The Future of Manufacturing with Sunny Han

Contact Sunny Han

Email: Sunny@fulcrumpro.com

LinkedIn: https://www.linkedin.com/in/yusunnyhan/

Lisa Ryan: Hey, it's Lisa Ryan. Welcome to the Manufacturers' Network Podcast. I'm excited today to introduce you to Sunny Han. Sunny is the CEO and founder of Fulcrum Manufacturing, an ERP platform dedicated to helping manufacturers build a better future. He led Fulcrum to raise a $3.1 million seed round of venture capital in 2020. Sunny is dedicated to delivering a connected future where frictionless manufacturing production and supply chains lead to faster and better product innovation. Sunny, welcome to the show.

Sunny Han: Thanks for having me, Lisa.

Lisa Ryan: So, please share with us a bit about your background. Where you started, and what led you to do what you're doing today?

Sunny Han: There's no magical story. My entire childhood was spent playing with computers and writing software and making friends with people that played video games with me and things like that. So I have a deep-seated past in technology. How I got into manufacturing was having no direction after college and working in the consulting industry. Because of that, I was exposed to many manufacturers, and I spent almost a decade working with midsize and small manufacturers. Between five to 10 employees, all the way up to hundreds or thousands of employees, and the flavor of that work was mainly in organizing them, helping them communicate better internally implementing technologies to assist with implementing earpiece systems, customizing them, writing custom software on top of them, helping them position themselves in the market correctly, and doing all sorts of different things.

Through that experience of learning about all different types of manufacturing, I started to get this hunch that a new operating system for manufacturing could drive a very different future of how manufacturers work with technology. It wasn't as if I was born on a shop floor with a tool in my hand or something like that. It was a very circuitous path that led me here. But it's something that I've fallen in love with over time.

Lisa Ryan: That's what we need. Not only do you bring more youth to manufacturing than what we're seeing, but for the most part, the silver tsunami is going. People are retiring in record numbers. So that easy adaptation you bring to technology and your love of manufacturing all woven together is precisely the type that we need to change the conversation. I mean, there's so much focus on er P and technology and everything in manufacturing. However, as you and I spoke a couple of minutes before the show, we still need to focus on humans. So how do you look at that? As far as that ideal mix of making sure we're taking care of our employees, attracting them into manufacturing, retaining them, and bringing in the technology, we need to move forward.

Sunny Han: I think there's this weird tension that exists right now, and I think most people don't understand it. I didn't understand it for an extended time. I don't think I still fully understand it. Still, manufacturing has been the origin of many business concepts, six Sigma, lean, agile, Kanban, kaizen - all of these concepts that have been ported over to software development and other businesses. They were developed primarily to make manufacturing more efficient and have these processes available to improve continuously.

So I think there's a statistic that over half of all the software programmers in the world were CNC machine programmers. So writing software for manufacturers has a rich history of manufacturing - both supporting, sponsoring, and ultimately spreading the word of technology out into the world. So that's where they started. And yet, when you ask them about manufacturing, most people ask a 20-year-old or a 25-year-old or even a 30-year-old, and the impression is that it's an old backward industry. It's dirty and a little less technologically advanced. This tension is weird and strange, but the fact of the matter is that manufacturing is not a commodities thing.

Operating a laser cutter takes skill and knowledge, and programming takes skill and expertise to understand what different gauges of metal and how they react and different EDM Ratings on rubber, how it melts, and how it extremes through an aperture, and things like that. I think there's a lot of craft that goes into it. I think what we see right now from the newer generation is that there is a little bit more of a risk aversion, but there's a lot more of a desire to know something that's deeper know something that is a craft.

So I'm very, very bullish on a return of a younger generation into manufacturing that's going to happen very soon, in my opinion. But that's also going to be human-focused. A lot of times, people ask me about the future of manufacturing. It has to be automated. It has been primarily machine-driven. I think that's the case. I believe that we're moving into a future where there will be more and more machines doing things that otherwise humans would do out of necessity because of the Labor force.

Still, I don't think that transition will happen over two years; I think it's going to take 30 years to transition. In the interim, we're going to need a group of wonderful humans that can both programming the machines to create them. Still, we ultimately do the work that humans are meant to do, which is creative communication. You know roles and responsibilities that are far more about what humans want than just the execution of making a component or apart. Hence, a long-winded answer, but hopefully, That gives you some context of where my head's at on that subject.

Lisa Ryan: Well, and it's something that I think many manufacturers have been doing for a long time; it's like they're in the "we've always done it this way, there's no need to fix things that aren't broken" mode. They're afraid of technology because they think that technology and automation are going to replace jobs And. In some cases, it will, but if we could replace the grunt work if we could replace that, like you said, the noncreative. Just the things on the line and have a machine do that and then allow the humans to be creative and work with the technology.

