Contract laser cutting and metal fabrication services
Brothers Caleb and Jacom, with respective backgrounds in electrical and manufacturing engineering, teamed up on an immersive motion simulator for Private Label VR in Spanish Fork, Utah.
Their inability to find a suitable contract manufacturer for fabricated metal parts led them to start OSH Cut. (OSH stands for Open Source Hardware.)
"We found that we could spin up a new design in an hour or two, a day, then the next two to four weeks trying to find a shop that could prototype it for us," says Caleb. "We found the process was very antiquated, very poor. There's gotta be a better way to do this."
In six short months, the Chamberlain brothers developed an online app to handle customer intake, design for manufacturability (DFM) checks, quoting, and other pre-production functions. The first version of the OSH Cut platform launched in November 2018.
"It's completely automated," says Caleb. "We tried to make it as seamless an experience as possible. A customer can drag and drop a bunch of parts into our system, it analyzes the profiles. If it's a 3D model, it'll take the model and actually unfold it to create a flat pattern. In sheet metal, you create the flat first and bend it into the finished state."
"It adjusts design parameters as needed to make it manufacturable," he adds. "Then it actually does a full simulation right there on the website white the user's watching. It'll show them how the press brake will bend their part. If there are any issues with die access, flange support, or collision with tooling, it'll actually show exactly where it happens so the customer can tweak their design."
"Ordinarily, shops are hiring an engineer to do all that work just to quote a job. There's ordinarily very lengthy back-and-forth processes that are expensive for the shop and frustrating for the customer. Pushing that all onto a web front end allows the customer to iterate quickly and answer all the questions they need as far as capabilities go."
The end result? "By the time a part is submitted to be manufactured, we know it's good to go," says Caleb.
The system cuts lead times to the bone. "We'll ship parts as soon as same-day," says Caleb, noting that quoting alone usually takes two to five days. "We set up our system so you can get an instant price and get a part as soon as tomorrow -- or today, if it's at will call."
The approach allows for no minimums and high margins. "We have no engineering staff, we have no quoting staff," says Caleb. "A normal shop our size might have five to 10 people in the front office bidding on jobs. We've been able to eliminate most of the front office, which allows us to operate much more quickly and efficiently."
Of its 35 employees, the company has two software developers and two people in the office. "Everybody else is on the floor," says Caleb.
The company's customer base is notably diverse. "Our single biggest demographic is aftermarket automotive products," says Caleb. "We also serve other fab shops that don't have lasers, we serve a lot of OEMs that are manufacturing their own products who again can't afford or don't have the space for a laser to cut their parts out. Third on the list is engineering companies: We ship parts to SpaceX and to Boeing and to JPL and to NASA and outfits like that."
The range of customers makes the company buoyant in the face of choppy waters in any one sector. "In this industry, usually shops like to cultivate big production customers, and they'll have five or 10 customers who account for 80 percent of their revenue. For us, we have 500 customers that account for that -- so about two orders of magnitude more customers -- and that gives us some resiliency to risk."
OSH Cut ships orders to customers nationwide. About 12 percent of customers are in California, with 10 percent in Utah. Pricing typically beats competitors for low-volume orders, but is in "the middle of the pack" for larger orders, says Caleb.
Beyond laser cutting and bending, OSH Cut offers such post-production processes as deburring at its 12,000-square-foot facility in Orem. The company currently has day and night shifts and two laser cutters, and keeps an inventory of more than 300 materials.
OSH Cut has come a long way in four years. "When we started, it was literally just me and Jacom," says Caleb.
Annual revenue jumped by 174 percent in 2021, and Caleb forecasts another 85 percent uptick in 2022.
"We went from five to 35 people in 18 months," says Caleb, noting that investment in digital marketing catalyzed the growth trajectory. "We can spend $50,000 to $60,000 on digital ads . . . but anything above that per month, we find that the diminishing returns hit pretty fast and pretty dramatically."
Regardless, he adds, digital has proven a great fit for OSH Cut's business model due to its scalability and breadth. "A traditional shop might have inside and outside sales and go out and win big jobs. For us, it's the opposite: We want a whole bunch of small to mid-sized jobs that we can bid competitively on and still make really great margins and scale that way. But that means it's not enough for a salesperson to bring in one or two customers a week or a month. We're trying to hit 500 new customers every month, so it's quite different."
Challenges: Caleb highlights the "balancing act" between investment and growth amid blinking warning signs for a recession. "We want to expand, we want to grow quickly, but we don't want to overleverage, so the real challenge is managing that risk while also making sure we don't get some conservative we miss opportunities to scale into this space, which is pretty open at the moment," he says.
Opportunities: "We think that we're service-limited right now," says Caleb. "We offer blank cutting, just cutting the profile or a part, and deburring, bending, and tapping. We don't offer hardware insertion, we don't offer powder coating, we don't offer welding, we don't offer formed features like louvers or hinges. If you look at the world of sheet metal, we offer maybe 5 percent of what's possible in terms of finished product. And that's allowed us to grow quite a bit, but we think that now spreading into the market that we really need to expand our value-add and start offering all of those services, one at a time to make sure we don't get ahead of ourselves."
Needs: In order to launch a swing shift in late 2022, the company needs to hire about 12 more employees. Hiring hasn't been a problem for OSH Cut, as the company's business model results in margins that are double or triple the industry norm. "We're able to pay people a lot more," says Caleb. "We're paying our people often as much as two or three times more than what the median pay is in this industry for the job they're doing."
He adds, "We combine high automation with high pay so we can get great people. We've had zero problems attracting the best of the best to run the operations on the floor."
OSH Cut also needs more space. OSH Cut is moving into a 40,000-square-foot facility in early 2023 to accommodate growth. "We're in the process of building it right now," says Caleb. "Once we move, we'll have the ability to buy more lasers and other equipment to support our customers. . . . The lasers are really big, so space is the constraint right now."