MAY 2008: FEATURE; MANUFACTURING
MADE IN OREGON
Josh Powell works on a Gold Class Benchmark
knife.
PHOTO BY LEAH NASH
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Companies find it pays to keep manufacturing local. Take that,
China.
By Michelle V. Rafter
When Les de Asis shows a visitor the carbon dioxide lasers and
computer-controlled machines in the factory of his Oregon City
company, Benchmade Knife Co., he’s like a proud father
showing off his kids.
De Asis and his wife Roberta started making pocket knives and
hunting knives 17 years ago in a 2,000-square-foot space.
Today, Benchmade’s 45,000-square-foot facility is
bursting, with close to 90 machinists, assemblers and other
factory workers producing high-end knives that sell for as much
as $2,000. In the factory, state-of-the-art robots burn knife
blades out of premium-grade stainless steel and titanium.
Assemblers attach finished blades to knife handles and
embellish them with accessories. Master sharpeners hone blade
edges just so. Finish workers package knives in color-coded
boxes: red for the least expensive up to gold for the most.
Benchmark owner and founder Les de Asis on the
assembly floor.
PHOTO BY LEAH NASH
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Benchmade could make knives in China. In fact, some low-end
products are made there, though they comprise just 3% of sales.
Instead, the family decided to keep the majority of its
production in Oregon — a decision they say has been the
key to their success.
By keeping manufacturing local, Benchmade has more control over
raw materials, production and employee training, Les de Asis
says. That allows the company to roll out new products and fill
orders faster. As a result, Benchmade knives are so popular
with hunters, police officers and enthusiasts that sales are
growing in triple digits and annual revenue has pushed past $30
million. Benchmade now has 150 employees and is hiring more.
According to de Asis, keeping production local is also why
Benchmade routinely wins weapons industry awards and why the
company was a 2007 finalist in a family-business awards program
run by Oregon State University’s College of Business.
Benchmade isn’t alone. The company is among a cadre of
small and mid-size Oregon companies that have purposely chosen
to keep factories here rather than send work offshore —
and succeeded because of it.
Carla Vedder works on knives at the company’s
Oregon City plant.
PHOTO BY LEAH NASH
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There was a time when shipping production overseas seemed like
the best answer for rising labor costs at home. But with oil
prices driving up transportation costs, and prices for raw
materials and labor rising in China, going offshore
doesn’t seem like the end-all, be-all answer it once was.
Businesses looking to keep their factories here — or
bring them home again — can look to companies such as
Benchmade for how it’s done.
In addition to maintaining tighter control over production,
keeping factories in Oregon allows companies to quickly respond
to changes in the marketplace and do a better job guarding
proprietary information, say de Asis and other company owners.
The “Made in the USA” label is a big boost at a
time when U.S. consumers worry about lead-tainted products made
overseas and when the weakening dollar is making American-made
goods more attractive as exports.
“There were two or three companies that started about
same time we did in the same industry that did the offshore
thing,” says Hanz Scholz, co-founder of folding bicycle
maker Bike Friday, in Eugene. “They’re not here
anymore,”
To help local factories stay put, state agencies and
industry-led groups are working on a number of fronts in
efforts to bolster a manufacturing industry that’s been
battered by steep declines in wood products and computers, the
state’s long-time manufacturing strongholds.
Manufacturing still accounts for 25% of the state’s total
gross domestic product, second only to Indiana in the country,
says Tom Fox, a business development officer with the state
Economic and Community Development Department in Salem. But the
current economic downturn — whether it’s a
full-blown recession or a temporary slump — is cutting
jobs. By the end of February, Oregon’s factory jobs stood
at 199,500, down 9,100 since an August 2007 peak. That’s
a slightly smaller drop than in the same period the previous
year, when factory jobs dropped by 9,600 from a high of 213,000
in August 2006, according to the Oregon Employment
Department.
Though wood products, computer and electronics manufacturers
are suffering, job losses have been buffered by an upswing in
food, metals and machinery factory jobs, according to a March
report from the Oregon Employment Department. While they
won’t reverse the declines completely, growth in those
and smaller sub-sectors is expected to fortify and diversity
manufacturing employment over the next 10 years, according to
the report.
Scott Dawson, dean of Portland State University’s School
of Business, agrees small pockets of manufacturing job growth
are helping the state during current hard times. “It
stands to reason we’ll have somewhat of a
downturn,” he says. “But I’ve lived here most
of my life and I don’t think we’ve ever weathered a
downturn this well.”
OUTSOURCING PRODUCTION to a cut-rate subcontractor sounds like
a great way to go. But hidden costs can eat away at those
profit margins, says Nancy White, owner of Custom Interface, an
electronics maker in Bingen, Wash., across the Columbia River
from Hood River. Those hidden costs materialize when an
offshore contractor misinterprets engineering drawings so work
has to be redone, or substitutes inferior materials so a
customer won’t accept the finished goods, White says.
