Bret Boyd on What Mid-Market Manufacturers Actually Need: Capital, Customers, and Options

These are super high-paying jobs working in high-tech that allow you to build a great depth of knowledge and great skills that are very transferable across businesses. I actually think telling the story more effectively will bring more people into the industry. Feel like it's happening, candidly, that we're moving in the right direction right now.

What does it take to shape the future of American industry? Well, it starts by hearing the voices of thousands of mid-market manufacturers that make up a huge chunk of the industrial base. Today we're sitting down with Bret Boyd of Sustainment to hear how he's taking a grassroots approach to learning what's on their mind by doing a survey with the New American Industrial Alliance, NAIA. We'll be talking everything from technology to procurement to workforce, and we'll be discussing the actions manufacturers can take in the meantime to ensure that we continue to build in America.

All right, Bret, welcome to Manufacturing Happy Hour. You're familiar with the show. You're based down in Austin, Texas. That's one of my favorite cities to explore, hang out in, and, of course, grab a beverage in as well. First question: If we were doing this interview live in Austin, where might that be?

Oh, man. Well, it's great to be with you. I am honored to be on the show. Been listening to this for a long time. I don't know, maybe throw something easy out there like the Broken Spoke. That would certainly be an interesting place to have a drink at with you.

Now, remind me, is the Broken Spoke, is that the dance hall down on Lamar? Am I making that up?

That's absolutely. That's been there since the beginning of time. It's half fallen apart because I think it's too hard to repermit. But if there is one old-school iconic Austin country bar, it's the Broken Spoke.

And to paint a picture for the audience that might not be familiar with it, I've actually not been inside there, but I've driven by it a lot of times. If anyone's seen the movie Up, where the guy has his house and they've built all the development up around it and things like that, the Broken Spoke is in a similar position. There are a lot of four-story condos that are around there, but there must be someone saying, "You're not going to touch this place. This is going to be a dance hall forever and ever."

Absolutely. It's an Austin establishment.

So, let's say we're drinking Lone Stars at the Broken Spoke. I want to hear your story. I think that's a good way to get into our conversation around what you're doing as far as being the voice of mid-market manufacturing, connecting manufacturers. But first, let's dive into your background. You went to West Point and you were, as I recall, an infantry officer in the U.S. Army for five years. There are a lot of paths one can go after their service and return to civilian life. Looking back, was there a moment that really impacted your decision to go into, from what I've seen with your background, a career in aerospace and defense technology?

Yeah, I appreciate you asking, and I will say I went to West Point at an interesting time. I was a senior at West Point when the towers went down. Candidly, I went to West Point for free college, challenge yourself, upward social mobility, whatever you want to call it. And that paradigm changed very quickly when we were about to graduate. We were the class that kind of went directly out into the Iraq War.

I graduated '02, branched infantry, served in the 1st Infantry Division and then the 3rd Ranger Battalion, did four tours in Iraq. I think we are all a product of our experiences, for better and for worse. But that definitely left a stamp on me. I left the service in 2007, so I've been in industry working in technology for a long time here, but that is definitely a core part of me.

Well, first of all, thank you for your service. Thank you for wearing the uniform. My next question is a follow-up on that, and this is more of a general life question, if you will. Is there a lesson that you learned during your time in the military that has turned into, let's say, a unique strength for you now in the industrial world?

Yeah, that's a really good question. I would say small unit leadership in the military is very different than what you see in the movies. In the movies you see people yelling at each other and, "Do this because I say." It's absolutely not like that. Especially in the special operations community, these are highly competent men in the part that I served in, but highly competent men all working together towards a common goal. And there is a ton of initiative and creativity and all of the things that really you see in building businesses.

So I guess I view my time, or the key lesson and the key life experience in the military, was really in building teams, empowering people to be excellent, and solving complicated problems. And that's certainly what we have in manufacturing specifically, and I think in industry and in company building broadly.

Yeah, and I'm going to jump ahead in your career a little bit because there are a lot of different steps that we could jump into throughout your career. But as I said, it looks like there's been a common thread where you've been in industrial space, industrial technology, defense technology, aerospace, etc. At Sustainment, currently, you help manufacturers with procurement technology, getting them out of spreadsheets and into what folks would call a supplier relationship management platform, an SRM. Of all the problems you could be solving in industry right now, and there are a lot of opportunities in this space, especially here in the U.S., why is this one so critical? Why is this one you're doubling down on right now?

Yeah. So one of the things that I bring with me from having started my career in the military is that I'm a mission guy. I am oriented and I am motivated by solving a mission, solving a problem, and really working on something that's important. Building businesses and financial interests and investors and all that stuff matters, but at the end of the day, I really am oriented around mission.

