBag.”

Baker takes inspiration from a German designer who in 1970 said, “Good design is as little design as possible.” The eqpd bags are stylish, but simple and made to last, and everything being manufactured in Twisp by local workers making $15 per hour.

With a handful of employees and a product that is selling, Baker is looking to create regional manufacturing hubs in other parts of the country. He acknowledges it is an uphill battle in an era when manufacturers feel like they’re fighting against their own government.

“I am shocked at the lack of incentives you get to create American manufacturing jobs,” Baker said. “And that to me sums up a very complicated conversation around taxes, all that stuff, but I am really taken back every time I pay my quarterlies at the lack of interest and incentives that I get from state and federal levels.”

He added, “The current manufacturing system is not designed to make the American economy successful. The current system is designed for global trade.”

One resource Baker has turned to is the Make it in Washington program, part of the federal Make it in America Challenge. The initiative leverages federal grant money and matching state and private investments to help rural businesses grow and improve through training, consulting, assistance with supply chain challenges, competing for global customers, finding new sources of capital and access to product development resources at the University of Washington.

Program Business Consultant Ryan Layton is seeing positive results as he travels throughout the state working with rural businesses. For starters, American manufacturers increasingly are looking first domestically for parts, as Layton shows them it isn’t as expensive as one might think.

According to a 2014 Bloomberg study, Indonesia offers the lowest manufacturing costs, followed by India, Mexico, and Thailand. China and Taiwan follow, and the U.S. comes in at No. 7. The report said that for every dollar it takes to make something in the U.S., it costs 96¢ to make it in China, not as big of a gap as people generally think.

A lot of times decision makers look at the lower raw costs of a part being made overseas but forget about the time and shipping expenses that come with getting that part across the ocean. Layton explains there are local options just as affordable, plus built-in advantages like no language barriers or time zone gaps.

Better quality is another advantage to domestic manufacturing. “We kind of sold our souls to foreign companies to build products for us, and the quality of products were not maybe up to our standards,” Layton said. “Or people were finding that things don’t last as long as they typically require and now they’re looking inward to our country as an alternative source.”

Washington has seen a resurgence in the beer, wine and cider industries. Manufacturing in and around the aerospace industry is strong, with Boeing having a significant presence in the state. Additionally, foundries and boat manufacturers dot the west coast.

However, the timber industry has been decimated and mining has been hurt as well, according to Layton. “It has happened where small communities have been just wiped out, and individuals have had to either leave or find other ways to sustain jobs.”

The loss of American manufacturing jobs is staggering, with over 5 million disappearing this century, according to a CNN Money report. However, the country did add over 800,000 jobs since 2010, but there’s a long way to go to return to U.S. manufacturing’s heyday. In 1960, one out of four American workers had a job in the sector. Today, it’s not even one in 10.

In short, there is much to do, with glimmers of hope.

Communities must think outside the box or fizzle, and certain counties have done a good job of getting creative and marketing themselves, according to Layton.

“The offering from these rural communities has been is, ‘Come to our community and enjoy the lifestyle. We have less-expensive labor, we have less-expensive power and the land cost here is significantly less,” he said. “So if you want to build a large manufacturing facility, you can come out of a higher-priced market like Seattle and come to a rural community and basically build double the size and have an abundance of space and fill it with employees in our communities.”

Individual manufacturing professionals have had to adjust as well. “We’ve had some people get creative and come back and say, ‘Hey, I know how to make X, Y and Z from my experience. I’m going to start a company that manufactures near and along the lines of what I was doing.”

Layton said U.S. manufacturing companies are becoming more and more efficient and finding cost-effective ways to make things closer to home. He’s working with several companies that initially outsourced much of their parts and pieces to foreign manufacturers “and have since found other sources here domestically as well as within the state to source products, and that has been a big win.”

He added, “When you can find somebody that’s anywhere between 100 and 200 miles away from you to bring parts in to create a manufacturing product, versus having to ship it across the ocean and wait 90 days and have supply chain issues, that’s where the efficiency of the American manufacturer is going to be a boost and have a win.”

Layton reported that about ten different businesses in Washington have gone from 60 to 70 percent of their production in a foreign market to producing completely in the United States.

It will take more of that to grow a rural manufacturing economy, as well as help from government. For example, if tariffs (taxes on imported goods and services) are reduced or eliminated on certain products, it will have a “detrimental” effect on these rural communities “because they just won’t be able to compete on a price level at all,” Layton said.

Creating tax structure and marketing initiatives that encourage businesses to expand operations in rural areas can also change the game.

“That’s probably going to be our biggest thing is to have the legislative group open that up and provide tax incentives for these businesses to grow into rural communities.”

It will also take more people like Baker that look beyond just the raw numbers and see the morale boost and lifestyle improvements that come when people come together to create something and make it in their own back yard.

“To realize the jobs that are created when you make things here, it’s shocking to think that all that opportunity is somewhere else,” Baker said.

For him, the effort is paying off. Eqpd is in year three and production and distribution is ramping up. Baker feels like the company’s mission is resonating and its products improving. Though he relies on the experience and talent he brought to Twisp, he has found very capable people in his new community and relies on their talents as his business grows.

The products speak to the community they are created in and Baker is looking to remind the world of the satisfaction that can come when a product reflects an identity.

“There was a beauty and romance and actually a really healthy economy when we behaved that way,” he said.

 

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