Some of White’s customers who make military equipment are
barred from using foreign subcontractors, giving her preferred
status as a U.S.-only supplier. Clients also choose to work
with her because of the fear factor, White says. “They
may be concerned about having their technology cloned, or they
can’t afford to wait 12 to 14 weeks to move from
conception to finished product,” she says.
Allaying those fears helped Custom Interface’s sales grow
30% in the past year and pushed employment to a record high 80
people, including 10 new hires so far in 2008, White says.
Sending work offshore runs counter to lean manufacturing
techniques many Oregon companies are adopting. For small
businesses following those practices, it doesn’t make
sense to hook up with a Chinese contractor who insists a
customer order 20,000 parts when they only need a couple
hundred, says Charlie Lake, president of Warne Manufacturing, a
Tualatin maker of mounting brackets used to attach telescopes
and lights to hunting rifles. “I can respond in a matter
of weeks when most companies take months and months,”
Lake says.
After Lake bought Warne in 2001 and instituted lean
manufacturing, production cycles dropped from 22 days to one,
he says. By optimizing factory space, Warne stayed in the same
7,000-square-foot plant while adding 20 employees and producing
five times as many scope mounts. That boosted profits to more
than 15% on annual revenue that’s risen to $4 million
from $850,000 seven years ago, Lake says. Now the
factory’s so crowded, he’s adding 1,200 square
feet.
The “Made in the USA” label has been a plus for
companies such as Bike Friday, which makes travel and folding
bikes. It’s important to U.S. customers, who buy most of
the 1,000 bikes the company makes in a year, Scholz says. But
it’s even more important to customers in Taiwan, Japan
and South Korea, which account for a quarter of sales.
Customers there like the cachet that comes with owning
American-made goods, Scholz says. “We may be one of the
few bike makers in the United States that exports to Taiwan and
China,” he says.
Because of demand, the 21-year-old company has seen its
workforce grow 30% in the last five years to an all-time high
of 42. That’s more than twice what it was when the
post-9/11 dip in air travel walloped sales.
Bike Friday, which builds its folding bike in Eugene,
exports its bicycles to Taiwan, Japan and South
Korea.
PHOTO BY JON MEYERS
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SOME COMPANIES KEEP their factories in Oregon because they get
financial incentives to stay. One is Triad Speakers, which
makes high-end home entertainment systems. In 2004, Triad
secured $216,000 in loans and grants from the Portland
Development Commission to help finance a new production
facility in Portland’s Airport Way urban renewal area,
according to PDC spokeswoman Anne Mangan. In exchange, Triad
committed to keep all 60 of its employees and add jobs, all in
Portland. As of March, Triad’s workforce was up to 74 and
wages for factory jobs have increased, says Larry Pexton, the
company’s president.
“The program is quite well conceived and produced
exactly the intended results: higher-paying manufacturing
jobs,” says Pexton, who in mid-March was in China setting
up a showroom that will sell Triad equipment.
Co-founders and brothers Alan (front) and Hanz
Scholz say that making their product in Oregon gives
it a competitive edge.
PHOTO BY JON MEYERS
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The state also has programs to help keep factories here. Since
2002, the Oregon Economic and Community Development Department
has awarded close to $2 million to more than 120 companies
through Oregon Manufacturing Extension Partnership, an industry
group that trains companies in lean manufacturing methods, says
Fox, the OECDD business development officer. The 3-year-old
Oregon Innovation Council, or Oregon Inc., is in the process of
awarding $28.2 million in grants approved by the 2007 state
Legislature to manufacturers and consortia working in emerging
industries.
Industry groups are doing their part. Lake, with Warne
Manufacturing, is head of the Oregon Manufacturing Workforce
Strategy, a four-year initiative backed by $500,000 in state
grants to help manufacturers train workers. The organization
started a website called Oregon Manufacturing to share data on
resources and funding for training workers and developing
business plans. Private businesses have also teamed up with
government agencies and community colleges on a project called
Worksource Oregon to help train high school and community
college students in the kind of modern manufacturing skills
employers need.
At Benchmade, de Asis is active in Oregon Manufacturing
Workforce Strategy, Worksource Oregon and other workforce
training initiatives, all aimed at finding more employees. The
company needs the extra hands to deal with a growing backlog of
orders. De Asis recently added a 20,000-square-foot mezzanine
level in his building to move storage off the factory floor and
make way for more manufacturing equipment. Another
30,000-square-foot addition is in the works.
Now de Asis is starting a second company to capitalize on
expertise he’s developed in rapid prototyping and other
21st century manufacturing processes. “If we’re
going to be world class,” he says, “we can sell
that to other companies.”
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