The Manufacturing Executive
The Manufacturing Executive

Episode · 9 months ago

How Colocating R&D Drives Manufacturing Innovation w/ Martin DeBono


It’s no secret why so many companies have sent their manufacturing overseas: It’s to save money.

But are you really saving when the hassle costs you your ability to innovate quickly?

Today’s guest, Martin DeBono, President at GAF Energy, joins the show to share his insights on how colocating R&D domestically can ultimately save you by helping you get innovative products to market faster than your competitors.

Join us as we discuss:

- The difficulties with overseas manufacturing

- Why reshoring (and specifically, colocating R&D domestically) can help address both the supply chain challenges and the labor shortage

- How Martin is putting his advice into practice 

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You're never going to out cost the Chinese, are never going to outcost the Koreans. Like those they can. They can suck cost out of manufacturing facilently like there's no one's business. Therefore, in order to compete, need innovate, and one part of innovation is actually getting the innovation to market much more quickly, and only going to do that by collocating research and development with R and A. Welcome to the manufacturing executive podcast, where we explore the strategies and experiences that are driving midsize manufacturers forward. Here you'll discover new insights from passionate manufacturing leaders who have compelling stories to share about their successes and struggles, and you'll learn from be tob sales and marketing experts about how to apply actionable business development strategies inside your business. Let's get into the show. Welcome to another episode of the Manufacturing Executive podcast. I'm Joe Sullivan, your host and a CO founder of the Industrial Marketing Agency guerrilla seventy six. When you think about manufacturing a cross seas, the advantage that comes to mind of courses cost savings, and sure it's pretty Dang tough to beat those cost numbers that show up on your P no, nol. What about the things that don't show up on your P now, or at least directly? Supply chain challenges and inefficiencies, the impact of a higher quality product, employee satisfaction, the ability to innovate, and that one in particular, innovation, is what my guest today is going to talk about. He'll explain what happens when your R and D and your manufacturing operations are located across the hall from each other instead of across the ocean from each other. So let me introduce him. Martin Debono began his career in alternative energy in a somewhat unorthodox place, as a decorated officer on a nuclear submarine in the US. Maybe Martin has held to sales and marketing positions at various tech companies, including CISCO, Seebul, insightful and...

...pure networks. Prior to running GAF energy, Martin headed Sun Powers Residential North American business and global commercial business and served as president of Sun Power capital. He's also a member of Phi Beta Kappa and has a BS from the University of North Carolina and an MBA from Harvard University. Martin, welcome to the show. Thank you, I'm glad to be here. Awesome. Will Martin, can you kick things off by telling our listeners just a little bit about Gaf Energy and also what led you to your current role as president there? Absolutely GIF energy mission is to drive energy from every roof. We're an operating company in the standard industry family companies. Stair Industry owns the largest rooping companies in the worldly. On Gf, in the United States they are BMI and Europe, and collectively those are the number one roofing companies in each of those geographies. GIF Energies another I independent operating company looking to capitalize on the fact that the roof is the ideal place from which to generate electricity, who are creating products that enable roofers and consumers to do so. I ended up in at this point of my career. I guess it was the secutest path. As you mentioned in the Intro, I started as a nuclear submarine officer. After that was a variety of different tech companies, both small and large, and one day was called by a recruiter who said Hey, are you interested in solar and at the time I was very intent solar, but I don't realize it was commercially biable, and this is in two thousand and thirteen. Once I understood that solar actually was commercially viable, it's been one of the most exciting chapters of my career. Spent five years it's Sun Power and then three years at gf energy, and at Gif energy we just launched a revolutionary new product, nailable solar Changel, and so really the compoward to seeing the success that has and hopefully will make renewable energy more mainstream amongst consumers in the United States at first and then ultimately worldwide. Awesome, I managed. It's a pretty exciting sector to be in right now. It's all changing so fast...

