Why Making Things in the USA Is More Than Just Patriotism

“Why are you manufacturing your own drones? You should find a contract manufacturer in Southeast Asia to do this.” 

We’ve heard this many, many times, especially from potential investors. And it’s a fair point.  They are worried that potential and actual competitors can obtain a cost advantage by simply moving their manufacturing.  

From a certain point of view it certainly appears to be far cheaper to manufacture things in Malaysia, for example, than Upstate NY for two reasons.   

Reason 1: Even a modestly paid employee at $45k (which is not a bad salary for Upstate NY) is more than 4x more expensive than a worker in Malaysia. And labor is the key cost driver for any product. 

Reason 2:  Because the supply lines have shifted to Southeast Asia over the last 30 years, a Malaysian contract manufacturer also has a cost advantage in obtaining raw materials. 

And then there is a “Silent Reason 3.” Manufacturing things is hard. Quite hard. It takes a maniacal mindset of near insane pedanticness to manufacture products of high quality at low cost. It’s a burden that most people would prefer to avoid. 

So the allure of contract manufacturing is very strong: far less cost and far less to worry about. 

Why then would Modovolo build its drones in the USA? A bunch of reasons. 

The Rust Belt Patriot. Prior to the 1980s Upstate NY was a manufacturing mecca. Massive factories. Lots of manufacturing jobs. But as the 20th century came to a close, so did all of these factories. 

Rotting hulks of empty factories are endemic across Upstate NY cities like Utica, Syracuse, and Buffalo. It’s a sad reminder of what once was.  

But we believe it doesn’t need to be this way. That’s why it is a key part of our co-founders' personal mission to not only return Upstate NY to its former glory but to surpass it. 

The Intellectual Property of Making. Most people think of “intellectual property” as patenting product designs and how the products function. And they are right. That’s what patents primarily do. But there is so much more to a product than its design and function. The product must scale. What do we mean by that? 

Well, it’s (relatively) easy to design and build a handful of units of a product, because you can do time-intensive things like having a skilled engineer solder all the connection points for your electronics instead of building connectors. Soldering takes hours and hours to do but you don’t care because you are only doing that 4 to 5 times. 

 It’s quite another thing to scale to manufacture thousands of products. You can’t spend hours and hours on one task like soldering. You only have minutes. And you can’t use a skilled engineer. You can only use relatively unskilled labor. 

And that means you need to invent ways to make the manufacturing process and the product easy and fast to build in order to scale.  And those “manufacturing inventions” are just as important as the product design itself. Likely more so because there are many inventions that are simply staggering in their abilities but can’t be manufactured at scale. So those inventions sit on the shelves of research laboratories. 

This is especially true in things like batteries.  There are many battery designs that could provide over 1,000 mile ranges for electric cars but with current manufacturing technology they can’t be built at scale. And they don’t make it to market. 

So there is intellectual property in knowing how to make things. And that means when you design a new product your team is also thinking about its manufacturing at scale, then you can move far more quickly than anyone else. 

Thinking of the Entire Cost. We said at the beginning of this article that it “appears” to be cheaper to build things in Malaysia. Why do we say, “appears”? 

If you compare labor and materials costs of Malaysia versus Upstate NY, then yes Malaysia is cheaper. But that is not the entire cost of manufacturing in Malaysia. 

You need to include shipping the product to the US; the costs to store and manage the products in warehouses; you need to include months of lead time before you can get the product. And those costs are high. Inventory is one of the most expensive things tying up cash in a business. 

But that’s just the beginning. There are tremendous “communication costs” as well. You don’t just send the product design to the contract manufacturer and call it a day. There are months (sometimes years) of back and forth in design sprints, shipping prototypes to test in market, all of which means time. And time costs money. 

BTW, these are lessons that Dell Computer learned years ago. Which is why Dell builds its computers primarily in the US. Speed to market and a radical reduction in inventory levels has meant that Dell can relentlessly reduce its costs. 

Conclusion. At Modovolo, we see U.S. manufacturing as a nostalgic exercise in patriotism and we also see it as a competitive advantage. Building in Upstate NY gives us control, speed, and the ability to innovate at every stage of the process. It’s not just about where our drones are made, but how fast we can make them better but at an even lower cost than the Chinese.