MANUFACTURING: Saturday spotlight: ‘Insourcing’ thrives

Posted: February 22, 2011 by Ted Fogliani in: Press Releases

CARLSBAD – Outsource Manufacturing Inc. knows it can’t compete on price alone in pricey San Diego County. So the company stresses proximity to customers, quality and efficiency, said company president Ted Fogliani.

The contract manufacturer makes high-value products that require precision manufacturing, Fogliani said. Nearly all of its customers are in San Diego County.

“There’s always a huge geographic advantage, if you’re good enough,” Fogliani said Thursday morning while giving a reporter and photographer a tour of Outsource Manufacturing’s 60,000-square-foot headquarters and manufacturing plant on Faraday Avenue.

The 14-year-old company advertises its location with the name of its website,

Outsource makes and assembles components for electronics, medical devices and military equipment in the gleaming, white-floored building. The manufacturing areas were hushed during the tours.

“You can see what’s going on here,” Fogliani said, gesturing to the employees at their work tables. “It’s quiet, it’s focused, there’s not a lot of chit-chat, because what we’re building is critical stuff.”

Most of the company’s approximately 130 employees work a Monday-to-Thursday, 10-hour schedule, he said. This schedule was adopted a few years ago when gas prices spiked, and employees decided to keep it when prices came down.

The company goes into overtime work when special orders need to be rushed; then the manufacturing continues on Friday and sometimes on Saturday.

Outsource is hiring, mostly for operator-level jobs, said Fogliani, who owns the company with his brother Christian, the chief financial officer.

“We’re looking for mechanical skills, disciplined employees who understand process, which means they can come from a lot of different industries,” he said. “Even people coming from food services understand process environments. They are sometimes a really good hire. We can train them mechanical skills and the technical stuff.”

Because failure in these products could have catastrophic consequences, customers demand close collaboration with Outsource, Fogliani said.

“When there’s a quality problem, my director of quality isn’t going to say, I’m going to schedule a flight for next week.” Fogliani said. “It’s, ‘I’ll be there in 10 minutes.’ And they love that.”

One of its high-profile customers is Life Technologies, and the life science giant gets a perk; its own room that only Life Tech employees can enter, filled with Life Tech equipment.

For its attention, the company has been rewarded with increasing business. Fogliani said the company ended 2008 with just more than $17.5 million in revenue, 10 percent more than in 2007. For 2010, revenue approached $50 million, 50 percent above 2009, he said.

The company has self-financed its expansion without taking venture capital investment, Fogliani said, keeping ownership between the brothers.

As revenue has grown, the company has taken more space. It has moved twice; once in 2004, from Sorrento Valley to 23,000 square feet in Carlsbad. The second time, a year ago, it moved a short distance away to its 60,000-square-foot building north of McClellan-Palomar Airport.

In addition to knowing how to serve its customers, Outsource knows what kind of products it can profitably make; those with a low proportion of labor costs compared to the value of the materials that go into the product.

“If a product is designed well, and it has enough material content, and a minimal labor content, it can be built anywhere,” Fogliani said. “If it’s 60, 70, 80 percent materials and the rest is labor, I can compete globally.”

Fogliani said the company will soon let potential customers do the math about domestic versus foreign manufacturing on its website. The site will add a calculator program that estimates product output in the U.S. compared with abroad. The feature is scheduled to go active Friday.

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