...and I know you guys had a just launched a new product which is off to a hot start in the new year here, so congratulations on that as well. Yeah, so we just we lost a product last week, so seven days ago launched the product. And what was nice about this launch and how I've been in silicon valley or socially the Silicon Valley companies ever set up the navy. There's a lot of vapor out there. There's a lot of launches for things that will be available in the future. When he launched his product that we already manufactured it, shipped it, installed it and because it's a residential building product, permanent and pat inspections past, so it was a legit product. We able to keep the wraps on it, and so at the consumer electronic show where we launched it, we received rave reviews. We won awards from good housekeeping to venture be to see yes self gave us a vest and show for smartrom category. So the product is it off to a very solid start and there's another reasons for that. One of wish is probably relevant to your audience, is people like the fact that it's made here in the United States and looks great and was installed by local professionals. So, Martin, it's that's a good lead into the next question and what really caught my attention when you and I first talked a while back, and that's this idea you mentioned about colocating research and development as a manufacturing organization. Can you explain what you mean by Colocating R and d? Absolutely, Colo, credit rd is where you have the research and development team and their their facilities in the exact same physical location as manufacturing. So, for example, in our facility of a hundred thirty Tho spur foot facility in San Jose, California. Around thirty or Fortyzero spur feet is dedicated to rd and the balance is dedicates manufacturing. Okay, perfect. And so, you know, I think as you think about this concept, you know one of the things that you, you and I were talking about a little bit recently was, you know when, decades ago, frankly, manufacturing in the US started moving off shores. You know, a lot of this was for cost reasons. And now here we are years later and you think about well, what's lost, and especially...

...from an innovation perspective. I know you have some some opinions about this, so I'd love to hear your kind of breakdown. You know, yeah, there may be a cost advantage, or at least on the surface, but what's really lost, and in particular, what's lost when you think about product innovation? Absolutely so, yeah, as you mentioned, this definitely cost advantage to manufacturing overseas. If there's there's no no doubt about that. But you want to have to put that cost advantage in the context of a competitive nature of industries, and I think what happens is the innovation advantage of collocating Rd dowarfs any cost increase you may incur. We give you an example. So typically the way how it works, or has worked, is an RD scientist, for have an idea about how to make a process better, make a product better. In order to get that into the hands of consumer, they would first need to plan a trip to typically Asia, execute that trip, get the idea off the ground, be there for a week. They haven't. They're not. They're long enough to actually affect change or long enough to discus, to give us some ideas. Come home, you know, Wash Them Afar how the change has been instantiated. Go back, come home, go back, and then ultimately wants to change is finally implemented. Well, then you have, let's just say it's two quarters, three quarters. Then you have another quarter of material on the water, and you're really talking about at almost a year from the time innovation is nailed in a lab to the time it hits the is reshort in terms of finished goods. If you were to compare that with the model where you co locate R and D and manufacturing, you can literally have the engineers walk across the factory floor speak to the appropriate leaders about how we would improve either as a new introducing new technology improve existing technology. They collectively can work together. There's, you know, no culture barrier, there's no language barrier and you they was a consistent effort to work on improving something. And so you see, change is literally within thirty, forty days that otherwise would take almost a year. And so the pace...

...of innovation is so much faster when you when your research and development team is able to walk and talk to the manufacturing team. In addition, because they're co located, there is built in empathy. They can understand each other, they can see how the line is operating, how the operators need to function, how the robots need to function, and they can understand the constraints their innovation much faster. And actually these two better design going in. And so while, yes, we will pay more for our manufacturing facility to be located in the United States, on a bottom line basis our ability to drive innovation is far superior to whatever experience and can I'll say the proof of the pudding isn't meeting. I mentioned that we just launched our product. Solardustries been around for thirty, forty years. I've never seen a solo product launched with the fans fare that we receive this past week. Yeah, that's pretty cool. You know, there's so there's so much that just doesn't show up on the PNL. Right. It's it's all the it's the opportunity costs, it's the efficiencies, it's the, you know, satisfaction of your team and you not burnt not burning out the best people and being able to track the best people, and I'm going to have you talked about that one in just a minute here. But you know, if you're just strictly looking at numbers on paper, there's so much that that you miss, right. Yeah, absolutely. So, let me go a step further. Each country has its own competitive strains and competitive advantages for it. So, for example, I don't think that there's a better place to manufacture goods and most Asian countries in terms of the cost. You're only your is their only metric. You're not going to make something cheaper in the United States than it as like. Just even look at the environmental considerations, let alone the standard of living over there. So why try to a global industry? Why, I, try to compete when you're out of inherent disadvantage? On the other hand, there's a reason why the United States has you know, if you think about the largest companies in the world, how many of them were spawned in the United States? How many respond the United States in the last ten or fifteen years? There sees of its tremendous culture and heritage of innovation. The idea that it's okay to fail is really unique to the United States. That's something that I've seen.