I know I was just at the FAB tech show and walking around. I love watching robotics. I love watching technology because it's fascinating, so if I'm fascinated by it. Imagine somebody walking into a manufacturing plant and seeing the robot seeing the automation. It becomes a recruiting tool like, hey, I want to work there. This is the coolest thing ever.

Sunny Han: Sure. A big draw is about to happen because the software will get a lot better and easier to use. It's going to be a lot fewer clipboards and pencil and paper and whiteboards. It's going to be a lot less manually moving things around. It's going to be a lot more robotic automation augmenting you as a human. Technology and software automation is going to augment you in your brain as a human as well. We're moving towards a future in construction and manufacturing specifically. People who work as operators will start to feel superhuman because of all these tools and automation around them. I think that will be exciting and not just a recruiting tool, but just kind of as a change in the paradigm about how people think about manufacturing in general.

Lisa Ryan: Right, I mean back in the days when I was selling into manufacturing, it was everything your mother ever warn warns you about. Dark, dirty, and dangerous, and now again, you have the fun technology and, I think, one of the most significant gifts of code. What came out of this whole thing was how it's sped up technology, because where people were afraid to use it before they realized that number one, they had to use it. It's so much easier. There's so much technology that is just intuitive that it's not nearly as scary as it used to be, so I think that we've had in these last 19 months or so more of this transition that we would have never had had it not be for this pandemic.

Sunny Han: Yeah, I think everybody is on zoom. We're on zoom right now, and I think it's just a lot less scary for most people. People are consuming media online. They're doing a lot of things online. They're storing items online and subscribing to different services that shift was already happening and accelerated almost to completion. So just in the last year and a half, many of our customers or prospects would be maybe a little queasy about having their software beyond the cloud. We don't have anybody care about that, so I think that's some a component inside there, but I also think that, too.

Thinking about how things work and how you work as a human being has also changed. It's not just with remote work, but what is gratifying about work has changed as well. So all of those things are leaving us in a market with an open mind and as an excellent opportunity to steer the market in the right way. To make the ecosystem go in a way that's positively reinforcing instead of more insular and to touch back on one of the points you just made implementing European systems; implementing machines, pallet systems, warehouse systems. These are harrowing experiences for many manufacturers 10, 20, 30 years ago, so it makes sense that they're hesitant to do it again. Still, I think they'll start to discover that it's just a very different process now that we've advanced quite a bit as an entire industry.

Lisa Ryan: Now, if you were to bring out your crystal ball, what are you, seeing as far as US manufacturing in the future.

Sunny Han: I see things that are coming back. I see automotive manufacturers missing a bolt or a break press piece of sheet metal that otherwise was made in bulk overseas that's coming back and being done here locally. I see many companies struggling to meet the demand of quickly quoting things to get something out the door. I see orders increasing in popularity and releases being more dynamic.  I see order quantity is going lower, and I see relationships getting a little bit deeper. 

I believe that a lot of things that we did to gain efficiencies 10, 15, 20 years ago by outsourcing to Asia or other places in the world, some of that will start getting done. There are concerns about climate change,  supply chain, flexibility, and agility. I think the cat's out of the bag - we rode that rocket of growth based on ordering large volumes from overseas, taking advantage of economic disparity. That economic disparity is shrinking. The ability to say that the future is not going to be volatile is going away, and I think we're going to see a larger than expected amount of reshoring work very soon. I believe the intelligent smart manufacturing business owners and business leaders are pre-planning and preparing as much as possible. They are making sure that they're ready to take advantage of it as it happens.

Lisa Ryan: So, and along those lines, you know what is some of the advice that you would have, as these manufacturers are planning the can help them to win business going forward.

Sunny Han: I think speed is essential. I think, in the past, where you might have been able to go back and forth for two or three months and try to establish a relationship, most people are trying to get an answer quickly. I think this concept of building a relationship first before vetting out whether the connections will happen that's flipped a bit where a buyer from a large manufacturing company is not going to be as tolerant of having a long relationship before buying from you. They're going to want to know your quality, what your pricing is like, and how you operate? Where are you geographically? And What's your capacity? much sooner because they're now starting to talk to more vendors. They want more stability. That is a change that the market needs to react to by getting answers faster, potentially taking a little more risk.  Manufacturers need to understand that price is no longer the primary factor in different fields.

It's the ability to react quickly, to have excess capacity, to build a little more. I think these larger manufacturers realize that the component vendors they're buying from are tier-two, tier-three, tier ones, so we work with these suppliers a lot. They need them to increase their supply by 30% or decrease it by 10%. That relationship is worth a lot of money because they understand what it means to have a bunch of AC units sitting out in their warehouse, not able to be shipped out because it's missing a rubber gasket. Or they have a bunch of RVs sitting out that can't be bought because it's missing a particular bolt. I think that was just not included in these large spreadsheets of these people make decisions with before. Now that it's made into the model, you can deliver more value by being flexible fast.

