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Managing a Business

article

Manufacturing

Government agencies and the manufacturing industry have joined together in private-public partnerships to create an extensive network of programs and services dedicated to helping small manufacturers start their business, expand operations, and become profitable.

Here you will find information on programs and services to help small manufacturers start, grow and succeed. Click on the bulleted links below to jump to that section in the article (links to subsections are below the main topic link).

Financing Small Manufacturing Businesses

When seeking financing for your manufacturing business, take some time to research all of the opportunities available to you. Financing can come from unexpected sources. In addition to traditional sources such as private equity and commercial lenders, there are numerous public options that can help you obtain needed capital. This guide explains public and non-traditional financing for small manufacturers.

Before You Begin

A strong business plan is a crucial part of the financing application process. Your business plan needs to clearly articulate your business and financial goals, and your path to achieving them. If you are having a hard time obtaining financing, you may need to revisit your business plan.

The following resources will help you develop a business plan:

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Types of Financing Programs

Many entrepreneurs start pursuing financing through traditional commercial lenders and equity firms. Even a solid business plan does guarantee traditional financing. Venture capitalists looking for the next big thing may only be interested in multi-million dollar deals, while commercial lenders are more risk adverse in tight markets.

However, there are several federal, state and local programs to help small manufacturers obtain financing for working capital, equipment and other needs. These programs include the following:

Loans

Loan guarantee programs provided by state and local economic development agencies, the SBA, the U.S. Department of Agriculture, and other agencies support small manufacturers by providing funds needed to obtain machinery, equipment and working capital. Loans are commonly used for start-up and small expansion projects.

Tax Exempt Bonds

Tax-exempt industrial revenue bonds are an attractive financing option for small manufacturers looking to expand operations and upgrade facilities. Tax-exempt bonds are typically used for expansion projects that require new machinery and equipment, and that will ultimately result in job creation and improved economic conditions in the business’s community.

Visit the Tax-Exempt Bonds page for more information about this financing option.

Import-Export Assistance

The Trade Adjustment Assistance for Firms is a federal program providing financial assistance to manufacturers affected by import competition. Sponsored by the U.S. Department of Commerce, this cost sharing federal assistance program pays for half the cost of consultants or industry-specific experts for projects that improve a manufacturer's competitiveness.

The federal government also offers a number of export financing programs to help small manufacturing firms expand their business overseas.

Grants

Federal and state governments do not provide grants to start and expand manufacturing operations. However, there are a few programs in which for-profit small businesses can compete for research grant funds. Visit the Research Grants for Small Businesses page for more information.

Venture Capital

Early-stage high-tech manufacturers can have difficulty finding the right venture capital source. While government agencies are not equity investors, they do have programs that match up small manufacturers with private equity investors. Visit the Seed and Venture Capital Guide to learn more about these programs.

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Locate Financing Programs

The Loans and Grants Search Tool lets small businesses quickly locate financing programs for which they might qualify. Click on a state link below to learn about federal and state government-sponsored financing programs available to small manufacturers.

Financing Programs for Small Manufacturers

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Lean Manufacturing

Lean manufacturing is a systematic approach to eliminating wastes in the production process. Wastes can be anything that does not add value to a finished product, including processes, materials, and people (for example, not using employees to their fullest potential). Lean manufacturing is a continuous improvement process with the end objective of delivering products in the quickest, most efficient, and cost-effective manner.

Lean principles are based on the Toyota Production System (TPS) developed in the 1940s. TPS demonstrated that even though processes differ between factories, common wastes and inefficiencies could be found in all types of production environments. TPS was groundbreaking and turned Toyota into a global brand. Over the years, TPS principles have been applied to a number of other non-manufacturing industries such as information services and health care delivery.

As an extension of TPS principles, lean manufacturing focuses on identifying seven forms of wastes:

  • Waiting - Waste occurs whenever materials are not moving through a process.

  • Overproduction - Waste occurs in "just in case" operations in which goods are produced in anticipation of possible demand, which can result in excessive lead times, high storage costs and more defects.

  • Over Processing - Waste occurs when using equipment in processes where cheaper, less complex tools can be more efficient. This activity is commonly referred to as "using a sledgehammer to crack a nut."

  • Work in Progress - Excessive inventory is a result of overproduction and waiting, and results in longer lead times and higher storage costs.

  • Transportation - It is wasteful to transport a product between processes. Production should be a smooth flow between one process and another.

  • Motion - Unnecessary ergonomic activities such as walking, bending, searching, and reaching can add up to delays and longer lead times.

  • Defects - Defects resulting in re-work and scrap that negatively impacts the bottom line.

