Local Rings True in Manufacturing and Sourcing to Alan Davis

[Yeager] It's all about local, isn't it? We talk about local production, local sourcing, local, local manufacturing, local workers. It's all the rage right now. And it is how this country is being talked about and making things in America. Again, we're going to talk about how there's a lot of manufacturing that never left. You just might not have known about it, and other companies didn't know about it. But this guy who we are going to talk to today in the podcast, is going to help us fill in some of those gaps. It's Alan Davis, he is the CEO of Connex Marketplace. He's based in Utah and he grew up on a Utah farm. We'll talk about a little bit of farm life, but we're also going to talk about 911 and how that gave him a front row seat to an industry at a certain time in our global history, and how things changed and how that's translated now into his business. Also, remember that Covid thing and the supply chain challenge that came after. We'll talk about that. We'll lean into that discussion about local sourcing, how things are made, maybe not necessarily in the cornfield, one in the town attached to it, and how it can change this country. Sourcing of materials. Yes, there are a lot of materials made. What's maybe a hurdle for getting some of those materials into the hands that can do something with it. That is this installment of the MToM podcast. I'm Paul Yeager. New episodes each and every Tuesday. If you get a chance, like, write a review, give us five stars. Whatever you want to do, share and tell a friend. But now let's talk with Alan Davies. I always love it, Alan, when we can go talk to a farm kid. So you grew up on a farm in southern Utah. Did I get that right?

[Davis] I did, yeah. Enjoyed every minute.

[Yeager] Tell me what was on your farm.

[Davis] Well, most minutes of it. I'll put it that way. Farm. Farm work is hard work, right? So. Now we grew alfalfa. We had, you know, we had some cows, we had pigs, we had chickens. you know, typical kind of small rural farm in southern Utah.

[Yeager] Did you ever think, this is where I'm going to be?

[Davis] You know, that's interesting, because growing up, farming was not my love. It wasn't where I wanted to be. I always knew I wanted to do something else. But, you know, I have other family members who, you know, loved that life. And, I do love that life. It just wasn't the right life for me.

[Yeager] Is saying you're involved with manufacturing too much of a, a generalization or how would you describe what? You know, the lead line of your LinkedIn profile is?

[Davis] Yeah. So manufacturing, really has become my passion. You know, the last well, since 2013, actually. So I started my company in 2009. In 2013, we had an opportunity brought to us, and I own a tech company, by the way. software development. And, the opportunity was to try to develop a solution that would better connect the manufacturing ecosystem in the state of Utah. It was an economic development study run by the state, and their intent was to figure out how to grow the manufacturing economy. And the number one recommendation coming out of the study was to create this solution, and whereby the large manufacturers could more readily find small, medium sized manufacturers and keep more jobs, more dollars in the state. And, it worked. You know, it was tremendously successful, in the state initially. And, you know, we had we had some really large, manufacturers participate. So we started off by bringing manufacturers together from all over the state. These were large, medium and small rural and urban areas. And, we actually held, workshops for four months every other Friday for four hours. And we sat down and we just hashed out with them, and there's about 40 manufacturers, you know, what is it we needed to build? Why did we need to build it? Why weren't there solutions to solve the problem? And it was really an eye opening experience because they shared with us. It was a lot of things. But and things like, you know, it was easier to find capability overseas and it was to find a guy down the street. And that was a huge problem. Right? 

[Yeager] Well, and it's become a huge thing that we've talked about in this country for, for on and off for years. So before we go fully into the topic, tell me what the biggest manufacturing is in the state of Utah.

[Davis] You know, aerospace and defense tends to be one of the largest. We also have, a really strong, medical device and, kind of, pharmaceutical, almost, more supplements than pharmaceuticals. But, those industries are very strong there as well as, you know, a smattering of most other sectors of manufacturing. It's, it's a fairly strong manufacturing.

[Yeager] Is it a balanced state?

