Short Runs Power Long-Term Strategy: South Jersey Manufacturer Builds Niche In Low Volume Production

Overseas outsourcing is helping drive down the number of U.S. manufacturing companies, but a lean South Jersey contract manufacturer has been able to grow by staying flexible and cutting its own costs without giving up quality.

“Training and learning how to do lean throughout the facility is letting us be competitive against overseas companies,” said Richard P. Szczepkowski, president and chief operating officer of Moorsetown-based Swemco.

Swemco makes circuit board assemblies that are used in everything from E-ZPass tollbooths to U.S. military jets. Customers include big firms like Tyco International Ltd., which uses the components in fire and natural gas protection systems, and smaller supply companies that incorporate Swemco parts into their own customers’ products, like the voice announcement systems used in buses across New Jersey.

Swemco’s approach helped the family-owned business rack up a record $15 million of sales in 2010, up from $10 million in 2009. The 75-employee company, which has a 36,000-square-foot manufacturing and warehousing facility on five acres in Moorsetown and a smaller Cherry Hill facility, expects to do even better this year, according to Szczepkowski.

The company also recently started doing component prototype design and engineering work to complement its core manufacturing capabilities. Right now, though, Swemco’s competitive advantage is its niche of so-called short-run, or low-volume production. These aren’t economical for high-volume overseas manufacturers, which typically need long lead times and have to ship large quantities of products to cover higher delivery costs.

But if a customer wants to maintain a buffer of inventory, Swemco will boost its production as needed, warehousing the spare components and handling the distribution logistics for its clients.

“From a strategic point of view, they’re doing the right thing,” said Bob Loderstedt, president of the New Jersey Manufacturing Extension Program, which has provided lean training to Swemco. “As a contract manufacturer, Swemco has core competencies that they can market to a wide range of customers. Someone’s always going to be busy, so even in a bad economy, they’ve got customers that need their services.”

Even so, during the recent recession, “when everyone went down, we also went down in every sector, so we actually had to go through our layoffs,” Szczepkowski said. But after a first round of layoffs, “the entire company, as a team, all agreed that everybody would take a 10 percent pay cut, which stopped the layoffs.” The company later repaid the lost wages, and by the beginning of 2011, the employees were eligible for traditional pay raises, Szczepkowski said.

Now that earnings are back on track, the company’s about to beef up its capabilities with $1 million of high-speed assembly equipment, according to Szczepkowski. He said the new, faster machines will let Swemco expand its niche from small-order production to midsized runs.

“Medium volume is what we plan to get into with the new equipment,” Szczepkowski said. “And that will take us into the tens of thousands — maybe into the hundreds of thousands, much of which is currently overseas. The lean is going to be even more important with that, since you’re talking large quantities with smaller [per unit] dollar values, where you can’t afford to lose half a penny.”

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