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Issue Date: Vol. 49, No.5, May 2009, Posted On: 5/24/2009


Made In The USA: How Pyramid Technologies Competes


Hank Schlesinger
swag@earthlink.net
Pyramid Technologies Inc., David Mays, bill validators, payment systems, vending, vending machine, vending business, vending route, automatic retailing, coin-op, manufacturing trends

David Mays has been thinking about China lately. What makes the president of Pyramid Technologies Inc. different from some other business executives eyeing Asia is the fact that his firm, which makes bill validators, is bringing the fabrication of plastic back to the U.S. In an age when many American manufacturers continue to rush in, lock step, to look for the low-cost "China price," Mays' move is preemptive and could serve as a model for other U.S. companies.

To that end, Pyramid recently moved all injection molding of plastic for its Trilogy line to its U.S. factory. "What we're doing makes sense dollar wise, and it makes sense to shoot the parts in Arizona," Mays told VT.

Injection molding for Pyramid's Apex line, the company's first validator and its most popular among American operators, has always been done in the U.S. But the Trilogy, introduced four years ago and designed for international markets, was made in China until now, Mays said.

His decision is based firmly on bottom-line business practices, but it challenges the common idea that American-made products cannot profitably compete with their Asian-made counterparts. Mays observed that manufacturing costs might be cheaper in China, but margins are eroded by as much as 5% by shipping. In addition, prices are going up in China as its people become more affluent and demand higher wages.

"Sure, the labor is a little cheaper overseas, but you have to transport it," he said. "And all of a sudden you've increased your cost by 3% to 5%, so you have to order a larger quantity. You have to carry all of this inventory."



PHOTO:Sometimes less really is more when it comes to innovation. Pyramid's line of Trilogy bill acceptors features fewer components compared with many competing models. Designed to function with fewer parts not only means greater efficiency on the assembly line, but also enhances reliability and ease of maintenance for operators. This 21st century design philosophy requires increased attention to detail in the initial stages, including input from workers on the factory floor. "As a rule, people tend to over design," says Pyramid's David Mays. "They make something that is overdone and don't look at cost savings during the design process."



Large parts inventories are not compatible with his firm's just-in-time manufacturing processes, which allow relatively low on-hand stock and rapid delivery from suppliers to increase efficiencies. "Ordering something from China, it's going to be at least 30 days before it's shipped, which is actually comparable to the U.S., but then it has to go on a boat and it's going to take a month and a half, sometimes two months, to arrive," he said. These logistical constraints often hold up manufacturing schedules.

But how does a company producing goods domestically compete with labor costs that are a fraction of U.S. wages? The strategy is to remove labor content – the cost of assembly – from the finished product, Mays explained. Viewed this way, labor is counted as another component, just like plastic or fasteners. Although parts may be only marginally cheaper overseas, most companies manufacturing goods in Asia see real savings from labor content more than any other element.

To reduce the cost of labor content, Mays has relied not on a cheap workforce, but on efficient design. "We have a bill acceptor that requires fewer parts," he said. "This means that, compared with everyone else's bill acceptor, our products require fewer assembly hours per unit. For example, if it takes 30 minutes to assemble something in the U.S., but 90 minutes in Asia, all of a sudden there isn't that much disparity in cost. I would say, on average, we need only one-third of the parts used in similar products from our competition. That's quite a difference."

Not only do Pyramid acceptors contain fewer parts, but they also are designed for easy assembly – another labor-reduction attribute. The Trilogy acceptor uses only two screws for assembly; most of the components simply snap together. "We designed it like a model car," Mays said. "This doesn't decrease quality as long as it's designed well. And the bonus to that is serviceability. Someone can go out in the field and change a belt with just a screwdriver."

While the uncomplicated designs of Pyramid's bill acceptors were originally created to save on manufacturing costs, operators quickly embraced their serviceability. Those same design features intended to trim assemblyman hours on the factory floor also cut man-hours in the field, and this became a major selling-point for the line. In engineering parlance, this is known as an elegant solution.


SIMPLICITY IS NOT CHEAP

Pyramid's designs do require additional resources during the initial development stages. "It takes a little longer to design," Mays said. "As a rule, people tend to over-design. They make something that is overdone and don't spend enough time looking at cost savings during the design process. They conceive a product, get it to market and then decide it's time to reduce costs. They start asking: 'How can we make it cheaper?' But we do that up front."

The Arizona company uses cutting-edge design technology during the initial development phase, beginning with stereo lithography, a relatively new technology for making prototype components. In essence, this machine takes an engineer's detailed drawing and creates a 3D model from it.

Prototyping in the past was an expensive process typically costing thousands of dollars, and requiring weeks to fabricate a model for a single component. Today, the use of computer-driven modeling systems allows factories like Pyramid's to create prototype parts for less than $100 in just a few days. This, in turn, allows engineers to refine their designs with multiple versions in a cost-efficient manner. What would have taken two or three months not long ago can now be accomplished in two weeks or less.

At Pyramid, production personnel are brought into the development process to evaluate how a design will perform when it's on the assembly line. "We're always going back to manufacturing so they can look at things closely," Mays said. "Engineers are smart guys, but they're not out there putting things together. Production people have been very helpful. They'll ask, 'What if you did this?' or 'What if it looked like that?' At a lot of companies I worked for in the past, the first time the production people saw a product was when it hit the production floor."

How Pyramid's model can be adapted to other manufacturing industries remains to be seen, but a return of at least some manufacturing to the U.S. by other industries is an intriguing prospect. For his part, Mays sees it working at Pyramid. "We compete daily with Chinese-made products and make fine margins," he said.

Pyramid maintains sales, marketing and manufacturing operations in Meza, AZ. Its two-building facility offers 25,000 sq.ft. of space and the manufacturing division can produce 15,000 validators a month. In addition to the Apex and Trilogy, the company now offers the water-resistant Aqua validator, which was recently introduced to the carwash industry.


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