Episode #75: Real vs. Fake Companies - Why Owning Manufacturing Matters with Shlomo Assa of Acclaro Medical
In this episode of US Manufacturing Today (powered by Veryable), Matt Horine interviews Shlomo Assa, chairman, president, and co-founder of Acclaro Medical, a serial founder in the laser industry with 20+ patents whose operations ship to 60 countries. Assa explains how COVID-era supply chain disruptions showed that IP alone isn’t enough; companies that outsource turnkey manufacturing lose control of delivery, pricing, quality, and the ability to redesign around component end-of-life issues, making them “fake” companies dependent on offshore partners. He argues the recurring lesson across his ventures is urgency: when customers pay, you must be able to ship immediately or risk losing the deal. Assa distinguishes healthy, cost-neutral subcontracting of qualified subassemblies from full turnkey outsourcing, and discusses the global pricing premium and trust associated with “Made in the USA,” plus leadership and respect as keys to building strong manufacturing teams.
Links
- Acclaro Website
- Acclaro on LinkedIn
- Shlomo on LinkedIn
- Matt Horine on LinkedIn
- Veryable Is Revitalizing U.S. Manufacturing
- Sign Up on the Veryable Platform
Timestamps
- 00:00 Welcome and Guest Intro
- 01:10 Real vs Fake Companies
- 01:55 COVID Supply Chain Wake Up
- 05:21 Ship Fast or Lose Deals
- 08:10 Fear of Manufacturing
- 10:08 Smart Outsourcing Rules
- 12:54 Turnkey Outsourcing Trap
- 16:17 Field Failures Cost More
- 18:07 Made in USA Premium
- 23:36 Quality Details That Matter
- 29:44 Workforce and Leadership
- 34:39 30 Day Fix and CI
- 40:35 Contact and Closing
- 41:15 Final Takeaways and CTA
Episode Transcript
Matt Horine: [00:00:00] Welcome back to U.S. Manufacturing Today, the podcast powered by Veryable, where we talk with the leaders, innovators, and change makers shaping the future of American industry, along with providing regular updates on the state of manufacturing, the changing policy landscape, and more.
Today's guest built and sold several companies in the laser industry, holds more than 20 patents, and helped develop two of the platforms that became the gold standard in facial aesthetics, CO2RE and PicoWay.
He's running manufacturing operations that ship into 60 countries, and he's got a great perspective about why most companies that stop owning their manufacturing eventually [00:01:00] stop being real companies at all. Please welcome to the show Shlomo Assa, chairman, president, and co-founder of Acclaro Medical.
Shlomo, we're excited to have you on US Manufacturing today.
Shlomo: Thank you for having me
Matt: Let's jump straight into it because I think this is a really really great topic and a great punchline when we met talking about that real versus fake dynamic. There's been a lot of talk in the world about real companies, real work, and manufacturing's right at the core of that because we're making physical product.
What was the moment-- you have a background, heavily in engineering but what was the moment in your engineering career where you realized that maybe the invention on paper and a manufacturable product were two completely different problems?
Shlomo: I think I think when I was involved with the launch of PicoWay and I got deep into the, the difficulties, nicness of building a product it kinda struck me that, just to create an innovation or to create an IP or patent is not sufficient. You really need to scale it up.
You need to figure out how to build and make money out of that. When we developed Acclaro or the ultra- the ultra-clear [00:02:00] product, we were in the middle, middle of COVID, and the supply chain crisis that happened during COVID and post-COVID forced us to take a deep thinking into what do we wanna do.
Do we really wanna go into contract manufacturing like everybody else does, just farm it out, or do we wanna get into manufacturing, and then what's then? And it was very easy decision because the decision was we're gonna go to manufacturing, 'cause without manufacturing, we do not own the ability to ship. We, in the middle of it, we had a, a microprocessor that was very commonly used by Motorola, that appeared to be used in almost every ATM machine, which was the core processor in our product. But we got the good news and the bad news. The good news was we can sell you the microprocessor. The bad news, it's gonna be, like, 52 weeks lead time. And we said how do we do 52 weeks lead time?" And Motorola said we lost a contract to produce it in Taiwan to Intel, so it's 52 weeks' time. But we have a [00:03:00] different processor from the same family. If you can use that, you can build your product." So we looked at the other processor.
We said that specs fits." It's a different frame. It's a different circuit board, but functionality is the same. Now, given that we had the engineering and the manufacturing, we could span the board very quickly, put the software in, and we were up and running, losing very little time. We had to do it three or four different s- times as we emerged out of COVID because, the, the world of microprocessor, the world of componentry is going through constantly end of life and changes components.