[Davis] Fairly. Yeah, I would say fairly balanced. not, not overly heavy on any of those, single areas. Although aerospace and defense certainly is the heaviest, largest. there's a lot of advanced manufacturing there as well.

[Yeager] So how do you get from the farm into involved in manufacturing then to walk me through that path?

[Davis] Yeah. So my education, let me down a lot of different paths. initially I thought I was going to become a counselor, and I was in psychology and all kinds of things. Right. But, in the end, I could see that there was a gap between technology and, and business that they really weren't speaking the same language very well. So I ended up getting a degree in technology. So I have an IT degree night background. And, for a number of years I worked in corporate America, you know, running IT departments and things like that, mostly on the software development side. But I had an opportunity in the early 2000 to lead a project, within the airline industry. It was for a former employer of mine based out of Atlanta, Georgia, and, it serendipitously, if you want to say, or maybe some other, word to describe it one way or the other, I, I ended up leading that project and moving my family to London on September 1st, 2001. So September 11th happened ten days later. I was in the British Airways offices as it happened and, you know, watching and then experiencing that unfold, firsthand from the airlines and from the airlines perspective. And, being in a foreign country was an amazing experience during that time. and it was a topic for another day, but just some incredible experiences. I was incredibly touched by the outpouring of love and appreciation for me individually being there in their country, but also, for Americans in general, by the British people as I was there.

[Yeager] Well, you've been around enough to know the term, I'm about to say. And that's a black swan. Yes. 911 was a tragedy, but for the airline industry, it was what you would call a UN planned event, the Black Swan. And so in real time, you are handling a crisis for an industry and trying to figure out, I'm guessing, how technology and safety are going to come together in a quick. So that was, I won't say, a complete set up for today, in this environment of everything changing, but it certainly didn't hurt.

[Davis] Exactly. No, I feel like the experiences I went through have positioned me very well to be the right person at the right place, at the right time to help, with the challenges that we're facing. And I'll try to share a little bit of that as we go through our conversation today. But with that, you know, experience, you know, the technology that we developed for them, I really did have a massive impact for them. It, we were recovering about $40 million a year, and deterring over $120 million of loss per year for them. We implemented that solution right after 911, and that really helped with their turnaround and had a huge impact in the airline industry. In fact, so the company I was working for was a recovery audit company. So they did auditing. They weren't a tech company, so they didn't know what to do with the solution that we developed. And so they ended up selling it to a company in India who owns it and runs it today. And almost every major world airline uses it. And so it was a tremendous success, but it gave me firsthand experience into how these solutions can actually change an industry and have direct bottom line impact for customers. And that's really what drove me to start, the i5 services and the Connex marketplace, that we own and run today.

[Yeager] Okay. So give me a sense of trying to not necessarily say it's technology that's driven your industry, but, is technology there for the benefit of making an industry better, or is it the technology used to make it more efficient?

[Davis] Yeah. So I would say there are technologies to do both. Right. So it depends on which perspective you're looking at it from. But certainly, we have opportunities to apply technology to make things better and more efficient. Right. If we do it the right way. so often we implement technology, and without the intended result. Right, without the intended outcome, because, we don't necessarily think about what the desired outcome is at the time we develop the tech. Sometimes we'll develop a point solution to solve a problem which, may or may not be the right solution to carry us through. So it's interesting how some of those things evolve and you see technologies come and go as a result of that.

[Yeager] So is America a technology country or a manufacturing country?