And I view this—I grew up in a manufacturing town. I know you're up north. I was way up north in Fairbanks, Alaska.

Oh, yeah.

Is where I grew up, an oil and gas town. And when you look at manufacturing, this is such an important part of the American identity that we wanted to build a business to help this industry operate more effectively. And when we step back, as you mentioned, there are a ton of different friction points in manufacturing, and there are a lot of great businesses being built to facilitate different parts of the industry.

We specifically looked at this supplier relationship management world here. This is essentially the intersection between procurement and supply chain teams at the OEMs and at the larger companies and contract manufacturers on the supplier side. And we really wanted to lean into this idea of helping manufacturers work more effectively together. And as you know, manufacturing is a team sport. Manufacturing gets done in community. Every single OEM, they can talk about being vertically integrated till the cows come home, but every single OEM relies upon a trusted network of contract manufacturers and suppliers and people that are essential to what they sell to their customers. And this is an area that we thought we could really make an impact in leaning into, to make that easier, faster, more efficient, more optionality, and so on. So that's where we started at.

And that makes a lot of sense. I'd heard you talk in other interviews about manufacturing being a team sport, and I think the way that kind of helped me reframe that thought even better was how you talk about the community focus of manufacturing. And that's a really relevant topic to bring up, particularly on this show, because over the past year, I'd say we've been doing a lot of exploration on Manufacturing Happy Hour of, hey, what is manufacturing like in rural communities? What is it like in urban communities? And especially in the former, in rural communities, we see how it is just a fabric of the community. It's what ties it all together in a lot of cases.

And you're right, there is, between the supplier network, between the OEMs, the manufacturers themselves, tons of connection. And I love that that is a part of your mission over at Sustainment. And I think it really ties into what you're currently doing with the New American Industrial Alliance right now. And you've teamed up with them to hear what's on the mind of manufacturers across the U.S. You're literally doing a survey with them right now, correct? I've got more to this question, but maybe you can paint the picture a little bit before I go too far.

Yeah. So fundamentally what we believe here is that if you look at the way the global economy has evolved over the last 30 years here, we think that we have hit peak globalization and that we are moving towards the next phase of the global economy, which will involve more localized manufacturing supply chains. I think that's a, I don't know, call it a 30-year, 50-year secular trend that we're in year maybe two or three of. So fundamentally this is what we think is happening.

We think that companies are looking to balance basically optimizing for cost and optimizing for resiliency around their supply chains. We see this happening when we talk to international companies that are looking to localize in whatever parts of the world they're in. But we fundamentally believe that there is an underlying tectonic shift that's happening that is driving the localization of manufacturing supply chains. And what that means for American manufacturers is that we are in the early innings of, I think, a significant resurgence of U.S. industry.

That's one of the baseline assumptions that we talked to our investors about, that we've made when we invested in this business, that we think this is happening. And this is not to say that we're going back to the 1980s or 1940s or whatever you want to paint as the glory years of manufacturing. It'll be different. It'll be technology enabled. But this idea of the world kind of changing from a uniparty or unipower world with the U.S. as kind of the dominant superpower to one where you have a very competitive landscape. Supply chains are national assets. Industrial strength is national strength. This is happening.

And so as we go out, again, we want to be part of the infrastructure layer that enables that to happen. So we want to be part of the technology that helps drive opportunity into U.S. manufacturers. It's the heart of us as a public benefit corporation. It's why we provide software for free to suppliers. There are a whole lot of cascading reasons or cascading impacts for our business from that fundamental view. But that's the world as we see it.

And we're looking for thought partners in this, right? So we're trying to find other organizations that share this view. And this is when we ran into the New American Industrial Alliance, NAIA, or their CEO Austin calls them NAIA. And I think they are doing a great job representing and stewarding this movement. They've got a great conference in Detroit in July. I think this will be the second year that they've run it. It's called Reindustrialize.

And so we've been looking for ways to collaborate with that organization and really say, "Hey, how can we leverage the strength of Sustainment to be useful to the overall cause?" And we're not policy people. I'm not providing recommendations to the administration. We have some ideas for things that they could work on. That's what NAIA views as their core competency here. But we want to help feed them information. And importantly, we want to ensure that as all these fancy D.C. people are having policy conversations, that the voice of the actual manufacturers in middle America are getting represented in those conversations.