So that made me realize that without manufacturing the product, you don't really have a real com- 'cause why I call it a fake company is 'cause we are at the mer- you are at the mercy of some people offshore, whether they are in Thailand or in Singapore or in Taiwan or in Mexico doing your product. You're at the mercy of their willingness to go the extra mile, redesign the boards, redesign the componentry, [00:04:00] redesign your software in order for you to be in business. Because if they don't do it, you have nothing to sell. You have nothing to sell, you have no revenue coming in. So to me, building the product with IP, without IP, it's completely part of the essence of being on a real company. You wanna own a real company, you gotta have a real product made, add to that the American technology made in the US, so that's a different topic. But to me, if you're not making the product, you have very little s- very little control over the pricing, quality, availability, and ability to change or overcome adverse events like, supply chain disruption, end of life, products that are defective, and so on and so forth.
So that's why I say if you don't have manufacturing, you don't have a real co- fake company
Matt: That's a really refreshing take because a lot of times the, the manufacturing world is pretty black and white. Daily operations, supply chain, it, it-- People don't have that sense of [00:05:00] realness anymore in contract manufacturing, which we can talk a little bit more about in the show. I have past experience with contract manufacturers, good and bad, but it is true in, in a lot of sense what you're saying is that abdication of having the real product that you own and that you've invented makes, makes a lot of sense and true.
Your background, you're an engineer by trade. You've been a serial founder, built and sold companies. Of the four companies that you've built and sold, what's the one lesson that shows up in every single one of them?
Shlomo: The urgency to deliver products when the customer... When a customer comes to you and say, "I like your product, here's a check. Give me the product." When the money changes hands, if you don't have the product ready on the shelf to lo- to sell this becomes an academical transaction. Because immediately post the transaction, the customer... If the customer gives you money and you don't have the product, and you tell him, "Give me two, three, four, five weeks," in two, three weeks it's 50%. Later than that, it's 80% you lose it. So there's buyer's [00:06:00] remorse. There's a lot of reasons why people walk away from deals. So when somebody writes you a check and say, "What do you want for the product?"
"100 grand." "150 grand." "There's a check for 150 grand. Ship it to this address. Can I get it tomorrow?" If you- if the answer is yes, I'm just making a phone call and it gets on a... it gets into the DHL or the UPS or the FedEx or whatever shipper you are, and given 24 hours you'll get it next day, you consume the deal. If you don't have control over this, you don't have a company. You're just basically a store, storefront with a facade, like they do in Hollywood, right? You walk into the f- into the store, and as you pass by the door, you get to the exit, you look at that and say, "It's a facade. Where is the product?" I don't have a product, I only have a facade.
So to me, this is fundamentally whether you have a company or don't. Because everybody knows when a buyer comes to you and willing to take your product, there's a [00:07:00] buyer's remorse, there's million reason why people are gonna cancel the deal. 'Cause every acquisition is an emotional acquisition. There's an emotional storm that causes the client to come and say, "Okay, let's do it. Here's the money." You wanna take the money, you wanna be professional, but you wanna take the money, you wanna ship the product. This transaction requires you to have everything line up ready for the customer. Again, if you need to bring it from Thailand, and it needs to come land it in the US, and then sits in custom for three weeks 'cause we're missing... somebody's missing a stamp on a package, I'm... I almost guarantee you, and that's my experience, the customer will say I changed my mind, there's things happened, I no longer need the product. I'm going a different direction," and you're stuck with the product. They had a revenue, had no c- no account receivable, and you got expenses. So to me, the sense of urgency is that when somebody writes you a check, be seriously ready with the product, so you take their money and you ship the product. If [00:08:00] this transaction cannot be done in real time, you don't have a real company. You'll never get with revenue
Matt: It's a really important point. I think something you said when we first met really stuck with me. A lot of companies today get the sense, basically what you just described is it's a, a fake mentality, right? Where you're accepting payment for
Shlomo: fear. No it's not fake, it's a fear. Most executive I met that are private equity and from banker's perspective doing the right thing to, to the owner who was the private equity or some investor, they're driven by fear. Meaning, why would I get into manufacturing? Again in a private conversation I told you, and now at my production facility, I get a- around between $14 and $15 million a year revenue per employee, per assembler. Every assembler in my line produces 1.2 to $1.3 million of goods per month. That's about $15 million per year. I... why would [00:09:00] you pay somebody else to do that? What? Because you cannot have a payroll? You gotta pay the payroll anyway. What, you cannot build an environment to the employees and actually take care of their wellbeing as a human beings? What's w- what is wrong with that? So I think people are afraid for manufacturing, and it is super important to distinguish between real companies and companies who struggle to to show growth, to show cons- consistent results. It's to me black and white. When I look at a company that doesn't produce, I'm saying, "So what are they... What are... How do they different than a distributor who brings a Korean product or Chinese product?" They have excellent service in the sales, excellent service with clinical training, excellence service in repairing the machine. But as soon as the manufacturers say, "Hey, you know what? I don't like you anymore. Get outta here," you have nothing. You just lost your franchise. So to me, it's the sense of urgency that makes the difference
Matt: No that's pretty spot on, and I think your framing of it is almost like a [00:10:00] distribution administrative company, no technical staff who can actually speak to how the product is made. You're dependent on a cost-plus relationship, those types of things. Just for the benefit of the audience, where is the line in your view between healthy outsourcing of some of those types of things and losing your identity?
