Bringing it home: Turning Performance

Horst Engineering’s Mexican operations are homeward bound. The contract manufacturer is closing its operations in Guaymas, Sonora, and shipping the equipment back to the U.S. The Mexican facility, which employed 50 people, was established in 2006. As part of the move, Horst is establishing a satellite facility in South Windsor, Conn., about 4 miles (6.4 km) from its East Hartford headquarters. The company also plans to expand operations at its sister company, Sterling Machine Co. Inc., Lynn, Mass.

“After careful evaluation, our management team decided to expand operations in the U.S. rather than continue in Mexico,” said CEO Scott Livingston. “The workforces in Connecticut and Massachusetts are so highly skilled that it makes up for what was a perceived lower cost of doing business in Mexico.”

Privately owned Horst Engineering & Manufacturing Co. was founded in 1946 and has 95 employees at its two plants in East Hartford. The company’s core processes include Swiss screw machining, turning, milling, thread rolling, centerless grinding, honing and light assembly. Sterling Machine employs 40 people. Included within Horst is Thread Rolling Inc., a 20-year-old business unit that performs thread rolling and centerless grinding for other contract manufacturers.

Made in Mexico

When it was built, Horst Engineering’s Mexican plant was part of a companywide expansion to meet demand from aerospace customers. “When we launched the maquiladora, we wanted to grow our manufacturing business around the concept of lower-cost regional manufacturing,” Livingston said. “At the time, some of our OEM customers were encouraging us to establish a manufacturing operation outside the U.S. due to demands within their companies to expand the supply chain and spread procurement out geographically.”

Dean Robinson, a veteran machinist, at Sterling Machine, which uses both modern CNC equipment and “old-school” cam-style Swiss-type screw machines, one of which is shown here. All images courtesy Alan Grant, Digital Creations.

Chinh Nguyen, milling setup technician for Horst Engineering, inspects an aerospace part.

After researching various locations, the company decided on Mexico as the best option. “We needed to expand our physical footprint anyway, and we got some business for the Mexican plant from legacy customers and some from new customers who were exclusively focused on that region,” he said.

Livingston noted the Mexican operation offered cost savings, but not what he calls “transformational” cost savings. “We never planned for the Mexican plant to replace our U.S. manufacturing base. We were growing in Connecticut at the same time we were growing in Mexico.”

Fundamental Changes

Over the past 9 years, some business fundamentals have changed. “In 2006, it was relatively easy to get to Guyamas, but after the Great Recession, the flight patterns changed and made it harder for us to get there and more challenging for us to manage the plant,” Livingston said.

Horst Engineering CEO Scott Livingston.

He also said when the company first invested in the Mexican plant, it was led to believe that a more robust supply chain would develop over time. “To complete our parts, we rely heavily on an ecosystem of suppliers offering services such as heat treatment, coatings and testing. That supply chain has been slow to develop in Guyamas. We were still limited in some of the products that we could produce there, while in New England many of those services are within a stone’s throw of our plants.”

It was also challenging for Horst’s suppliers to reach the Mexican plant. For example, Horst primarily used U.S. suppliers to install machine tools, and it was difficult to get that equipment delivered, installed and calibrated.

Livingston said the case for reshoring is more compelling today because the economics have changed, with labor cost being a smaller part of equation and increased automation making it easier to increase production in the U.S. “Also, the availability of skilled labor is tight everywhere—not just in New England,” he said. “It’s tight in Mexico, too, because more companies have brought businesses there and soaked up the pool of available skilled labor.”

Livingston cautioned that he is speaking only from his own experience and noted other companies continue to invest in Mexico. “It’s good for those companies and it’s good for Mexico,” he said. “Mexico is fortunate to have a manufacturing-oriented economy and people there aspire to jobs in advanced manufacturing. We had several employees who were furthering their careers and elevating their economic status. But in order for us to grow our business, we needed more than that location could offer.”

Homing in on Efficiency

Horst Engineering decided that it could get “more” at home in Connecticut. Livingston noted that metalworking technology continues to improve and Horst is quick to invest in advanced technology and processes—such as multiaxis machining and lean initiatives—that can boost productivity.

Crib Attendant Henry Presley leads Horst Engineering’s kitting process.