So, as a result of that, we've been surveying our network. We engage with tens of thousands of manufacturing suppliers. Again, the general way our business works is we sell software into procurement teams in DoD organizations and in commercial OEMs. And then as a result of that, their suppliers will tend to join. They'll engage with Sustainment. We'll have a relationship with them and help them grow their businesses. But the net-net is we have access to a lot of U.S. manufacturers. So that's the heart behind the survey, which is still in progress. We're not entirely done with it, but that's what we're working on.

Yeah, I actually took a little time late last week to poke around the survey as well, just to get an idea of some of the questions that were being asked. And I'm going to ask about that here in a minute. There was a quote that was in, I think it was the article announcing that the survey was coming out, from your director of operations, Christopher McCole. And this is what really stuck out to me, was that policymakers often hear from lobbyists and large corporations, but at Sustainment, you believe the most authentic, actionable insights come from the shop floors, the plant managers, the small business owners who are actually building America every day.

And I think I heard on another podcast, and just from my own knowledge as well, the majority of manufacturers in the U.S., 98% of them, I think, are sub-500-person companies. So that's where this survey comes into play, and you're really trying to be the voice of that organization. Out of curiosity, how many manufacturers are you expecting to reach when this is all said and done?

Yeah, we want to hit hundreds, working towards thousands here over time. And as we know, manufacturers are not sitting at their computers waiting for you to send them a survey so they can dutifully fill it out. So we've been working on it. We've been working with a lot of our state support organization partners as well to get this populated.

But you're exactly right, and this is something that I think everybody who's in the industry knows, but that people who are outside the industry don't really appreciate. The combat power in American manufacturing is in entrepreneurial small businesses spread throughout middle America. That's where it is, full stop. It's not in these large, big-brand system integrator OEMs. It's actually down in the small businesses. The rubber hits the road at the small business segment, and manufacturing employs 13 million men and women. About 70% of those work in the small business segment. And any way you stack it up, the strength of U.S. manufacturing is in these small businesses. And so we need to understand what they're up against, what they're working on, and what they need. And if we really believe in this reindustrialization movement, we need to do things that actually help those businesses, as opposed to the large companies way up the stack.

Well, my next three questions are all what I found to be core topics that this survey was focused on. And I know the survey is still active, and quite frankly, we'll always be pulling perspectives of midsize manufacturers, even when this comes out in early July. But I'm interested to hear maybe some of your initial findings around three specific topics. What are you finding is the manufacturing industry's workforce outlook? That's number one. What is their technology outlook right now? And then what is their procurement outlook? And that'll be supply chain, reshoring, tariffs, all the things that fall into

That bucket. But let's start with workforce. What are you sensing? What are you hearing is the workforce outlook of especially these mid-market manufacturers right now?

Yeah, as a first point, the cohort analysis of these respondents is super interesting. And by that I mean cohorts of, when you look at these by size, by region, there are very interesting patterns in the sense of certain types of companies talk about the exact same problems. So looking at manufacturing broadly, I think, is a little bit more difficult than looking at the sub-50-employee, family-owned, second-generation segment or whatever. It's pretty interesting. And I'll make some generalities that cut across that, but I think that, as a first point, is important framing.

So look, workforce. I actually expected workforce to be the overwhelming number one issue on top of everybody's list. And it was high on the list, or it's coming in high on the list, but access to capital is actually higher than workforce, which was surprising to me. And as we think about it and as we drill into this a little bit, the idea of saying, "Hey, I would enter into new markets except I struggle to access working capital that helps me take those risks and place those bets," a lot of businesses put that higher on their priority stack than they did workforce, which, again, it's fascinating to me. Workforce is definitely a top three almost across the board for everyone, and that certainly is an issue.

Workforce and additional—this isn't really a workforce deal, but again, when you look at the cohort analysis, especially in the sub-50-employee segment of manufacturers, the time to retirement for owners who were filling out the survey and the number of those who didn't have—I forget how we asked it, but do you have a clear transition or a clear succession plan? The number of people that didn't say, "Yes, I have a very clear succession plan," who are also nearing the end of their life cycle as the owner-operator of that business. That was pretty interesting as well.

But look, as we know, workforce is really important. Fundamentally, to go on a little bit of a tangent here, I think what we need to do is we need to drive more business into our manufacturers. We need to drive more revenue, more opportunities, more customers into our mid-market manufacturers. And in doing that, I think that will drive them to invest more in advanced technology and make capital investment decisions, and it will lead them to hire people with more compelling and more competitive wages on W-2s that have duration and so on.

For me, I think workforce is actually downstream to the productivity of the industry. If the industry is more financially productive, I suspect that the workers will show up, or those jobs will be more compelling. This isn't something that happens overnight, but I actually view that as downstream from the success of these businesses.