Because there have got to be some, some maybe some early warning signs. Maybe your organizational drift has
Shlomo: No, no. It's an excellent question. Excellent question. It's a million-dollar question, and I'm gonna answer you with a great deal of detail. Outsourcing is not bad I do a lot of outsourcing. I take subassemblies that I look at them and I s- and my production te- team saying, if you want us to make that, we need more space, we need more people." But we have a company here, local company that we know, that we work for many years, that we trust, that we can qualify them to do the subassembly on what we call cost neutral, and then we can focus on continuous scaling of the organization. That that's subcontracting, but you're not giving away anything.
But the key is a cost [00:11:00] neutral. The word cost neutral, very few people understand what it means. I have a lot of bankers came to my place, bankers that I know from my Candela days and before, they say, "What is a cost neutral?" Very simple. It's the same cost it costs my organization to build a subassembly, that is the cost I'm gonna pay you to do the work.
I'm not gonna pay you a penny more. So if to take a, a bag of sheet metal parts and rivet them to a particular frame that I need, costs say 20 minutes of labor plus the cost of the parts, that's what I'm gonna pay you. Not a penny more, not a penny less. If you feel you cannot do it, then you're not the right assembler. So what do I achieve by that? I achieve by that, that I have a lot of people who are coming and going like an accordion. When I need them, they're coming in, they take the product, they do the work, they give me the work. I can actually scale up my production without hiring more people, which I don't necessarily need more people, by giving, by [00:12:00] creating an alliance with other people. But the other people don't have the design. We own the design. We have to qualify the subassembly. We have to write the documentation, all the ma- assembly instruction, the, the drawing. Everything needs to be done in a way that I can pick up this documentation and drop it on somebody else. The learning curve is very simple, and it becomes what we call cost neutral.
Because they look at it, say there's no risk in the subassembly, so we're not assuming risk. You're not dumping on us risk you're not willing to take. You're giving us the recipe to succeed 'cause here's our assembly, all the documentation is in place. You're giving us a clear visibility how to quote the parts or where to buy the parts," right?
So there, there's no hidden, there's no hidden money, there's no hidden risk, and you'd be surprised how many people willing to do it, and that's what they thrive on because they don't have the ability to do what we do, which is IP relate and so on. So I think where it becomes an issue is when you do a turnkey.
A turnkey [00:13:00] is what we did in Candela. When Candela was acquired by Apex Partners, Apex Partner came in and said, "We don't wanna be in manufacturing. We do not, and we wanna farm out all the production. We wanna be distribution only." And when we ask why, they said there's too much risk in manufacturing," and so they ship their product to Nigel-Nipro with the intention that Nigel-Nipro will produce it In their facility in Shanghai. But then Trump puts a tariff on that, and then Shanghai no longer an option, became Tijuana. But Tijuana, they don't have the skills, so now all of a sudden the support comes from Germany. You look at it and you say, "How do you allow such a lousy decision to escalate?" Once you sign a contract, the big company is saying, "It doesn't matter to you where we produce the product, as long as we satisfy your needs." But y- you and I can argue, is supporting product that is made in Tijuana by sending engineer from Germany, is that the [00:14:00] right way to do it? The answer is no. You don't need to, you don't need to be a genius in manufacturing. It's a common sense. You need people who are supporting your assembly line that lives in the same place where the assembly is there, so when there's a question, they pick up the phone, somebody comes within an hour and solves the problem. You don't need to wait a week and a half until somebody from Germany flies to Tijuana. So to me, the borderline is turnkey. When you do turnkey, like what Apple did with the Flex, take all the production of the laptop, all the production of the iPhone and ship them to China to get a better product. That's the bor- that's the borderline. To me, in a small company, big company, a billion dollar or smaller, it's a small company in America, and you do what Apple tried to do, you're doomed to fail. You'll be, you'll run your company to bankruptcy sooner rather than later because the contract manufacturing, it's a cost plus op- operation. You're paying for every time they go to Starbucks, you're paying for that. Where my employees go to Starbucks, I don't pay for that. I pay their salary, I [00:15:00] give them a very decent bonuses, but I don't pay for them to go daily to Starbucks. Contract manufacturing, they go to Starbucks, you're paying for that
Matt: Yeah, there's so many hidden costs in that and just the
Shlomo: can tell you when I was in Candela again, when we shift, when we shifted all the production from in-house with the support of good s- with good subcontractor to help us to do sub-assemblies, we shipped a turnkey to Niger and Nipro. The contract called for 22% their cost. You look at it today, they're 45%.
