Another update dropped this morning----Weekly update from Sig Manufacturing 04/16/21 – Tom Lagerhausen, COO & CFO
Thank you everyone for the comments and questions last weekend in response to the first Sig Post. I read every comment / question and started a file of requests and ideas for future thought and planning. Some of the comments were requests for the return of some vintage Sig kits, which I will definitely review with my team. Cost and manufacturing capability of the vintage kits will dictate progress.
Quick Updates-
Wood Shipment – The 26,000 board feet of Ecuadorian balsa was released from customs in Philadelphia on Friday and is on its way to Sig. Our saw room staff is eager to start cutting into it.
ARF Shipment – Cargo ship containing ARF shipment of 480 ARFs anchored at Los Angeles Port Thursday evening with estimated unloading next Saturday. We provided another purchase order to our Vietnamese facility for 600 more ARFs to be fabricated in July.
Laser Cutting Machines – 500 watt laser cutting machines we acquired a few weeks ago are being disassembled for shipment to Sig. We are currently preparing the area in Sig’s main building for required power and ventilation.
Weekly Post – This week I will touch on the manufacturing of ARFs (Almost Ready to Fly) kits, a kit designed to allow customers to quickly build a kit and get it flying.
According to the AMA, ARFs were first introduced in 1964 by Len Purdy, who’s company produced over 150,000 ARFs from 1964 to 1978. Sig joined the ARF parade in the early 2000’s, first having our ARFs produced in China, then moving the operation to Seagull Manufacturing, located in Ho Chi Minh City, Vietnam. Seagull is one of the premier ARF fabricators with over 35 world-wide distributors marketing their products. I attached some photos of the Seagull factory building and shipping some of our ARFs.
The designs used by Seagull for our ARFs were created by Sig’s own design team in our research & development area. Sig designed 44 different ARF kits in total, but we are only marketing 21 currently.
People have asked me, “Why don’t you produce the ARFs in the USA?”. The quick answer is USA labor costs versus labor costs in Vietnam. If you look at some of the attached photos, the manufacturing process to fabricate ARFs is very manual, with workers manufacturing fuselage after fuselage, wing after wing, etc. It would be difficult and expensive to bring that type of production to Iowa.
Sig sells both Sig branded ARFs and Seagull branded ARFs in the USA. About 75% of our sales currently are Sig ARFs. Seagull is introducing new models every year and we will evaluate each model for inclusion in our product mix. We are also reviewing additional Sig model kits as potential ARF products, but those ambitions will be at least a year out.
Unlike producing Sig kits in our factory here in Montezuma, manufacturing overseas has its moments. Beside relying solely on quality control efforts from the outsource company, lead times from initial purchase order to delivery can be long. Our current lead time for ARFs is about six months. Once a purchase order is submitted, it would take approximately three months to get into Seagull’s production schedule, a month of actual manufacturing, and another two months for shipping via cargo ship over the Pacific Ocean to the west coast, and then a train to Sig. Due to the long lead time, for example, our Christmas inventory will need to be ordered mid-June.
In the past five years, Sig would receive two ARF shipments annually, about 1,100 planes. We are building stock this year, looking to order three shipments in 2021 with a potential of four shipments next year. It is our hope to have ARFs coming into Sig every two months by 2024.
Another item to consider when manufacturing overseas is obtaining ARF repair parts after a crash occurs. I do not know why, but some of our products we work so hard to create end up as ground fodder. Sometimes it is a wing or landing gear hitting the ground too hard, or sometimes a pilot wants to see if he can strike oil by embedding the propeller six inches into the earth.
Because the long lead time to get into Seagull’s production schedule, it could be six to nine months for a repair part to arrive. To build up our stock of ARF parts so they are available when requested, we are reviewing the more common repair parts that are requested for the 84 different ARFs we sell.
I have also been researching a potential answer to the repair part, using 3D printing technology at Sig to produce the part onsite. (Please, no comments from the build-from-scratch modelers saying using 3D technology is sacrilege). Today there exists various wood fiber filaments that can mimic balsa wood in weight and strength quite well using the 3D printing process.
When manufacturing overseas, it is a little difficult because we cannot see the daily operations like we can at our own facility here in Montezuma. But keeping a good working relationship with the international partner will resolve that. I plan to visit Seagull later this year to keep that relationship going and see if Sig can assist in their production process to reduce the lead time required to produce our ARFs.
Next week Sig Post (4/23/21) – Sig’s Wood Warehouse and Saw Room Operations