[Davis] You know, I've watched the evolution of our country through a number of cycles of this question. Right. So, in the early 2000, it was shocking because we closed 78,000 manufacturing plants, 6 million jobs were lost, most of that sent to China. And watch the devastating effects that had on our people and our economy and everything else. So the minute we are not a production economy where we are producing and manufacturing, we are on a quick decline. So we must remain a manufacturing economy. And technology can and should lead that. Our innovation is really what has made us, a worldwide leaders in not just manufacturing, but in so many areas. Right. So quick statistic. Pre-pandemic, China produced about 20% of the world's goods, with about 200 million workers. The US produced about 18% of the world's goods. so close to the same percentage was about 20 million. So 10% of the labor force for almost the same output. so if you think about that in terms of our technology, our ability to innovate, it's critical and crucial that we continue to innovate, and be able to deliver, through our technical solutions. Right. Even more, what's needed. And it's not necessarily that the world needs more goods, but we need more quality and efficiency. And we need to produce things closer to home, particularly as it pertains to the vital parts of our production. Right. So it's okay if we have consumer goods, as an example, that are not vital to our survival produced somewhere else, but items that are vital to our survival, our defense, our food, our medicine, those kinds of things which are super critical to us, should and must really be produced, as close to home as possible.

[Yeager] And is that because you mentioned security? but also, I'm guessing just for the health of our country.

[Davis] Yeah, certainly. so security for sure. You know, the minute that we are outsourcing our, defense manufacturing to an adversary country becomes a significant problem. And we have that problem in the US, right? We've allowed that problem to happen. food production as you watched, you know, logistical problems over many years now, really start to impact different areas of our supply chain, food production is is a vital one, right? So food and medicine are two of them that, can have a devastating effect very quickly if that supply chain is disrupted. So, not to mention, you know, the ecological impacts, environmental impacts that we are occurring every day as a result of shipping, all the way around the globe. the production for some of our basic, needs and essentials here in the.

[Yeager] US is is there one particular reason why that manufacturing was shipped off just to save labor costs, or was it something else?

[Davis] Yeah. So and certainly there were some political, issues at hand at the time, but most organizations looked at it as a significant labor savings. And that was the reason that they, they pushed forward, trying to put out a 2025 plan that, many people I can think didn't even pay attention to. But they told the world, we're going to take over manufacturing. And, I don't think the world really listened to what China said. because they didn't realize that China would also really use that as leverage and to take advantage of other countries. instead, you know, we we allowed an incredible imbalance to happen in our world. And that imbalance has caused tremendous trade problems and has caused all kinds of production problems, has caused environmental problems, labor problems, all kinds of things that have occurred as a result of that. Now, you know, taking a look at the problems that we have created, we have a tremendous opportunity to correct them.

[Yeager] Well, I guess the big question is, can we get all that back?

[Davis] Yeah. So it's an interesting question, right. An interesting dilemma because nothing happens overnight. It's not you can't snap your fingers and bring it back. well what we can do, and this is something that we've been working on for over a decade now, is to slowly, methodically identify those areas that are important to critical to our production in the United States and start bringing them back. Right. And we're seeing it happen. It's, it's amazing to have a front row seat to the changes that are occurring and watching manufacturing come back, watching at least the critical areas of manufacturing coming back. and the intent is not really to bring all manufacturing back, but the intent is really to stabilize, global production, and do it more intelligently so we have less of an environmental impact so that we are, more self-sustaining, in, especially in critical areas. And so watching that unfold and seeing companies go through those processes, it is very possible for us to bring it back. And we are in the process of doing that. And, it will not happen overnight, but it is happening.

[Yeager] Anybody who watches this TV show or listens to this podcast has heard me say what I'm about to say. Covid accelerated a lot of things that were happening. The one thing that it did is it accelerated the supply chain challenge, and that started pointing out the issues that you're you're exactly talking about. Alan, is, well, yeah, we can't we can't we can't ship it from overseas because of this problem. But if we could bring it from into, say, this country, it would be a much easier solution. Is that accurate for you?