Okay? So if you're trying to build a 70 or 80% gross margin 'cause you own the IP, you'll never get there. If you pay 40% to an integrator, you'll never get to your gross margin, not million years. So I think that's the bo- that's the bo- that's the borderline to me. When you're shipping all your production, lock, stock, and barrel to somebody you're basically shipping your future
Matt: Really good perspective and a good call-out for, I think that a lot of organizations drift into [00:16:00] that in a lot of ways. E- eventually it just begins compounding on itself where they've decided to outsource components of their manufacturing to the point of your great example, which is just we don't want the manufacturing, it's too complicated, it's too risky, it's too whatever.
And you see a lot of c- ma- great manufacturing companies that have basically become distribution companies from
Shlomo: I, but I wanna add one more point, and again, this is from my experience in Candela that helped me a lot to clear why I wanted to go to manufacturing logs, stock, and barrel. We're saying that the problem that you have in a production costs you a dollar to fix. The same problem in the field costs you 100 or $1,000 to fix, right?
And that's very logical, right? So why would you give away the dollar problem to fix, but you'll invest in $1,000 to fix? In other words, why would you not produce your product, but you'll hire a bunch of people to fix your product in the field? W- where's the logic? You're not investing in solving problem when they're costing you a buck, but you're investing in solving a product when it costs you [00:17:00] 1,000 bucks. It, to me, those decision nothing to do with the economy. Those decision are driven by fear. Fear or ignorance. The executive will make those decision are either ignorant or they're driven by fear. They're afraid of succeeding and they're making the very, very logical decision, "I don't have the skills, so let me give it to somebody who does have the skills." But if you are-- But you're running a company, you don't have a lot of skills. You don't have the skills to do a GAAP accounting, you hire an accountant. You don't have the skills to to do sales and marketing you hire marketing people. Then you find out you don't have skills in social media, then you hire somebody who does have skills in social media, right?
So the idea is that, "Oh, I don't have skill in manufacturing, so let me ship all the product out." Makes no sense. Absolutely no sense. And that's why I call it fake company
Matt: No fake company and driven by fear. I think the fear framework is so great. We had a guest on this past week about choosing hard, it was the discussion that we had, and [00:18:00] his leadership framework was doing the hard things and doing things that move your business forward, and, not being driven by fear is a big one in manufacturing overall.
I think, one other thing that we we talked about when we met was, some of the, the headwinds that manufacturers face. You referenced the pandemic timeframe, the supply chain volatility. There's tariff volatility. There's kind of a reorganization of, the global framework and how trade will be conducted.
But you brought something, to light that we haven't really discussed much on this show, that, selling into some of these international markets, the Made in the USA component of this, commands a pricing premium overseas in a lot of cases. And your definitions were pretty specific.
How is that premium held up or shifted as more countries build credible manufacturing of their own? Or how do you... I guess we'll lay the groundwork first. Where do you see that premium, and why do you-
Shlomo: The US market is driven by, by, by the freedom to exercise your American dream. Let me put it in a very blunt way. I'm a first-generation immigrant. Many of my co-founders are [00:19:00] first-generation immigrants. We came here to pursue the American dream. We became very patriotic in the US because the USA produces spectacular technology in the world.
The 90... I would say 95% of the most important innovations in the last 200 years came from the America. And then you c- you can spin around any, any way you want. And I don't wanna get into politics of other countries or for it or less for it. The biggest innovation coming from the United States, and when somebody abroad, if it's Korea, or Japan, or Germany, or Italy, they look at American product, they ask himself the question, "Is that a me too product?
Is that's original product? If it's original, can I trace down who are the co- what are the component makers?" So for instance, one of the first opening point I'm saying, my my, my graphic user interface is a Windows-based, Windows Microsoft, and it's using Intel i7, and that has the power of your laptop.
