By Eric Peterson | Jan 30, 2022
Contract additive printing and machining services
Alchemy Industrial is a response to the increasingly fraught global supply chain.
"We solve supply chain problems," says Khan, whose background is in the chemical and energy industries. "Part of my career was spent managing a supply chain in China for a prior company."
Khan lays out his motivation for launching the startup with co-founder Andrew Malek in 2020. "There were really three things that led me to think about building a contract manufacturing business," says Khan. "One of them is rising labor rates in China which have continued to go up in that country as the middle class develops in China."
"Another is the emergence of different kinds of manufacturing technology," he adds, reeling off a list from additive to AI. "The consequence of that is the labor cost input of a manufactured good continues to decline."
And thirdly, Khan notes that "at least a billion people around the planet who have yet to begin consuming products" is shrinking as GDPs rise. "As those people begin entering the economy, demand for manufactured goods is going to go up," he says.
In the context of a perfect storm in the supply chain in 2022, the model looks a bit prescient. Two years in, Alchemy Industrial now has a half-dozen "core" customers for its additive, CNC, and electromechanical assembly services, says Khan. The company has a growing number of 3D printers along with laser cutters and CNC machines.
Robotic automation and electrical infrastructure (including vehicles and chargers) are the top market verticals. "We entered the business with an active customer," says Khan. "In 2021, we built our capabilities and customer base."
Khan says the company's current capabilities are a good fit for a wide range of industries. "We don't focus on what to make, but how to make it," he explains. "We're at our best when we make the entire product instead of just a piece. Then we can go about figuring out how best to make it, solve supply chain issues, fix drawings and engineering files, and those kinds of things. It's really just getting ready to scale manufacturing."
Alchemy Industrial is based in a 5,000-square-foot space at Houston's $38 million East End Maker Hub. The 300,000-square-foot facility on 21 acres, a former Baker Hughes factory, is the largest project of its kind in the Lone Star State.
Khan chairs the board of TXRX Labs, a nonprofit makerspace that partnered with Urban Partnerships Community Development Corporation on the East End Maker Hub. TXRX leases 60,000 square feet, and 95 percent of the remaining 240,000 square feet is leased by companies like Alchemy Industrial. A new build of a similar size is on the drawing board
Khan describes a powerful "positive feedback loop" among the hub's tenants. "It's a really unique way of creating a beneficial flywheel," he says. "It's almost like they can't help but help each other."
He adds of the East End Maker Hub, "More than anything else, it's driving the revitalization of manufacturing on the east end of downtown, which is called EaDo. It has historically been the manufacturing center of Houston, but it's kind of dissipated over the last 40 or 50 years."
As of 2022, the comeback is in full swing, and Alchemy Industrial is part of it. Khan says he looks at the company's trajectory on a "quarterly basis": After 200 percent growth in Q1 2022 over Q4 2021, he expects another 100 percent in Q2 and Q3.
"The customers we're winning and the customers we're calling on have good organic growth potential," says Khan. "We want to win new customers, we will win new customers, but probably 80 percent of our effort is just doing the best job we can for existing customers."
Challenges: Finding and hiring manufacturing talent is at the top of the list, says Khan. "Finding people who know how to make stuff or want to make stuff or want to learn how to do it We've underinvested in that message in this country unfortunately, and so we've got to find a way to get people to enter the industry, especially young people.
Khan says "rethinking the user experience for customers" is a close second. "As our customers get younger, they want to interact with us in different ways. We need to be mobile-enabled, have information online, have updates for people that don't require them to call in all the time, be able to view drawings, quality documents et cetera online."
Opportunities: Reshoring manufacturing and supply chains, says Khan. "It's not so much a low-cost advantage anymore just to buy overseas. It requires a more holistic view on cost."
While he's bullish on automation and electrification, he takes a wider view. "The pie is going to get bigger," he says. "This is not a time for competition, this is a time for collaboration."
Within that context, he sees innovation in additive manufacturing and automation as the big opportunities for the industry. "Even though additive has been around for a few decades, I really think we're in the first inning of a nine-inning game on additive adoption," says Khan. "Automation is not a job killer or a job threatener, it is an enabler. We absolutely cannot without automation. We just don't have enough people."
He shares an anecdote from a machinist: "He put it the best way possible, which is that: 'In the past, the machinists were the orchestra players, but in the future the machinist has to be the conductor of the orchestra.'"
Needs: Alchemy Industrial needs "the right kind of customers that we can provide the most value to," says Khan. "Look, manufacturers don't leverage things like social media in an elegant way. The fact of the matter is the old-fashioned way of showing up and dropping off a business card is not going to work. No one is buying that way. So I think social media is a great way to be an educational resource and teach your target market how to buy the stuff that you are making and selling."