[Davis] Well, yeah. I mean, our, our, saying has always sourced local first. Right. So you should be able to find the most local source for production that provides you the quality, the capacity and also, the price point that you need as a business. Right. when many companies. So when the shift started to happen, we saw a lot of that happen because of labor, right? You know, it's interesting because, as we've gone through, these cycles. Right? And we've watched the changes occur, we we really have had to bring back, vital parts that we sent offshore, meaning things like tooling. So we sent most of our tool in guy industry. We sent a lot of our intellectual property, with the naivete, I guess, that, you know, it wouldn't be stolen or used and, it certainly has been and will continue to be as long as we continue to ship it out. So there were a lot of things that we sent that are not as easy to bring back, right, and difficult to recover from, but we can absolutely bring a lot of that back. And and we're seeing we're seeing a resurgence of our tool and I industry. We're seeing, different ways of building, molds and and different things for injection molding and things like that, using 3D printing and other. You know, we talked about innovation and using other innovations to solve the problem in a different way. And the more we do that and the more we source local first so that we are not causing these massive disruptions. when we have supply chain problems and when we look at the total cost of production instead of just the labor costs, then we see a shift, a change, right? So many companies, when they started to do that total cost analysis, realized that, you know, they were holding a lot of extra inventory to handle disruptions in the supply chain, that the production problems were costing them a tremendous amount, because to get somebody overseas to resolve those issues and concerns was not necessarily always an easy endeavor or locating someone there on site. There were a lot of different reasons why there are additional costs to producing around the globe, as opposed to producing down the street and down the street. Maybe the labor cost is a little higher, right? But the overall cost is likely lower. And when many companies have started to do that analysis, they've realized that producing down the street is actually a better proposition and producing on the other side of the globe.

[Yeager] But who was pushing that? I mean, I go I had a conversation with a longtime tool and die maker who turned into a farmer who did both, and he always blamed NAFTA for reason. He lost his job. His job went to Mexico. but then I also think of that scene in the end of Christmas vacation, where they have the, you know, the brother, the cousin Eddie goes and gets the guy all the ways to save a buck. I mean, was it the business owners, the shareholders, states who was driving that push to save the labor that maybe set us up in this problem?

[Davis] Yeah. You know, I think we all had a role to play. I think, you know, all the way to consumers. Right? So as consumers, we have a role to play in this, to, we want the lowest cost, cheapest, price we can get on many things. Right. As a result of that, it drives companies to drive down costs so that they can provide that at the very lowest cost possible. And, many U.S. companies realized that they couldn't compete with the low labor costs in other countries. So production of goods in other countries, that would it was just it wasn't possible to compete any longer. because of the economy. We have here. And, you know, it's wonderful because the quality of life we have in the United States is really still somewhat unparalleled globally. Right. but that means that our labor costs are higher. And, you know, in order for us to compete with a low labor cost resource that means we have to innovate significantly in order to do it. And the companies who were successful at doing it, we're able to, maintain, right, competitive advantage in the marketplace, those that were not outsourced. And so, you know, the consumer behavior drove it, then the corporate behavior drove it, and then government behavior and really aided it and helped it. Right? So we stopped saying that we were a manufacturing economy. We start saying we were a services economy. Right. And all kinds of things that happened. you know, from in late 90s to, you know, early, probably, 2010 and beyond. Right? It in that period in particular, we went through this migration of sending a lot of our manufacturing away, focusing more on services and less on production. And, it really caused just, a shift in the US that, has been that truly we haven't recovered from, but has been difficult for us to even come back from.

[Yeager] Well, let's first tell me how you describe I-5 Connex Marketplace, how this tell me what it is. Because then I think my follow up comes to answer what you just laid out, what you set me up for the softball. I think Allen.