For a lot of people, this is American in- [00:20:00] ingenuity. Th- this, no, this is not associated with Taiwan or Korea. Nobody cares where the Intel chip is made. The Intel i7 is an icon in in, in computer power of Microsoft, right? And you can go on and on. I'm using the scanning technology, right?
So I'm using Novanta. Novanta is a billion-dollar American company who is a supermarket of optical solution, which are all of them innovative, one of a kind. Many of them come from MIT. It's not argue- that nobody will argue with you. So when you come out and you say, "That's made in the US, and it's the best of the best that the US technology can put together in a medical device," that, that commands a premium. It's not compromised by me too. It's not made by a component just to make the cost of production cheaper and I get better gross margin. We put the best of the best the American technology can offer in order to bring this premium product, and when we put the label made in the US, it takes a premium. It's a fact. If you ask me post-COVID, if made in the US [00:21:00] would be that big... I'm gonna tell you one more interesting thing. We started a company in Boston. We were living in Massachusetts, me and the co-founder, and we said, "Let's start the company with a Boston address." It was in Boston address, and the Boston very quickly bought us nothing, really. We realized that ac- accept the fact that most foreigners know where Boston is and don't know where Rhode Island is. We're not getting any recognition, we're not getting any value out of Boston. So that's why we moved outside Boston, 'cause there was no sense making business in Boston. But I'm gonna tell you that made in the US we get that every day.
I go to Germany, right? In Germany, Germany is a technology savvy company, coun- country. Germany makes Porsche, Germany makes Mercedes. They get make BMW. They make electric cars. They make airplanes component. Germany is a very technological savvy country. You would argue that Germany is more technologically than Thailand. But the value I get of made in the US in Thailand and Germany is, [00:22:00] if it's not identical, sometimes in Germany higher than in Thailand. So made in the US has a huge selling value all over the world. For all those entrepreneurs and young people who have their... Or looking at the American dreams, wanna get into that, you can try it out. If you produce the product in the US or you're calling it manufactured in the US but made in Mexico, you'll get the value of made in Mexico. I'll get the value of made in the US. This has nothing to do with the IP. It's nothing to do with the function. This has to do with the robustness and the structure, and what are you offering me when I'm paying you for the money?
'Cause obviously I'm buying your ideas, I'm buying your IPs, I'm buying your production, your quality. I'm buying everything you're selling. I'm buying, and I'm becoming part of your... I'm becoming a client of yours, part of your cabal of customers, right? So I wanna know that what you put into my product is the best of the best one. It's no different than a mom trying to feed her kids the best of the best organic f- to go out and spend top money for certain type of things. So it's the same thing. [00:23:00] I found out that anywhere in the world that I going, from Korea to Indonesia, to Germany, to France, to UK, to Sweden, Middle East, Dubai, anywhere in the world, made in the US carries a, a, a tremendous value
Matt: That's really encouraging news because I think, a lot of the discussion around reindustrialization has talked about the output of American manufacturing and still viewed as the, for lack of a better word, the standard around the world. And a lot of that has to do with some of the things you've highlighted earlier in the show, the, the discipline behind owning the manufacturing process and, doing it in a way that is to a really high standard.
And I think we, we talked about a couple of examples on there, but what's an example of, some of those small details that turned out to matter enormously when your products were in the field? You highlighted, not sending somebody else to the field to address a product that you didn't make, but some of the safety d- driven design choices that show up when you build versus having somebody else build.
Shlomo: It's, it starts from the very beginning availability to sell on [00:24:00] time. You talk to many buyers, they'll tell you, "I walked away from deals 'cause They wanted me to wait six to eight weeks. So availability of the product, that's number one. Number two, it's the reliability, it's the installation, it's the installation experience, the customer experience from the moment that the product arrived into his clinic and how until it starts working.
In, in made in the US you don't expect dead on arrival, that, that term doesn't exist in US. We ship all over the world. We ship in cardboard boxes, we ship in any configuration cardboard with any airline, and it comes, it gets out of the box you plug it in, it works immediately.
So it's... and it, and the performance of our device, why we are considered to be market disruptor, why we are growing our revenue like a rocket ship, is because we produce unparalleled value, and it is coming because we have unparalleled component quality. They're coming from the best of the best the US can offer. Everything we put in the machine is the best [00:25:00] of the best. We don't compromise. We could have bought a AMD processor, and we can bought the W- Windows single board computer from Taiwan. This is what I did in Chi- in, in Candela. We chose not to. Because, yeah, AMD isn't the same level of Intel when you buy laptops.
