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April 15, 2024

Farmington manufacturer’s expansion will allow tools to be made in-house, cutting need for foreign imports

HBJ PHOTO | STEVE LASCHEVER Ebm-papst Inc. employee Dianna Sykes peers through part of a fan produced in the company’s Farmington production facility.

After COVID paralyzed supply chains, companies emerged from the pandemic looking for ways to reduce vulnerabilities and bolster their ability to recover from unexpected disruptions.

To improve their resiliency — and in some cases, to facilitate growth — companies want to be located closer to their suppliers, just as customers want to be closer to the companies with which they do business, experts said.

Jeffrey J. White

“I think what COVID taught us, to some extent, is that the world was maybe a little smaller than what we thought it was,” said Jeffrey J. White, a law partner at Robinson + Cole, who leads the firm’s manufacturing practice.

White said he’s seeing a trend in which manufacturers are consolidating and fortifying their supply chains. He expects the shift to continue in a multitude of forms.

Some companies are reshoring, bringing production back to their home country after being outsourced. There’s also the concept of friend-shoring, which means moving supply chains to countries perceived as being friendly, and near-shoring, which means relocating to a nearby country.

The overarching concept is that companies are seeking more control over their supply chains, which can mean fewer delays and lower costs.

“There are variations, but it’s all based on the notion that there is an economic stability incentive to, in my mind, broaden what your U.S. operations are able to do,” White said.

Paul S. Lavoie

Paul Lavoie, the state’s chief manufacturing officer, said the move toward local production is reflected in recent data, which shows that the manufacturing industry’s contribution to Connecticut’s GDP grew from 10% in 2021 to 12% in 2023. He attributes the increase largely to reshoring and related activities.

“We’re seeing more and more manufacturers that are vertically integrating their operations by taking work that was done in the supply chain, especially supply chains that were offshore and overseas, and bringing the work back here to their facilities in Connecticut,” Lavoie said.

Customized tools

An example is Farmington-based ebm-papst Inc., which manufactures energy-efficient fans and motors, and is in the process of localizing its supply chain by bringing tool production in-house.

Its parent company, ebm-papst Group, is privately owned and headquartered in Germany. Farmington is home to ebm-papst’s North American headquarters, which also serves South America.

The company’s North American wing has more than 500 employees between Farmington and its other U.S. production facility in Telford, Tennessee.

The Farmington headquarters — which includes two large buildings on a sprawling 27-acre campus at 100 Hyde Road — will soon undergo a $3 million expansion.

The 14,671-square-foot addition includes a tooling center, which will enable ebm-papst to create its own customized tools used in the production of fans and motors. Currently, those tools are produced at its parent company or affiliates in Europe.

Mark Shiring

Rather than importing the tools, Mark Shiring, president and CEO of ebm-papst’s Americas region, said the company will save money in the long run by building them in-house.

“It makes sense to add this tooling center here so that we are not only producing the product close to our customers, but we’re making the equipment and the tooling close to our production site,” Shiring said.

The project, which was approved by the town in March, also includes adding a drive-thru bay to improve truck circulation. When completed, flatbed trucks will be able to enter an enclosed facility to unload deliveries of sheet metal. This will make deliveries quicker and safer, Shiring said.

Also, indoor deliveries will protect sheet metal from damage during poor weather.

The project, which is expected to begin this summer and be completed by fall, will result in more efficient operations, he said.

“We’re faster, we’re more flexible, we can react quicker if there’s a problem,” Shiring said. “So, it just makes a lot of sense that we coupled these two projects together to enable our business to continue the growth that we’re on.”

The tooling center will produce fixtures and assembly pieces for equipment that will be used at the Farmington and Tennessee sites.

“They’ll do the design, the build, the procurement, the whole thing,” Shiring said.

Meeting demand

Ebm-papst’s sales have been increasing, due to demand for energy-efficient products, which often employ fans like the ones the company produces.

“The commercial air conditioning ventilation space is quite, quite strong right now,” Shiring said. “There are a lot of energy-efficiency regulations in the market that drive our customers to want to use our products in order to help them meet those requirements. That’s a big part of where our growth is coming from.”

Shiring said ebm-papst’s North American operations represent about 18% of the global business. But he said the company is investing heavily in North America and has a goal of increasing that business to 30% to 40% of the global market.

The privately owned company doesn’t disclose its financials, but Shiring said the U.S. operations have averaged 10% growth annually over the last three years.

More efficient operations and the additional space will help support that growth, he said.

Ebm-papst employee Mike Warner works in the company’s Farmington production facility. The company is building a new tooling center that will allow it to create its own tools for the production of fans and motors.

There is another trend that is leading foreign companies to bring more manufacturing to Connecticut. Foreign companies with warehouses and distribution channels in the state are starting to use those facilities for actual production, Lavoie said.

One of the reasons is because China became a less reliable trade partner during the pandemic, Lavoie said.

“Shipping times were extended and people couldn’t get parts,” Lavoie said. “I had one manufacturer telling me that they didn’t know how long the lead time was going to be because their system only went up to 99 weeks. And they knew the lead time was longer than that.”

Lavoie said Grand Brass Lamp Parts in West Haven recently began manufacturing parts that it previously distributed, “because the lead times were much quicker.”

The business was a distributor, relying on nearly all of its parts to be manufactured in China. Now, it manufactures about 40% of its parts in West Haven.

Public policy is also a factor in companies’ decisions to reduce their reliance on overseas production. While labor costs may be higher in the U.S., tariffs, sanctions and shipping fees can offset or exceed the savings from outsourcing, experts said.

“There have been a variety of economic protectionist laws, tariffs, and various other things, that have been implemented to encourage U.S. manufacturing,” White said.

The CHIPS and Science Act of 2022 provides more than $50 billion in subsidies for U.S. semiconductor production and research. Also, tariffs against China make it difficult to import components for solar panels. The current and previous presidential administrations have been clear about their goals to promote U.S. manufacturing, White said.

Companies that expand their production capacity in the U.S. are also developing redundancy, improving their ability to recover from natural disasters and scale up or down, based on demand, White said.

“If you have a problem in your one manufacturing facility, in terms of talent or supply chain issues, or whatever else, you’re putting all your eggs in one basket,” White said.

White also said some manufacturers have found creative solutions that both reduce costs and generate revenue — “like playing offense and defense at the same time.”

A company that moves a piece of its supply chain in-house, like ebm-papst, could generate a new revenue stream by selling its tools.

“Once you build that capacity, you can then sell it,” White said.

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