[Davis] All right. Yeah. So i5 services is the company that we started in 2009. And really we were looking for, problems, massive, difficult, challenging problems, and no one else wanted to solve. but the we knew we could solve. Right. So the airline experience gave me that understanding that if we could see the problem and most of those challenging problems are solved because no one wants to solve them, right? Because they're difficult to solve. And, but we were looking for those, and we could see when we were introduced to what was happening in manufacturing, we could see a massive problem in manufacturing. And we were coming late to the game. 2013. Right. I had observed, you know, what had been happening in the economy and all those things, but we were coming late to the game in 2013. But no one was stepping forward to say, this is how we're solving, this is what we're going to do. And there was a lot of, what are we going to do? But no, this is what we're going to do. And, you know, we were hoping that maybe the US would have an industrial policy that would lead us and all that. But no, it wasn't. So it was really left to industry to solve. So by engaging with industry to hear what the challenges were and to go shoulder to shoulder with them, to figure out how to solve it. And that's really what started the Connex Marketplace. And the Connex Marketplace was built as a solution to help them find the guy down the street first off. Right. and they they told us that, you know, they couldn't find, manufacturers based on what they produced sometimes on the products that they made, but not what they did. Right. So there wasn't a place where they could look for, I don't know, things like equipment, processes, certifications, materials, things that would really indicate what a manufacturer was capable of doing so that when they needed that, they could actually turn to someone who had the right capability, the right certifications, all those things. And without that, that transition, became overwhelming for them. Right? They didn't have a way. So, you know, we asked them about, well, why don't you use you know Thomas now mfg.com sam.gov DMV you know scraping websites using an AI tool. you know Google right. and one of their responses actually step with me all these years. And one of the manufacturers turned to me and said, Allen, you know, you try to go to any of those resources and find where all the women owned plastic injection molding companies are in the state. You know exactly why we can't use them. And and they were right, dead on. You know, we didn't have that resource in our country. And, the reason we did it was difficult. the publicly available data that we have in the US for manufacturing is woefully inadequate. Our best data for being able to find manufacturing capability is based on X codes and an X codes. NAICs codes, for those who may not be familiar with them, they there's entire segments of manufacturing that are not even represented in those codes. Right. So to find manufacturers that way and that's what almost every resource was using to help people find manufacturing capability. So that was that was one of the fundamental problems. The second thing was buyers had gotten into the habit of using Google, and Google was their number one resource for trying to find manufacturers in the US. And we still hear it today, right? We hear people stand up and say all the time, we don't do that in the US anymore. We don't make that in the US. You can't find that in the US and we challenge them. In fact, we put out numerous challenges to the marketplace saying, look, we guarantee that we can find the resource in the United States in less than 30 days, or we will give you a year of free access to the platform while we continue to look on your behalf. And we've only missed on that one time. And it's shocking, right? So we had, significant DoD leaders stand up at an event, that we were helping host that said, we have no more ball bearing manufacturers in the United States. And our jaws just dropped. We were like, there's no way. So we did a search. While he was actually speaking. We gave him a list of 30 certified ball bearing manufacturers in the United States, and two weeks later, they issued a $50 million contract for ball bearings to a U.S. manufacturer. And so but things like that are just commonplace now where we've gotten into the belief that it doesn't exist because we Google it, we don't see it. We think it isn't there. But it's not true. And, and retraining buyers to think differently, to act differently is probably the biggest challenge of all. But, to gather that data is also not not easy because, because it doesn't exist publicly. We've had that painstakingly gather it from manufacturers over a decade now. We've been at that. So we know we have the greatest resource of U.S. manufacturing capabilities that's ever been assembled. And that's why we're so excited about it, because we know we put together the right solution to solve the right problem at the right time.

[Yeager] Well, I think of all those the sourcing. Let's go back to that part of what you just said, the sourcing of the material. We talk about the chips we can't or the iPhone. We can't make this because it's not here, it's in this country. And then that becomes an issue okay. So that's the sourcing thing. Is there any way that this product addresses that challenge, of something very specific.

[Davis] Yeah. So let's use chips as the example. Right. So in fact, just this week had a conversation with another material provider in the United States who has almost every significant, rare earth minerals and raw material that people would need in the US based in the US, mining from the US, producing in the US. Right. and able to produce what we need. And even having stockpiles ready to help. but we have EPA regulations and all kinds of other things which limit, their ability to be able to, number one, produce at the levels that are needed. And number two, to really, produce at a level that is able to be competitive with foreign sources of raw materials. Right? So we are causing the impediments to ourselves. And, so there is a role of government here. There is a role of regulation here that needs to be played in the right way. I understand why we have the regulations and there are some important reasons why they exist. But revisiting what we have, that it's been decades and decades old, right? And is no longer relevant to our current condition, is vital to our success moving forward. But yes, we have the raw materials in there. We are able to help them. Fine. So the silica sand, you know, that is talked about so often for the production of chips. It's there. It's here we have it.