Nah. Look at laptops. Go to Dell, go to Lenovo, go to every laptop. You'll have an AMD and you'll have an Intel. The Intel will be 25% more. It's the same computer. You don't know the difference, I don't know the difference, running Windows. The quality of your products and the component you're putting there commends the value. Coming with a ta- tag made in the US as a disruptive product makes the difference. I'm gonna tell you one more thing. You have to remember, America is the first one that created the flying airplane. People forgetting that. So when I was an engineer my, my first degree was a mechanical engineer.
I studied in Israel, and my my, my class of metallurgic was based on Bethlehem Steels. It was a spectacular [00:26:00] book of alloys, and a for- 4340, the AI- AISI 4340 was invented for landing gears in airplanes, for Boeing. What... Fast-forward 20 years later I, I or 15 years later, I'm immigra- immigrate to the US and become a US citizen.
It was my dream to go to see Bethlehem Steels. I go to Bethlehem. There's a small little museum and there's a park. I say, "Where's Bethlehem Steels?" "It's gone. It's gone. 10 years ago, George W Bush eliminated it. We bought it." I said, "So w- what happened to all this spectacular development that they've done?"
"It's gone. Never comes back." I was shocked. How is a country will give away one of the most innovative foundry? This is a steel foundry. They were taking iron- And creating alloys, and some of the alloys that they're making enabled landing gears. So to me, for a lot of people in the world, made in the US resonates with this.
It [00:27:00] resonate with enablement, with pioneering technology, with the best of the best. You don't need to say... you need to deliver a product that has the image of the best if you wanna be calling yourself the best of the best. You cannot come to countries like Argentina, ship a product doesn't work, and call it made in the US, and say people, "Oh, yeah." But if you ship a top quality product with a label made in the US, you'll get premium
Matt: No it's a great point, and your example of Bethlehem Steel kind of captures the sentiment there. The I-beam, if you've been up to Lehigh Valley and seen, the foundries and where they produce that, it's almost like a, they've obviously done redevelopment and gone back in there to, to try to revitalize, and there's a lot of manufacturing still there, but it was born from Bethlehem Steel.
And hopefully in the coming years we'll see something like that come back because it was so innovative and
Shlomo: I, I'll give you another, I'll give you another example. This is even closer inv- e- example. When I was in Candela, I met couple of guys from from Ohio [00:28:00] who convinced us to go to business in building some gas filling canister that we needed, and they telling us that in their town there's enormous amount of vacancy.
You can get properties for 20 years lease for maybe 10 cents on the dollar. I said, "How is it possible?" So I said let me fly." I flew to Cleveland, I drove to their town, and it's where the Suburban was made. The Suburban was manufactured in Ohio, and the United States, under the NAFTA agreement, shipped all Suburban to Mexico.
It was cheaper to build the Suburban in Mexico than in, in, in in Ohio. You go to Ohio today, there's still tens of thousands of building with landlords who cannot rent them out. A- and we talking about all this, this is strategic. You can come and say it's a Suburban, a good car, a bad car, it doesn't matter if it's a good car or a bad car.
It was developed in America in Detroit. It was built in Detroit for the American consumer. A lot of the soccer moms loved the Suburban in the '60s and '70s. It was an [00:29:00] icon. It was an icon, always been an icon, and it's gone. And what happened to Detroit? Detroit was one time, one time the center of the auto- automobile industry. So I think the, the renaissance of the American industry can come back if enough people like me realize that, manufacturing is a very import- p- important part of owning your future
Matt: Said. It's core to the process. It's-- If you're not making it, then, you can ta- I can go on this topic, and we have on this show a lot about, a services-based economy, that it's a consumption economy, that it's just consuming the lowest quality products at the highest volume possible.
But if you're not making and building things, you're abdicating some sovereignty on, on a, on just a personal level, but a national level. With that, there was something else that, that we talked about the, the quality of the design product, owning and manufacturing products.
You referenced earlier, the revenue per generated. That can only come from a really good place where you have a good culture, where you have a good a place where people [00:30:00] feel rewarded for the kind of work that they do. What do you think manufacturers get wrong about what it actually takes to attract, keep the kind of skilled, labor on the floor that, that kind of talent?
We hear a lot about that. I tend to think that the labor shortage is a myth. I think it's a utilization question. But oftentimes, manufacturers do run into this. And does owning the manufacturing process, does that-- is that a big component of this?
Shlomo: It's a leadership problem, it's literally a leadership problem. In my company, we have people with IQ of 200, literally people who are genius in mathematics. Th- those are creating algorithm, computation algorithm second to none. Second to none. Because, we have to produce a FDA-regulated, highly safe and highly intrusive product to human beings, so you know, you gotta have spectacular algorithm to control your energy and to control your device.