I love the perspective you provided here because, admittedly, on this show, a lot of times we hear workforce is people's number one issue. And I'm sure for many—well, I know for a fact many businesses, that is their number one issue. But I like that you added some nuance to that as well, talking about the access to capital, discussing that there, and then also the lack of transition plan. We're hearing more and more about that on the show as well.

I want to ask you about a story I heard you telling recently, though, that I think might help drive this point home a little bit. You were mentioning that in the early days of the pandemic, there was a big call that, "Hey, we need to make more ventilators. We need to make more ventilators," and things like that. And what I took away from that story is it was very revealing about the manufacturing capacity that you were just talking about that's available here in the US. Maybe go into that a little bit more, and I think that'll help people understand why there's more nuance to this workforce challenge.

Yeah. And let me take a slight tangent to get to that, just to provide some context for where we're coming from. So we build software and AI to solve this buyer-supplier connectivity problem. And in a lot of commercial manufacturers, it's like, "Hey, I'm working in Excel and email, and it's running through one inbox, and I don't have a shared sense of truth, and it's really hard for me to be agile and get multiple quotes so I can have offshore, nearshore, onshore." All of these problems around scaling and agility and risk and resilience, we're focused on those on the commercial side.

On the defense side, it's a lot more around, "Our supply chain has attritted over the last 20 years to the point where I have one supplier for so many of my critical items. And as a result of that, my lead time for parts are measured in years. And that hurts me in the sense that I, the Air Force, or pick a DoD customer, I get measured on the availability of my equipment, my tanks, my airplanes, my whatever I'm responsible for. And so I have horrible readiness ratings because I have long lead times for my parts. The reason I have long lead times for my parts is because I don't have enough alternatives to have competition in the process to actually pick lead times, to have leverage over lead times with multiple suppliers and multiple options. So therefore, I'm kind of stuck."

So in the defense side of our business, we're very focused on really looking at technical data and using the technical data package, they call it, which is essentially the CAD file or a 2D print of the CAD file, and inferring from that not just who has built this for you in the past, but who could build it. And let's say you're looking for a repair part for a B-52 up at Tinker Air Force Base or something like that, something that's not terribly, terribly complicated of a part. There are thousands of oil and gas manufacturers in the Texas-Oklahoma corridor that could build that part for you. They may not know you, you may not know them, but that capability and capacity exists for you.

So if you take that as the founding kind of reason to exist for our business—and so again, we sell software into the DoD that helps support those use cases in addition to supplier engagement and relationship management and so on—we really got traction in COVID. And in the state of Texas, when they were looking at COVID, we worked with some of these state task forces, governor's task force on manufacturing, the manufacturing extension partnerships, and some of these groups who are really trying to figure out the ventilator problem.

And when you go look around and say, "Who makes ventilators?" and you're Google searching to see who lists ventilators as an item that they sell on your website, there's not a lot. Not a lot. But if you take the BOM for a ventilator and break it down into its aggregate part groupings, there are tens of thousands of manufacturers in the state of Texas that can contribute to the overall manufacturing of a ventilator. And that was a really important unlock for us, and I think for a lot of our partners as well, to say, "Hey, we need to really start looking at this industrial base, our manufacturing industrial base, as a capacity- and capability-rich resource. But we need to know how to ask, and we need to know who to ask, and we need to know who to talk to."

And again, at the end of the day, this isn't like catalog stuff where you're looking for parts in a store. This is, "I need to identify manufacturers who can build what I need, but then I need to talk to them. I need to get comfortable with them. They need to get comfortable with me. We need to develop a relationship, and we need to work through a process to get those parts and their capability into my ultimate end item to support the ventilator mission or the airplane mission or whatever I'm working on." But that's fundamentally how we're approaching this.

And I even think workforce is a similar tenet of this idea of what is the actual capability and capacity of the industrial base, and how can we intelligently make those connections and those workflows happen faster between buyers and suppliers?

Yeah, I'm going to do my best to do a quick summary as we go from talking workforce to talking technology here. From the survey itself, you mentioned that access to capital was actually further up people's lists than workforce was within the survey so far. You also highlighted that folks didn't necessarily have that clear path to retirement, path to transition with their business. And I like what you just said there about the connection between workforce as well as helping manufacturers kind of unlock that capacity that might not be realized today. My next question is around the technology outlook. What are some of the initial findings around manufacturers' technology outlook?