These wastes are often symptoms to deeper problems. Companies that fail at lean manufacturing often treat the symptoms rather than taking further steps to identify and resolve root causes, which are often “invisible” on the surface.

In a true lean environment:

  • Production is "just in time" – created as needed

  • Materials flow through a smooth process in which unnecessary waiting and transporting are eliminated

  • Equipment is right-sized to specific production tasks and processes

  • Inventory levels are reduced

  • Quality and accuracy are improved, and defects minimized

Lean manufacturing leads to higher profits, cost-efficient production, improved quality, greater throughput, improved employee morale and increased time to market.

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How Can I Become Lean?

Contact your local Manufacturing Extension Partnership (MEP) Office. MEP offers free and low-cost workshops and hands-on assistance to help small manufacturers learn lean tools, methodologies and practices.

The Lean Manufacturing Online Tutorial provides a step-by-step explanation of lean principles and how to apply them to your operations. This free course includes videos from lean production expert, James P. Womack, Ph.D.

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Case Studies and Success Stories

These case studies demonstrate how organizations have successfully implemented lean principles:

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References

Government agencies, nonprofits and educational institutions have a number of programs and services to help you learn about lean manufacturing.

Best Practices Resources

  • American Society for Quality’s Lean Enterprise Division
    Offers training and resources in lean principles and practices that can be applied across the enterprise.

  • EPA - Lean Manufacturing and the Environment
    Gives tools and resources from the U.S. Environmental Protection Agency (EPA) to help manufacturers adopt lean practices that protect the environment.

  • Green Suppliers Network
    Details the partnership between the EPA and the Manufacturing Extension Partnership, which works with manufacturers to engage small- and medium-sized suppliers in low-cost technical reviews that focus on process improvement and waste minimization.

  • Lean Enterprise Institute
    Overviews the Lean Enterprise Institute, a nonprofit corporation founded by James P. Womack, Ph.D, to promote a set of ideas commonly known as "lean thinking."

  • Northwest Lean Networks
    Assists companies in implementing lean manufacturing and lean production systems.

Lean Tools and Methods

Lean manufacturing is a continuous process rather than a destination. Becoming lean means creating a performance-based, customer-centric company in which all employees are engaged in lean initiatives. Getting there requires the adoption of tools and methods to help you eliminate wastes and their root causes, and become more efficient and profitable. The following resources provide starting points for learning about lean tools:

Sector Initiatives

  • Lean Aerospace Initiative
    Covers how the Lean Aerospace Initiative (LAI) at the Massachusetts Institute of Technology helps focus understanding and application of lean techniques in the aerospace sector.

  • Lean Construction Institute
    Explains the Lean Construction Institute, which reforms the management of production in design, engineering and construction for capital facilities.

  • Lean Shipbuilding Initiative
    Provides information on Lean Shipbuilding, an initiative to make the shipbuilding industry competitive by applying lean manufacturing principles.

  • Society of Automotive Engineers
    Offers a suite of products and services designed to assist the automotive and aerospace industries in the development, implementation, documentation and dissemination of lean enterprise principles and practices.

  • United States Army Lean Six Sigma Program
    Covers the United States Army’s effort to reduce waste throughout every process.

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Regulations and Compliance

In regulatory terms, manufacturing is a broad business activity encompassing many specific industries. Regulations that apply to food manufacturers do not apply to clothing manufacturers. However, several environmental, workplace safety, and tax regulations apply to most manufacturing activities, regardless of the goods produced.

The resources below provide starting points for learning about regulations that apply to your manufacturing business, and how to comply with them.

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Environmental Regulations

The EPA regulates the impact of manufacturing businesses on the environment. Enforcement, permitting and monitory activities are delegated to state agencies.

The Environmental Regulations Guide provides a directory of EPA resources that help EPA-regulated businesses understand and comply with environmental regulations.

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OSHA Regulations

Under the provisions of the Occupational Safety and Health Act of 1970 employers must provide a workplace free from recognized hazards that are causing, or are likely to cause, death or serious physical harm to your employees regardless of the size of your business. The Occupational Safety and Health Administration (OSHA) was established to create standards and regulations that implement the Act.

OSHA regulations are especially important when applied to manufacturing environments where workplace hazards are common. The following resources were prepared by OSHA to help small manufacturers comply with workplace safety regulations:

  • OSHA eTools
    Provides interactive, Web-based training tools on occupational safety and health topics, from machine guarding to shipyard employment.

  • Compliance Assistance Publications
    Supplies comprehensive resources on complying with OSHA regulations, including e-Tools, publications and resource guides, fact sheets, and workplace posters.

  • OSHA Recordkeeping Handbook
    Outlines rules for recording, tracking and reporting workplace injuries.