So we have those IQ 200 that are, they're geeks. They are software geeks. They're sitting in front of the m- four, five monitors with [00:31:00] line of codes you don't understand the language. And we've got a production people that never went to college. They typically graduate 12 years and go into work.
They love working with their hands. They're very good with their hands, they're very good with the eyes. They got steady hands. They can actually take two pieces of fiber and hold it in front of them and glue them to perfection. How do you make both of them reside in the same building? Is it, are you gonna treat your doctor different that you treat the guy who is your car doctor? If you treat them differently, then you'll be broken car in the freeway. So it's all about respect and it starts from leadership. If you recognize that a person who builds the machine is a different Has a different personality, has a different aspiration in life, but is important part of your team. And you bring them together and you teach them to be a part of the same organization. I build the product, you put the software. Without what I do your software is in the air, or without my software your piece of hardware is a junkyard. So it becomes part of the [00:32:00] process.
It's almost like an orchestra that plays, and the value of the s- of the individual instrument is not measured by how many notes you do in Mozart. If I bring a tuba, you'll say the tuba is too dominant," so therefore all the composers using the tuba only for few tones, that makes it not important. It's the same important, 'cause you cannot have the symphony play without a tuba. So it's all about leadership. It's about recognition that different people have different skills and have a different part in the organization. It's very simple. If you recognize that, then you manage that appropriately. You task them differently.
You incentivize differently. You give them different guidance. The, the head of manufacturing is a guy that I hired in Candela. He came out of school. He was a kid with no skills. I promoted him five times, at the last promotion he became the head of the quality control of the pick-away. He was that good. He was sharp and good, a very quick learner. Very good with his hands. We [00:33:00] hired him in Aklar to be the director of manufacturing. He's now senior director. And he built the whole production. His wife told me, the first time we start to produce our product in a first Christmas party, she said to me, "Mike love working with you because you trust him."
She said that trust is the biggest thing for him because you treat him as equal and you're willing to listen to his idea no matter how crazy the idea sound. You trust him that he knows what he's talking about. And to me, li- like I said at the beginning, it's leadership. If you have the ability to treat e- different people equally with no exception, you can build a thriving organization where you've got IQ 201 and a guy who literally n- very good with his hands, doesn't know how to write a single line of code, and they can be best friends and they can do all the, all the silly things in, in, in when you do the company, the beach party, they can do the silly thing and they can play the silly games, and they don't look at each other, "I'm more important" or "You're more important."
[00:34:00] Doesn't matter. It's we're part of the organization, equal part. Each one of us is a screw in a big machine that without the screw, the machine is not operational. And I'm saying all the time, "This product is being assembled by good ol' American." Pe- people look at me, right? There are Americans that willing to work. Yeah, there's a lot of Americans willing to work. A lot of them. And those who don't work, they just didn't find the right place to go to work
Matt: Said. Yeah, that's the utilization component of this, and labor access and something that we combat every day is, how do you get people access to the type of work that is rewarding and fulfilling? Manufacturing's synonymous with that. It's something that 100% resonates with what we talk about every day.
This is a, a part of the show, Shlomo, where we ask for the, what I call the free advice. Like the, the consultant, if we were to ask you if anybody had a moment with you, if they were taking a look at their company and they said, wow, that's... A lot of what we talked about today applies to them.
Have they outsourced their manufacturing? Have they given up too much? Do they have fear about, the manufacturing process? What's the one [00:35:00] thing they should do in the next 30 days to maybe start changing or correcting the course of where they're taking their business?
Shlomo: Do a realistic assessment of what will cost you build the product yourself by rolling your sleeves and putting the realistic number versus what the other guys are giving you the rosy picture. 'Cause the other guys will give you the rosy picture to get the contract. Once they got you hooked, everything will become more expensive. And then ask yourself the question, worst case scenario if I do it, worst case scenario they do it, and ask yourself can you live with the worst case scenario? We've done this analysis, and we said, "If the 25% cost of contract manufacturing become 45% to the other company," the answer is no, we're bankrupt. So is it a risk worth taking? Where if we produce the product and we make mistakes, and our mistake costing us the cost of service goes from 2% to 8%, is it the same thing? In a, in one example, 2% to [00:36:00] 6% we have a pro- we have a, a, a company with some issues which we felt in the field, meaning we're not doing a good job on identifying the product at home, but we can keep c- keep doing it better by enabling our people to do what we call contact con- continuous improvement. Delegate the people to understand the source of problem and solve them instead of telling them what to do. And then you can track the 2%... the 6% going back to 2%, but once your 22% supplier got you to 45, they're never gonna get you back to 22. The 45 will go up to 60 because they got you hooked. Why would they give you money back? There's no incentive for them to do it. They have no... They're not invested in your product. And I give you another example. So you sh- you ship a... Y- in my case say I, I finish a product, I put it in a, in the in a inventory, and I got a com- a company from Brazil buying it, or a, a doctor, right?