Yeah, there was a correlation with the access to capital and access to or investment in new technology. Those are obviously correlated, and I think this is something that we're going to dig into a little bit further. But I do think a lot of smaller businesses struggle to get competitive financing for working capital issues and so on that gets them more comfortable to make those investments. That's something that we need to dig into a little bit more. I don't have anything terribly interesting to say there.

But the majority of the manufacturers that have responded have been very high. We asked, "To what extent are you actively investing in new technology?" and asked for examples and made those kinds of questions, and almost everybody scored very high. And they're self-identifying to say, "Yes, we are actively investing in new equipment, new software, new technology, new training for our workers to upskill and uplift our organization." Again, almost everybody self-assessed in the upper third range of how we asked that. And it might be the psychology of not wanting to fill out the thing that says, "No, we're not really doing anything to innovate with new technology." We might not have asked that specifically in the correct way. But it was generally pretty positive, and that maps to my experience as well.

And you know this: when you talk to people outside of manufacturing, people will develop a Rust Belt picture in their head of some dilapidated building, and it's not like that at all. These businesses are amazing. They're working with amazing equipment, with skilled operators. My experience is that, again, it is definitely, when you go look at an auto manufacturing, a highly roboticized auto manufacturing line, that's very different from the tier-five, tier-four supplier facility. But the amount of cobots that you see in these facilities—I usually walk away impressed when I do these site visits.

Yeah. And it's interesting, I do a lot of work with A3, the Association for Advancing Automation. They just started measuring what percentage of robotic sales are cobot sales, and it's something like over 10% right now. So we're seeing that adoption.

You bring up a topic—I'm going to ask you another question here—you bring up a topic that comes up on this show quite a bit, and that's, hey, manufacturing in this day and age is a high-tech industry. You look at a lot of these facilities, like you were just highlighting, and the technology's there. You and I get it. The people listening to this podcast get it. But the general populace still doesn't see that. And that's one of the areas where I'm trying to help all of us break out of the echo chamber a little bit, to get the general populace to understand that when we talk about manufacturing, we're not talking about an old-school factory where our grandparents worked. We're talking about new manufacturing. So what is your take on changing the perception around what manufacturing really looks like today, not just for our community, but really the general populace?

Yeah, we are totally aligned with that. And I think that's another issue that contributes to workforce challenges, because if you're a high school kid and you have this old paradigm in your mind of what manufacturing looks like, maybe you go decide to do something else. But if you actually realize what it is, these are super high-paying jobs working in high-tech that allow you to build a great depth of knowledge and great skills that are very transferable across businesses. I actually think telling the story more effectively will bring more people into the industry.

And as far as how we do that, one is media, and modern media, candidly. And the IndustryWeeks and all of these publications that insiders read, I think, are great. But I think this show, for example, is something that I suspect hits a much broader and much younger and much more relevant audience than maybe some of the—I'm going to call it legacy media in our industry. And I don't mean that pejoratively at all, but the media that's been around for a while. So I think looking at content and how we use social and how we distribute messages and how compelling video is—you and I could talk about this all day, but if you walk down with an iPhone, down a production line, people will be like, "Oh, dang." There's actually a lot going on there. And I think things like that are very helpful.

I also think what the New American Industrial Alliance and others are doing to make this a national issue and try to drive, again, awareness and resources into this. And I give a lot of credit also to the current administration and how—we can argue around the right way to do tariffs, or if tariffs are the right policy, or we can talk about a lot of different ways that they've implemented this. But fundamentally, that's part of the national conversation now. Manufacturing and re-industrialization and onshoring is part of the national conversation in a way that it hasn't been in years. And I think that's really important as well, that we be talking about it, our leaders be talking about it, our educators be talking about it, these businesses become more productive so they can hire and they can invest, and all of these things flow through. But I really do feel like it's happening, candidly, that we're moving in the right direction right now.

One other thing I'll add, and my listeners have likely heard me mention this before. I agree with everything you've been saying about new media driving more awareness around manufacturing. You're someone who is absolutely on the podcast circuit right now. I love that you're getting your voice out there. One other thing I always add to this conversation is, as someone like myself that is now in the twilight of their youth, I've just got a couple more years till I'm 40, I think one thing that's helping is it's not just folks like you and I having these conversations now. There are 22- and 24- and 25-year-olds having that conversation. And those are the type of people the high school kids, the middle school kids, they're going to look at and be like, "Oh, they're only like five years older than I am. I can get into manufacturing, too, and I can get all these benefits that they're having being in this industry." So that's the other piece of the puzzle I like to add.