[Yeager] We're at oh, this audience is very, very aware of the sand story because it was a big thing when it came to fracking. everybody became an expert on where to find that certain kind of sand. And it was this one mine in West Virginia and this one in Wisconsin. We did learn in a hurry because people did stand up. So let's talk about in our last couple of minutes here, Allen, about rural, abilities to help in this situation. I can think of small towns, maybe yours, maybe mine that can have that plant. That is one of those 30 ball joint, manufacturers that can contribute and we can build out rural areas. Is that possible in all of this?

[Davis] Absolutely. Yes. You know, we we help people find the small manufacturers above everything else. We help people find them. So we if you're a small manufacturer, we need you. Right. If you're a medium size manufacturer, we need you. If you're a buyer or a large manufacturer, we need you. Right? Our country needs you, and we need to pull together.

 

[Davis]

This is the moment probably more vital than any moment that we've had in many of our lifetimes, right, or at least in recent history, where we need to pull together at a time when our country is falling apart, and I see much of that coming from small town America. I see it coming from rural America that's a little bit emotional for me, because that's where I come from. But at a time when our country needs us, this is the time, right? But it means coming together, at a time when we're falling apart. And yes, there is a role for everyone to play, rural America, urban America, all of us coming together, figuring out and manufacturing, farming, these types of industries don't have politics tied to them, or should not have politics tied to them, because this is vital to every human life, and the way that we live life. The quality of our lives is dependent upon how we take care of this issue right now. Today, and it will impact generations to come. And so pulling together right now gives us that opportunity to have a lasting impact beyond all of us, and to have an immediate impact for all of us that are here today.

[Yeager] It's hard to top that. I don't think I can ask another question that's going to get a good of an answer there. Alan, but what is there that I have? What? What else am I missing on this topic, or others that maybe don't pay attention to your bread and butter, that need to know about what's going on right here?

[Davis] Yeah, you know, I would just add maybe one thing, and that is, you know, on to what I just said, many people have pulled together, and it's amazing to see, right? So the National Association of Manufacturers is our largest national partner and our most well, our almost our longest lasting, I guess, our longest standing national partner, they've been in this with us since about 2015 so they've been in it with us for a long time. And they help on a lot of different fronts, but we also have Dems good the diverse manufacturing supply chain Alliance there, they help with diversity, right? An amazing national partner. And then at the state level, we have so many state level partners, and certain states that have leaned in really heavy, you know, Connecticut is probably our leading state in the country in terms of really growing manufacturing economy, and, you know, a vital partner of ours. And we do a lot with the state of Connecticut as a result of that, but many states have leaned in. There have been many governors who have talked about Connex, and they use Connex as their solution for connecting their supply chains in their states. And as we see more people lean in, so at the state level, you've got manufacturing extension partnerships, Ames, many people refer to them as manufacturing associations, Chambers of Commerce, Economic Development, Apex accelerators, all working in some capacity to help manufacturers. And we are doing our best to unite that entire set of organizations across our entire country, and we've been at that for as long as we've been building the tech. Because this is not just a technical solution, right? This is a solution of people coming together, enabled by technology to solve a very significant problem that we have right now. 

[Yeager] Alan, sounds like we're going to have to do a follow up to find out how our grades are coming, how we're progressing in this country, as we continue to make some things here and source some things in the United States. And it is certainly a top of mind on almost every newscast. It sounds like.  So Alan, thank you so very much for the time. I appreciate it.

[Davis] Thank you so much, Paul. Appreciate it. Take care.

[Yeager] New episodes come out each and every Tuesday. We'll see you next time here on the podcast, which is a production of Iowa, PBS and the Market to Market TV show.