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AMS CEO, cover story in Texas CEO Magazine
Is U.S. Manufacturing Coming Back?
AMS CEO, cover story in Texas CEO Magazine
AMS CEO Brad Scoggins on the Texas Manufacturing Revival
SOURCE: By Dacia Rivers, Texas CEO Magazine
Ask Brad Scoggins, CEO and president of Austin Manufacturing Services, the secret to his company’s success and he’ll tell you straightaway that it’s luck. While that might be a certain piece of the puzzle, it’s clear that there’s a bit more behind AMS’ success than good karma . . . like communication, commitment and chemistry.
Scoggins moved to Austin from Dallas in 2000 to serve as executive vice president at Avant Technology. He took the reins at AMS in 2009, bringing with him expertise in designing, engineering and manufacturing memory modules. Scoggins moved the company to a large facility in North Austin, where teams of workers dressed in anti-static suits build everything from the newest generation ham radios and LED systems for emergency vehicles, to automotive electronics and power management systems.
Inc. Magazine ranked AMS as one of the fastest growing manufacturing companies in Texas in 2013, due to the company’s impressive sales growth rate of 59 percent over three years and revenues of more than $23 million, up from $13 million in 2009 when executive management bought AMS from its parent company.
"The buzzword in that time frame (2000) was offshoring,” Scoggins says. “It was Asia, Asia, Asia."
But even then, AMS was offering something different – the ability for U.S.-based businesses to manufacture products domestically and avoid some of the pitfalls that come along with offshoring. The cost of hardware was never different when working overseas or domestically – the price difference came in the labor costs, but that’s something that has changed over the last few years, Scoggins says.
Inflated infrastructure and labor costs in Asia have made manufacturing domestically a more attractive option for companies, especially those that don’t have a large amount of revenue.
"In the $5 to $10 million range is where it begins to make sense to offshore,” Scroggins says. “But now the buzzword is onshoring."
In fact, a survey by the Boston Consulting Group found that 21 percent of U.S.-based manufacturers are planning on moving production back to the U.S.
Besides avoiding increased costs, some companies are turning to domestic manufacturing to evade potential IP theft and time lost while waiting for products to go through long shipping routes and the slow trek through U.S. Customs.
Texas in particular is becoming a hub for domestic manufacturing. Toyota opened a manufacturing plant in San Antonio and since 2008 has been assembling all Tacoma and Tundra trucks right here in Texas. Attracted by cost savings and a favorable business climate, Toyota execs chose to move the plant to Texas over locations in Alabama, Arkansas, Mississippi and Tennessee.
But not every company has seen such success by moving production to Texas. Motorola recently closed a manufacturing plant in Fort Worth after just one year of operation. High production costs combined with poor sales in a highly competitive, price-driven market caused the company to shutter the factory.
Despite some companies’ stumbles, Scoggins feels moves like this are huge indicators of how favorable the climate is for AMS and similar businesses. So far, the numbers back him up. Currently, manufacturing accounts for 15 percent of Texas’ GDP, and the state ranks second in the country for manufacturing jobs. Austin in particular is attracting a growing number of manufacturing companies. According to the Austin American-Statesman, manufacturing now accounts for about 20 percent of the city’s gross metro product and the top manufacturers in the city exported nearly $4.7 billion dollars worth of goods in 2010.
How It Works
When it comes to manufacturing processes, AMS doesn’t specialize in any one particular method, instead remaining flexible and open to using multiple techniques. When Scoggins took control at AMS, the company mainly stuck to surface-mount manufacturing with some through-hole manufacturing. Now, in addition to those two techniques, AMS performs mechanical assembly along with hand soldering and box builds, a process that takes a circuit board all the way through the manufacturing process to enclosure, programming and packaging.
"A lot of companies stop at the surface-mount level," Scoggins says," The rest of what we do with a box build is what we love doing."
While AMS solely builds other people’s products and is not an IP company, the business has begun to branch off into its own vertical markets to leverage its manufacturing capability, capital and overhead, since AMS can do so at a lower cost than a company who would have to find its own space and staff. Beginning this fall, AMS will add laser cutting and etching to its lineup of manufacturing processes. Future plans include adding a machine shop, something that will allow AMS to create replacement parts for its own manufacturing equipment so surface lines can stay up and running as much as possible.
Right now, the energy business is a bread and butter area for AMS’, accounting for a growing portion of the company’s clientele, especially in manufacturing equipment for oil and gas discovery and acquisition, as well as advanced alternative energy projects. But the energy industry can be volatile, so AMS has plenty of clients in the industrial sector, who use the company to manufacture automation and embedded devices along with industrial and motor controls. The security and communications sectors also take up a chunk of AMS’ manufacturing lines, followed by equipment for the medical sector, a line of business that Scoggins would like to see grow for the company.
The Power of Open Communication
Being in the manufacturing business means constantly working with vendors as well as clients, making strong business relationships an absolute must. While Scoggins realizes that a company can’t completely ignore costs, he stresses that at AMS, cost is not the most important factor when working with vendors.
"AMS is a firm believer in dancing with the date that brung ‘ya," he says. This dedication to working relationships paid off for Scoggins when he needed it the most. When AMS was going through its 2009 buyout and cash was short, some of the company’s suppliers had to agree to delayed payments to continue working with the company. One vendor even agreed to a 150-day delay, something Scoggins attributes to the transparency AMS offered to suppliers during the time, even opening up the company’s books to the vendors.
"If we tell you something, we do what we say we’re going to do," Scoggins says. If a check is promised on a Friday, AMS makes sure that check is 100 percent on time. As the company grew and regained footing after the buyout, the vendors that stuck through the lean times have become preferred suppliers that AMS will always try to work with first.
"I believe in being straight up and overtly honest, and that plays well with the majority of our suppliers," Scoggins says.
Similarly, when working with the organizations who chose AMS to manufacture their products, Scoggins believes the transparency needs to flow both ways.
"Determining what’s important and communicating that is probably the most important thing in choosing a contract manufacturer," Scoggins says.
It can take two years to get from conception to market, and it’s a process that takes lots of communication to successfully transfer the knowledge required to get the job done. Clients must work closely with the manufacturer, including sharing necessary IP, something that can be a large leap of faith. But it’s an essential step in the process.
"Lack of communication ultimately comes out in the wash," Scroggins says. "Misrepresentation of skills, stabilities and capabilities will show themselves."
A United Team
Maintaining a healthy working environment is another part of AMS’ success. The company has 95 employees and Scoggins is certain that each and every one is a perfect fit at the company.
"We have team chemistry," he says. "It’s like family here and our clients can see it and feel it."
When Scoggins participated in the buyout back in 2009, he felt he had two options as to what direction he could take AMS.
"You can run a mom and pop shop with a limited staff and be very flexible," he says. "The other end of the spectrum is an international footprint with capabilities that are set and not very flexible."
In the end, Scoggins tried to make the best of both worlds, incorporating the upsides of a large international company with the personality and feel of a small business.
"We straddle the middle and go to either side as it makes business sense for us," Scoggins says.
AMS is not a small company, but it remains flexible. They also have the benefit of being cash rich, a sure sign Scoggins and his team at AMS are on the right path as the demand for domestic manufacturing continues to grow.