Yeah, absolutely. And it's really interesting to see how empowered—how many companies have a 25- to 30-year-old executive, right, that's following the owner around, that's the systems—that probably started as, "Hey, I need to find somebody that understands software," and has grown in just how much responsibility younger people are getting given in these businesses. I

I think it's really fun to watch. I love it when you're in a business and you're like, oh, they're totally empowering people that have been out of college for three years working on this stuff. Anyways, I think it's great.

Yeah, we're seeing a lot of energy in our space right now. I'm excited to see that broaden to more of the general populace. You mentioned tariffs and that now we're having more of the conversation around industrial policy. The question I have is around the manufacturers' procurement outlook from what you're finding from the survey as well. We've covered workforce. We've covered tech. And when I say procurement outlook, I'm talking supply chain, reshoring, nearshoring, tariffs, all of these things that I think a lot of times, especially right now, people just kind of default to that last one I mentioned. But there are all these different levers that play into a procurement outlook. So what are you finding is the procurement outlook of mid-market manufacturers right now?

Yeah, it's such a good question. It's really interesting. I was going through the responses this morning, and they're either like, tariffs are great or they're horrible. Nobody's in the middle, right? They're either like, they're destroying my business or they are totally accelerating my business. And again, I think it ties to the cohort analysis a little bit.

Our customers are procurement teams, right? We work with thousands of suppliers as well, but I spend the majority of my time with supply chain and procurement teams. And this tariffs implementation is really difficult because, as we've talked about, we are not in a transactional industry, right? We are in a relational industry. If I'm buying some indirect procurement thing, let's say I'm buying toilet paper, it doesn't matter who I buy toilet paper from. It's the same thing, same SKU. I can get it from different people. It's all about price and timing, and I don't really care. I don't care who sells it to me. But in our world of direct procurement, I need you to build parts to my specification, which I am going to put in my item to sell to my customer. This is a deeply, deeply relational industry, and procurement teams have relationships with their international suppliers as well.

So it's how do you identify what to onshore, what to nearshore, where to identify multiple sources of supply, and how you almost do the Pareto analysis to take your, what are my most impactful parts that I can look for alternative sources of supply first, and go work through those first so that I can have the ability to basically not try to eat the whole elephant at once? That's what we see as a best practice and a lot of organizations working through.

And I will say that with the increasing rates and decreasing rates, and these guys get waivers and then they don't get waivers, man, it's hard to plan. It's so hard to plan. So you have this on the buyer side, on the procurement team side. What we essentially say is, look, this is an options game now. You're trying to develop as many options as you can so that you can quickly get multiple quotes as the environment changes, because it does seem like it's going to change for the foreseeable future. We're going to be in this interim period.

On the supplier side, it's also difficult because you're getting kind of jacked around by new potential customers that are asking for quotes, that are taking you through the process, that are getting comfortable with you, and then are trying to see if you can get close to the prices of their international supplier. And you're like, "Oh my gosh, why did I just spend all this time talking to you? Because no, I can't, because we pay people 15 times more than they do over there, and that's what it is."

And so I want to appreciate and respect the complexity of this moment for folks. So if you believe me that we're going from an old paradigm of orientation towards globalization to a new paradigm of an orientation towards localization, this period in between, it's the hard part, right? It's the hard part. And how hard you lean into this, how you align with regulatory movements and policy movements, what investments you make now versus later, these are all really difficult decisions that need to be made on a case-by-case basis.

And I think most of the organizations that I talk to fundamentally agree with what we're doing to use industrial policy to encourage the growth of American manufacturing. Tariffs being one element of policy toward, but there's a whole slew of different policies that can be implemented towards that. Most organizations, I think, really understand and agree with this philosophically, but it's like, cool, how do I navigate from the old world to the new world, and when are we through this, and when will we have line of sight so we can really get comfortable making investments? It's hard, and I really want to respect and emphasize, I'm sure there are a bunch of people doing this listening to this podcast, or whenever they listen to it, because it is a challenging time right now.

Yeah, just maybe a good quick summary, right? Because there is a lot of, let's just call it emotion, that goes into this right now when there are challenges. What would you say if you were to just summarize a quick list, the levers of industrial policy? You mentioned tariffs. That's, we'll call it the big scary one for a lot of folks right now. What are the others? This isn't just a black-and-white topic. There are a lot of different elements that fit into this. What would you say those elements are?

Yeah, broadly speaking, if you were to go look up industrial policy, you would be talking about tariffs. You'd be talking about monetary policy, and this ties through interest rates and the relative exchange rates between currencies, which is deeply important for materials and parts and all of the different things. Through that, you would also talk about the ways that you develop what you would define as critical industries inside your own country, right? And there are a whole range of ways to do that, from directly injecting capital into industries that you want to encourage the growth of, to tax breaks, to regulatory reform, to all the things that you need to do to essentially take the barriers away from companies from growing.