  • Onsite Consultations
    Provides free and confidential advice to help you comply with OSHA regulations.

Visit the Workplace Safety and Health Guide for a complete listing of OSHA requirements and resources.

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Tax Regulations

The Internal Revenue Service's (IRS) Tax Guide for Manufacturing provides tax tips, trends and statistics for the manufacturing industry.

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Marketing Regulations

The Federal Trade Commission enforce laws against businesses that make false or misleading claims about a product's U.S. origin. To protect consumers, the FTC requires that all products advertised as American-made must be "all or virtually all" made in the U.S.

This brief article outlines the FTC rule and compliance information for manufacturers: Made in the USA Labels: Information for Manufacturers, Retailers, and Consumers.

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Training and Assistance Programs for Small Manufacturers

Federal and state agencies offer a number of free and low-cost, in-person programs to help small manufacturers manage and expand their operations.

In-Person, Start-Up, and Management Services

Manufacturing Extension Partnership (MEP) Centers

MEP is a federal and state government service that connects small manufacturers with a national network of specialists who help business owners expand operations and improve productivity.

MEP services include:

  • Enterprise management

  • Strategic planning

  • Process improvement

  • Lean enterprise

  • Supply chain management

  • Quality systems

  • Energy Auditing ... and much more

Contact a MEP Center in your state to find more information.

USA National Innovation Marketplace

The USA National Innovation Marketplace is a MEP service that helps manufactures determine the products to make and where to sell them. This new program provides assistance with creating business plans and obtaining financing, and aims to help manufacturers discover new industries and markets in order to remain competitive and profitable.

Export Assistance

The federal government offers free in-person counseling services to help small manufacturers obtain export financing and locate business opportunities overseas.

  • U.S. Export Assistance Centers Offers small- and medium-sized businesses with local, personalized export assistance by professionals from the SBA, the U.S. Department of Commerce, the U.S. Export-Import Bank, and other public and private organizations. These centers are located in major metropolitan areas throughout the U.S.

  • Contact a Trade Specialist
    Provides a network of export and industry specialists located in more than 100 U.S. cities and 80 countries. These professionals provide free counseling and a variety of products and services to assist small- and mid-sized U.S. businesses in exporting their products and services. This program is provided by the U.S. Commercial Service.

  • USTDA Consultant Database for Small Businesses
    Provides a database of companies and individuals that offer fee-based consulting services to small business interested in importing and exporting. The database is offered by the U.S. Trade and Development Agency.

Visit Start an Export Business to find resources to help you export your goods overseas.

Government Contracting Assistance

The Procurement Technical Assistance Centers (PTACs) form a nationwide network of procurement professionals providing free and low-cost, hands-on help to small businesses seeking to compete for Federal government contracts.  PTAC has assisted several manufacturers in competing for, and winning contracting bids.

General Small Business Assistance

The SBA and other federal and state government agencies provide a variety of in-person assistance programs that help small businesses prepare business plans, obtain financing, start up operations, and expand into new markets. Click here to find out more.

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Business Site Selection Services

State economic development agencies assist small manufactures with finding and selecting a location for their operations. These services include listings of available office and industry space, as well as technical assistance with locating or relocating your operation.

Visit Choosing a Business Location to find a listing of site selection services in your state.

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Energy Efficiency Services

Your first step toward energy efficiency is to learn basic energy management practices. The SBA and ENERGY STAR® have partnered to create a guide for small manufacturers. Click here to learn about Energy Efficiency.

In addition, obtain a free energy audit for your facility from your state or local government's energy agency. An energy audit will provide details on your current energy consumption levels, and recommendations for improvements and cost savings. Many local MEP Centers also provide energy audit services.

You should also build an energy efficiency culture in your business. Visit Industrial Technology Best Practices to learn about leading energy conservation practices in industrial plants.

Finally, consider going beyond being energy efficient, and apply environmentally friendly and sustainable practices to your production process and finished goods. Visit the Green Marketing Guide to learn how to "green" certify your product and market to green consumers.

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Additional Resources

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Manufacturing Sectors

These industry guides include resources and information on programs that support specific types of manufacturing businesses:

  • Auto Manufacturing
    Offers resources that help auto manufacturers comply with government regulations.

  • Chemical Manufacturing
    Supplies resources for chemical businesses and chemical manufacturers to understand and comply with government regulations.

  • Food Manufacturing
    Gives a guide to the laws and regulations that apply to food and beverage businesses and the food and beverage industry.

  • Pharmaceuticals and Biotechnology
    Provides resources for producers, distributors and marketers of human and veterinary drugs, medicines, biologics, medical devices and equipment, and controlled substances.

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