And so what we're able to do by collocating rd with man with manufacturers, that we give a little on cost, but we're saying we're going to gain more on innovation, gain more on the ability to bring breakthrough technologies into the hands of our customers sooner, and thus we're going to be able to capture margin that otherwise we wouldn't capture. So it's like, you know, I always make the there's a famous expression bringing I have to the gun fight. You're never going to out cost the Chinese. Are you never going to outcost the Koreans like those they can. They can suck cost out of manufacturing facility like there's no one's business. Therefore, in order to compete, you need to innovate, and one part of innovation is actually getting the innovation to market much more quickly, and you're only going to do that by collocating research and development with R and D. Yeah, that's not that's well said. Well, you know, it's no secret that one of the biggest challenges facing the manufacturing sector right now and, frankly, our economy as a whole, is attracting and retaining talent. Right and I've heard you say that the best talent doesn't want to spend half their lives traveling back and forth to Asian airplane. So talk about this a little bit and and how it applies in this particular you know, the context of this conversation we're having. Yeah, so learning from myself is when we first decided to have the CO location with our rd and manufacturing, it was really to attract the research and development engineers. And there the pitches. Look, you don't need to fly to age, as I mentioned. So if you have a Monday morning meeting, you're leaving on Saturday or there all week. You get back until the following, you know, Saturday. So there's a week of your world that's been gone. And then if you have the jet lag, and that's really unappealing to Rd folks. They don't want to do that. They don't want to have to spend you know, I actually work with people who spend three, four or five months in the Philippines to get products up and running, and you just can't recruit that type of talent because now they're like, I'm just going to go work at Facebark, I'm going to work at Google and going to work at Apple, and so that the appeals to them. But similarly, the manufacturing professors in the United States who are used to traveling around the world because, look, if you're a hearing manufacturing rd if you're someone whose position, whose job it is to build our factories, you're used to spending your time on...

...airplanes. We've actually been able to recruit those people as well, because they love the fact that they are able to get cutting edge technology into their lines faster. And so for us it's been a huge boon to recruit the PhDs and masters in Chemistry Engineering for the development side. But similarly, we've been able to attract world class operational leadership. And then, of course, the last thing is for the for the line workers. They love the fact that the RD team spends time with them like I will never forget. We have a young engineer who literally spent three or four days analyzing one of our circuit formation stations and really establishing relationships with the operators and they love that. And all of a sudden, you know, we're hiring for another shift and sure enough, all the operators on our circuit formation station of trying to get their friends there because in that they recognize the fact that this is just not a typical factory, right, this is something where things are going to be changing, things going to be improving, and they get to talk to management. You know, they think all your D teams management, and so it's really been a fantastic it's been a successful experiment and one that we anticipate scaling. That's great, you know, is as you think about in the recent product launch and just what gf energy. I know you guys are very young company. What have you guys done from a business model perspective, maybe that you haven't touched on yet, to bring some of these concepts who're talking about to life? Yeah, so I think one of the Nice things as from a business model perspective is we're private company and we have intentions to stay that way. That allows right there's a certain amount of long term vision that one needs to put into if you're going to make this change right. This is not a short term investment. It's not going to pay off in two or three years, and so, as a private company with the heritage of manufacturing products close to where they're consumed, we've been able to take a long term view, and so what that has allowed us to do is take the chance on manufacturing in the United States. I think that the other I don't know if it is necessarily a business model innovation, it's certainly one for for roofing,...