So again, there's how do we look down and support the industries that we want to support, with manufacturing obviously being one? How do we look at monetary policy? And then how do we look at tariffs and essentially trying to, and I don't know if the phrase "level the playing field" in the way it's currently being used is directly appropriate, but if we're honest, this tariff thing is about China, full stop. I think all the other countries are great, but this is about China. This is about China growing to an industrial power the extent that the world has only seen twice more in history. There's an estimate that China is going to reach between 45 and 50% of total global manufacturing by 2030. And that's only been hit by the US right at the end of the Second World War and by the UK in the Industrial Revolution.

So this is really what we're looking at. We're looking at China. We're looking at how to counter China. And China has very thoughtfully invested in and essentially state-sponsored a bunch of companies in industries that they deemed to be important for their security: shipbuilding, drones, pharmaceuticals, semiconductors. And that has created a very, very difficult competitive environment for US manufacturers, right?

If you look at DJI, the drone company, the Chinese drone company, they have like a 90% market share right now. And the reason that exists is because China has been putting state capital into that company for decades. When a US company says, "Hey, I'm going to go compete globally with drones," they're competing with a company that's subsidized by the Chinese government. So that company wins. The economies of scale around drones all go to that manufacturer. So they're able to have these giant factories and benefit from all the economies of scale of that. The US company goes out of business, and then we end up in this world where we're like, "Oh no, small attritable drones look like they're actually going to be the small arms of the next war, or at least that's what some of the learnings in Ukraine are starting to look at. And we can't build them. This is a problem for us, right?"

And so this is the reality of needing to put things in place to both counter China and encourage the development of US industries that have lagged behind in this moment of Chinese ascendancy over the last 15 years or so. I know I'm running a little bit off topic here, but I think the framing of why this is important transitions directly into what are the tools that you have to do something about it. And then it flows into a discussion of we have to do it in an American way.

Yeah.

This Chinese way of these giant vertically integrated, BYD, their electric car company, has a factory as big as the city of San Francisco. That's not us. That's not how we're going to do this. We need to pursue this in a way that is American, and Americans are entrepreneurial small businesses. The national challenge is how do we incentivize and encourage and equip and unleash those businesses to be productive, many of which are your audience here.

Yeah. And for context, I've shared this with my audience before, but about 85% of the folks that listen to this are North American-based manufacturers. That's kind of the breakdown. And Bret, this is the exact type of conversation that should occur on Manufacturing Happy Hour, ideally over a couple Lone Stars at Broken Spoke, but we're ad-libbing today.

But to tie it into one of the very recent interviews that was just on this show, we were chatting with a professor at MIT that's been very involved in equipping the future workforce, the role of higher ed in equipping the workforce. And they've done a number of studies on how we've globalized over the past 40 years. One of the key takeaways that came up in that episode was, yes, you can design all of these things in the US, but if you're not actually building nearshore, onshore, et cetera, you lose a critical part of manufacturing innovation, which is DFM, design for manufacturing. So we're seeing that as a theme come up in these conversations. The audience, I know, is hearing that come from multiple angles as we have these discussions.

Based on the large conversation we've been having today, Bret, with the time we have left, I'd love to ask for some actionable advice. You mentioned at the start and then throughout the conversation, hey, we're in year three or four or five or whichever it is of a 30- to 50-year trend in a reshaping of the global economy. So if I'm a manufacturer that's up against everything you've mentioned today, I shouldn't say up against, because there are a lot of opportunities here too. What actions should manufacturers be taking today to prepare themselves for the next 20 to 30 years?

Yeah, that's such a great question because it does tie it to where do you want to be excellent and where do you want to plant your flag, right? And so I think identifying how you can connect your businesses with customers in these industries that have to come back to the United States is a pretty helpful way of thinking about this, right?

And so if you're a manufacturer supporting, again, I'm going to pick on oil and gas as an industry here, and you're very comfortable with your backlog of oil and gas business, I think that is going to be a great business. It's never going to go away. But thinking about, with this team and this capital equipment and this capacity and these skills that we have, are there opportunities to connect our business to some of these industries that we think are going to grow over the next 20 or 30 years? Defense equipment, semiconductor, that whole semiconductor supply chain in some way, shape, or form is going to have to come back.

Some of these different areas that may have been interesting customers to pursue on a case-by-case basis, I actually suggest thinking and getting programmatic around, okay, how do we develop customer relationships so that we can participate in the growth of these industries? And that's about diversifying your customer base and looking for opportunities to expand, which again connects to this access to capital, connects to investing in people, connects to investing in advanced technology and so on.