Lisa Ryan: And it sounds like a lot of communication goes along with building those relationships to set yourself apart from just being the cheapest manufacturer on the market. What are some of the things you've seen from the companies you work with as far as you know how they're communicating? How often they're communicating, you understand how they are building those relationships for the long term.

Sunny Han: I think a lot of it is still up in the air. It's still being developed right now. I think it's just a new dance that everybody's playing. I wouldn't say that there's any magical recipe, I think, just being open-minded. There's a certain amount of intuition that we all have that's based on experiences, right. That's where our intuition comes from.

We're learning that the future is very different than the past. We're taking a few risks in a very strategic way. That's probably the best way for you to learn a new dance with a new dance partner. You otherwise would have immediately said no to smaller production runs; maybe try it out see if you can make it happen. With the people you have, some complexity will arise from that, and there's a cost to that complexity. But the increased margins and the increased revenue you might get from these activities could more than offset that complexity and that cost and that burden. I think being more open-minded and willing to stomach a little bit more volatility in the short term is probably the best advice in terms of how to make sure that you're going to benefit and reap some benefit from this volatility.

Lisa Ryan: Looking long-term instead of the short-term pain you may be going through to get there. So, as we think about the changes again with the generations - millennials and Gen Z starting to come into the workplace and attracting them into manufacturing, we were looking at succession planning. Unfortunately, there are not many owners there with sons and daughters who are in line to take it over. So, hence, as people start the process, maybe they're not thinking about selling their business tomorrow, but at some point, it would be nice to retire and have that next person have those following people ready to take over the ship.

So, when we're looking at introducing these new generations into the workforce and that kind of succession planning to prepare your business either for succession or for sale, what are some of the things that you see that work along those lines.

Sunny Han: I think that the market out there is active a piece of context. A lot of manufacturers might be missing that because the stock markets are doing so well. Because there's so much liquidity and capital out there, private equity companies are traditionally buying manufacturers as their bread and butter acquisition targets. They have a lot more money, and they have a lot more pressure to deploy that money and to buy businesses. That isn't to say that every business has value is going to go up, but it does mean that the availability of buyers is high and there's probably a lot of folks that are being inundated with emails from companies that are looking to buy them. Some of them with names that they can't recognize whatsoever. There is a need to vet them out and make sure that they're legitimate and confident that they will do the things you want to do with the business long term.

If your employees are essential to you, make sure that you're able to carve a deal out that will serve you correctly. Most people miss that you feel that you are getting rid of the business on the worst day of your business life. Selling it will be easy, and just finding someone to provide you with enough money for it is the only thing that's difficult. But the moment it comes to walk away and the business is still functioning, the machines are still working, the people are still busy doing things, and the customers are still getting product ships. Removing yourself and your ego from a business is incredibly difficult, so the company is where the owner has already done that, and step back. The business is self-sufficient and has management in place.

They have the tools in place. They have the processes in place. Those companies are significantly more attractive to outside investors.  If I were to advise a family member who owned a manufacturing facility, I would tell them that you have to be honest with yourself, you might not be the person who wants to sell, and that's okay. But trying to be both, I think, is where the danger comes in.

Lisa Ryan: So if you're doing that assessment, and you know that you're probably too tied into your business and not as able to walk away, what are some of the baby steps to kind of put those processes in place to gradually start that process of moving out to make your business more sellable or marketable. If so, if you have an owner of a company, after they do their self-assessment, they realize that they are two tied into the business.

What are some baby steps they can take to start that process to make their business more marketable and hand it off to that next donor when the time has come?

Sunny Han: Yeah, I think a lot of times for business owners, the truth about their business rests in their brain and their brain only. There's a process called due diligence where anybody who's going to buy you will try to know the truth about your business. It's not like they're trying to poke holes in your story; it's not adversarial. It can feel adversarial for sure, but just like if you're going to buy a car, you're going to want to go check it out, take it for a test drive, things like that. The easier you can make that process, the more that the truth about the business is written down on paper is what you want. It isn't things that can easily be reproduced and also verified the better.

I think a clean shop is a much more intangible aspect of things as possible. Most of these investors will not come in and operate the business and make sure that there's a good working environment that people would want to work in. It makes recruiting other folks to come work at your company and has a calm demeanor about everything. 

That has a substantial intangible value because it tells the investor that acquiring this company is going to be just fine without either the owner or without me having to step in. Now some smaller private equity companies are called search funds, where they put an operator into the business to manage it and run it....