...and that is parts the products, parts of the business problement to who can do what better. So we know roofers can are excellent at selling products and getting your customers, and so we fully focused on a product that's designed for roofs to be installed and then any parts of that product that roofers don't like to do so, for example roofers and electricians. We have found partners and we have found our own ways to augment the full value chain with people who are good at that part of it. In other words, we're not trying to jam a square peg to around whole but rather we're really crafting the product we want for the channel which we want to sell it, and anything that's periphery. We're finding different partners to fill a hole, as opposed to trying to make our now a partners follow Martin, what advice can you give other manufacturing executives who are listening right now about you know how to apply some of you what you've been talking about, or getting started with reshoring or Colocation of R and d? Yeah, I think that you know many, many manufacturing executives. Our Operation Focus and everything needs to be measured on at the bottom line. There is and in doing so you're handicapping your cells from innovation, and so I really think that you have to look at do you have the ability to invent new products faster or even take cost out of existing products faster through innovation than your competition, and in doing so you should consider domestic manufacturing. Similarly, I think that you need to take the full view of what the true cost is of operating a facility overseas. You have to add in you know, how much working capital my tying up on the water, how much of these trips costing? How much more am I paying in recruiting fees. How much more of my paying and salaries to get someone's wanting to spend their time on an airplane? Right, is it really? You know, especially once you come out of Asia, right, there's a lot of salt. Looking at Mexico, South America, the cost difference. It's still cheaper, but it's you know, it's much the delta on the bottom line is much lower, but still you still have the same problems of people being away...

...from their home and especially now, and we all do this precovid I can't imagine doing this in a covid area. COVID are right, covids not going away. I think what people will find is people are going to be less likely to want to fly overseas and therefore look at what the benefits you can bring to on the top line and on the margin, as opposed to the bottom line, and I think that when you look at those benefits, I think that those people who take the chance on reshowing will be rewarded. Martin, is there anything you would like to add to this conversation that I did not ask you about? Yeah, the one thing you didn't ask me about, which is we actually made the decision to reshore before the supply chain disaster two thousand, two thousand and two thousand and twenty and twenty one, and so I think that that's the one area where, while seventy five percent, eighty percent of our content is domestic, the twenty five percent that is because so much of our spotching is domestic, when we're looking at safety stock, to have to unsure the factor you can continue to operate in the risk of supply pickups, the amount of work capital tied up as much lower because we're domestically located. We ended up relocated domestically again because our parent company has a heritage of building things where they're consuming, because they want to make sure they can get that consumer feedback in. But once you add the supply chain wose and the cost of safety stock keep your fee facilities up and running, you your choice is either go a hundred percent overseas, in which case you have the disadvantage you mentioned, but by coming domestically you're in a much better position to react when their supply chain shocks and when there are that you're tying up much, much a small portion of your balance sheet on safety stock in order keep the factory running. Then if you were found yourself manufacting elsewhere. So that's that's an important point as well. Well, Martin, this was a really great conversation. I appreciate you doing this today. Yeah, no, thank you so much. Really appreciate the opportunity to share, share a little experience here. Yeah, well, tell our audience how they can get in touch with you and also where they can learn more about JF energy. Certainly I'm on lated in, Martin de Bono, Gif Energy, and then our... is gaf dot energy, gaft energy. Take a look. We've got some innovative products, facilities in California and happy talk with other manufacturing exacts on best practices and idea. This is the way we can get no more innovation in manufacturing back to United States. Perfect. Well, I appreciate that and congrats on the product launch and all the success you've had to date. It sounds like you guys are doing some pretty awesome and innovative things. Thank you so much. Well, Martin, again, thanks for doing this and as for the rest of you, I hope to catch you on the next episode of the manufacturing executives. You've been listening to the manufacturing executive podcast to ensure that you never miss an episode. Subscribe to the show in your favorite podcast player. If you'd like to learn more about industrial marketing and sales strategy, you'll find an ever expanding collection of articles, videos, guides and tools specifically for bedb manufacturers at Gorilla Seventy sixcom learn thank you so much for listening. Until next time,.

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