But really being thoughtful. I think this is a time where being thoughtful and proactive around, okay, let's say this actually does happen. And let's say, again, onshoring or this whole localization doesn't entirely mean onshoring. It will be some blend of onshoring and nearshoring, and there will still be some global manufacturing supply chains. But playing out the thought exercise of what does that mean? Are we positioned to benefit from that? Are there ways that we should look at being able to take on maybe lower price or lower cost? Are there ways that we can look at our cost structure for our parts?

And we see some companies even considering spinouts. In aerospace, an AS9100 business would say, look, we can't go downmarket for our customers, but maybe having a partner or doing an acquisition that we keep as a separate company that can compete at lower prices with lower-tolerance work. Thinking about those things of how to participate in this is something that we've seen people that we really respect lean into.

It then gets into the idea of, okay, I have a plan. When should I go invest? Is now the time? Is later the time? That's harder. That is harder because the right plan executed at the wrong time is, you don't get a lot of credit for that. But just being deliberate and thoughtful around what's happening, how to be part of it, as opposed to the alternative would be to say, look, I'm good. I have my customers. I have my historical business. I'm going to kind of hold what I got. Those companies that are really proactive and thinking about this right now are the ones that we think are doing the right things.

And again, on the procurement side, I really think it's all about optionality and agility. You need to develop more options, have more relationships for more potential sources of supply, do the work to go ahead and vet some alternative companies. And probably most importantly is don't forget that your current suppliers, especially your domestic suppliers, are getting bombed right now with new inbound customer requests. So making sure that your suppliers feel the love and are comfortable, and people that you haven't visited for a while, you go take the time and ensure that you're top of mind, that you're doing things that you need to be to be an important part of their market and their mindshare as they go forward. Don't forget to make those investments as well.

Great advice. And I'm going to ask an even more tactical question here right at the end. And this really ties back to what you were talking about, about access to capital. It also ties into some of our conversations around defense. What do you feel manufacturers could be doing to take more advantage of? You mentioned MEPs earlier in this conversation. We talked about them on the show. There are things like

The APEX Accelerators that are getting manufacturers more involved with the DoD. Any advice there? Because I do feel like those are some very tactical tools, and there are certainly other ones out there as well that manufacturers can be taking advantage of if they want to be prepared to participate in some of these growing industries and trends.

Yeah, that's actually a really important problem, and it's a problem on both sides. There are some new programs that the SBA is thinking about. The Department of Energy has some program there. There are a lot of different resources out there that I never knew existed, candidly, before I got into this business. I knew about the PTACs, which was what the APEX Accelerators were called. I don't remember what it stands for before they rebranded, but I wasn't as familiar with some of these.

What we're trying to do at Sustainment is actually aggregate a lot of these programs so that when manufacturers—you can go to sustainment.com, create an account, it's free, go through it as a supplier, say what you do—and we're trying to queue up these programs so we can say, you're a 50-employee manufacturer in these industries, in these areas, and try to present different programs to be a channel from those organizations into suppliers. That's not purely wired out, but we are trying to do a little bit of work to help synthesize this.

But I would actually start with the MEPs, would be my advice. Most of the MEPs, we think, are really great organizations. They're probably the strongest of all the boots-on-the-ground groups. They're under a lot of pressure with funding and where they sit within the federal government and so on right now. But those can be great gatekeepers into the breadth of programs to help you get ISO, all of these different federal programs that exist out there. There are a lot, though, and it's candidly hard to keep up with all of these different organizations. And do trust that they have as much trouble getting manufacturers to use these programs once they commission them, because it is so hard to generate awareness in the community.

Bret, I appreciate all the specific advice, the overview of what you're hearing as the voice of mid-market manufacturers. Is there anything you wish I would have asked you that I haven't yet as we come up here at the end?

This has been a great conversation. I am really grateful to you for opening up your audience and having this conversation here. And again, if anybody is interested to check us out, we're at sustainment.com. Again, we're free for suppliers. Please join, make a profile. We sell software to procurement teams. Happy to talk to you about that, and just excited to be here.

Well, hey Bret, thank you so much for taking the time to be on the show. For all the listeners out there, we'll have ways to connect with Bret and Sustainment. All those links will be over on the show notes page, manufacturinghappyhour.com. Bret, thanks so much for grabbing a virtual Lone Star today, and I'll see you at Reindustrialize in Detroit very soon.

That'll be great. Thank you, Chris. I appreciate you.

Cheers.