It gets on an airplane, two days after it's in Brazil, [00:37:00] it's broken down. My team, a production team said, "No way. I need to know exactly what happened. I need to understand root cause analysis." They're rolling their sleeve because they own it. Now take the example of the same scenario with the contractor.
The contractor shipped you the product. The day they shipped you the product, they billed you. They ship the product on ocean or on, on slow freight because nobody wants to pay for that, right? So he ha- it, it comes to your facility two weeks later, sits in your facility two weeks, then it's shipped to Brazil, it's broken, you already paid the supplier. Supplier already got their money. They don't care about your problem. It's your problem. They basically... You basically have a problem in the field with no ownership in your management. Nobody owns it. And the guy who actually created the problem already got paid. He's already sitting on the beach thinking about about about "N- what do I do tomorrow?" This sense of ownership creates something that the industry, American industry, [00:38:00] was very good at: the continuous improvement. They call it Six Sigma, Six Sigma, Black Belt, all the companies calling them in the days that Jack Welch used to run GE and they used to do real manufacturing. We call it continuous improvement. Basically get the people in production to identify where is the source of the problem, what do you need to do in production to continuously improve so these failures in the field don't repeat themselves. This is the thriving organization you wanna have. So if you sh- ship your production, you ship all, all the defects, you ship all the problem, you just keep paying, and it's gonna g- become more and more expensive.
Never get-
Matt: Said. The problem tends to compound when you don't do the root cause and figure it out
Shlomo: and another thing I don't know, I don't wanna complicate the story, in, in business I always show this chart. One go up and one go down. You want the ASP, the average selling price, to go up, and you want your production cost to go down, then your gross margin is healthy, growing positive, right?
How do you control the cost of production down [00:39:00] if the people who produce it have no incentive? They have no incentive to lower the cost. Their incentive is to increase more and more fees, because they're getting paid for every dollar they're spending to buy, they're getting purchase burden or purchase fee. And for every dollar they every hour they get paid fully. So where's the incentive to... The incentive comes from management of the company towards the production and the buyers to say, "I need to lower the cost." Now, I can tell you, in four years or four and a half years in production, our cost at Cox went up by o- over 10 points, because we have the ability to ship to increase our ASP, which is part of what we as a business, and we have the ability to lower the co- cost of production, cost of material and cost of labor.
So it's another reason why I call it real company and fake company. If you wanna... If you really believe that selling carpet requires you to have a gross margin of 60 or 70 or 80%, in our case it's 80%, you need to [00:40:00] control every dollar that goes into the machine. Cannot cut, you cannot cut the quality, 'cause remember they're made in the US. They're made in the US is connected to... it becomes a poster if you cannot stand behind the quality. But becomes a, a value add or becomes your legacy if your quality is there, right? So every dollar you put in the machine needs to be accounted for, and your people who are doing it, you give them the tools to do continuous improvement.
They get better in, in cost, they get better in purchasing, assembly, and service
Matt: Spot on. Really great advice. Something that, manufacturing leadership should take note of. Shlomo, this has been an, a, a great episode and a really great talk. Where can our viewers go to find out, more about you, more about your company Acclaro or to get in touch with you?
Shlomo: Yeah. They can shoot me an email at my work email at S-A-S-S-A @acclaromd, one word, .com. So sassa@acclaromd.com. And more than happy to connect with them and give them advice. I would like to help young people, young [00:41:00] entrepreneurs make the right choices, like a lot of smart people helped me.
So I'm offering my help to people. Not interested in payment, I'm interested just to advance the idea of made in the US as a huge value for you
Matt: Said. Thank you very much for joining us today
Shlomo: Thank you. Thank you, Matt. You take care
Matt: Absolutely. So bring it back to the test we opened with. Is your company real or is it a distribution business wearing a manufacturer's name tag? Ownership isn't a nice to have. It's the only way you actually know your cost, your quality, and your control over your own delivery.
If building that kind of flexible on-demand labor capacity to support work like this is something you're thinking through, that's exactly what we help manufacturers do at Veryable. Check us out at www.veryableops.com. And to stay ahead of the curve and to help plan your strategy, please check out our website and under the resources section titled Trump 2.0, where you can see the framework around upcoming policies from the administration and how they will impact you as a manufacturer.
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