Orange, California

Owner Natalia Sephton is driving innovation at the longstanding Orange County contract manufacturer.

Founded as a Davenport screw machine shop, M&R Engineering has entered a new stage under the ownership of Sephton, who bought the company in 2017.

Originally from Russia, Sephton came to the U.S. to study engineering at the University of Southern California in the late 1990s, then worked for Alcoa Fastening Systems. “I worked for them and climbed the corporate ladder for 14 years,” she says.

That changed three years ago. “A recruiter called me one day and said, ‘I have this great opportunity,'” says Sephton.

The previous owner of the company was ready to retire, and he didn’t have a natural successor. She was ready to make a move from corporate America into entrepreneurship. “I left my cushy corporate job and came to work at a much smaller company.”

Now based in a 32,000-square-foot facility, M&R Engineering serves aerospace and defense as well as customers in the automotive aftermarket, sprinkler systems, and other areas. Sephton highlights the company’s key selling points: “It’s a healthy business. It’s a very diverse customer base,” she says. “We have a lot of contract manufacturing clients and also like to call ourselves a contract manufacturing job shop. About 30 to 40 percent of our business is in the job shop environment.”

The company boosted its capabilities when it acquired R&B Plastics, a CNC-focused shop, in 2007. “We provide both metal and plastic precision components,” says Sephton. “The two big things we offer our customers are diversity — different materials, different equipment, and also we want to really be an extension of our customers’ supply chains — and the second part is flexibility. We have short turnaround times. We’ve had customers that needed parts in a few days, and we’ve done that for them.”

Noting that the company’s tagline is “a one-stop shop for your machining needs,” she adds, “Besides metal and plastics, we also have 18 Davenport screw machines. We also have ventured into the CNC world, so we have CNC lathes, CNC Swiss turners, and CNC mills. We run small parts, we run large parts. With Davenports, it’s more high-volume, low-mix, and with the CNC shop, it’s more low-volume, high-mix, so we do both.” For some parts, volumes go up to as many as 5 million units a year.

To support customers with large orders, M&R Engineering has invested in automated QA equipment, CNC technology, and robotics to help with secondary automation. “Most of our machines are fully automated, so we try to get a complete part from a bar with automation where we can,” says Sephton.

Customers include Eaton, TMT Laboratories, and Schlage Lock. AS9100 certification drives the aerospace and defense businesses, which represent about 20 percent of sales each.

The early returns for Sephton’s strategy look good. “We’ve had about 10 percent year-over-year growth [in 2018 and 2019] and we’re positioned pretty good in terms of our backlog and new customers.”

The COVID-19 pandemic has impacted the company, but Sephton remains bullish on her company’s long-term prospects. “I’m still confident,” she says. “Once this is resolved and everybody goes back to work in the aerospace industry, [the suppliers] should bounce back.”

Challenges: Sephton sees a big challenge for bringing offshore manufacturing back to the U.S. “One of the things I see with COVID-19 is everybody’s talking about onshoring or reshoring. What are we going to do? We cannot compete with offshoring just based on the labor alone. We need to be much more efficient, more responsive, and provide better-quality products to our customers. That can differentiate us.”

She continues, “I see multiple ways of achieving it. One is through technology — buying faster and better equipment every year as budgets permit. We always invest in technology.”

Finding top talent is another continual challenge. “People development is another area where not just the company, but the whole industry can do better,” Sephton explains. “Before COVID, the unemployment was so low in the overall industry, finding any kind of people was a challenge. . . . I don’t think we as a country have enough trade schools. There are so many universities. There are private schools, there are state schools: I can count 20 in the Orange County/L.A. County vicinity. When we talk about trade schools, I can only think of two — NTMA and Cerritos College — for machining, and maybe a couple of automotive schools. And that’s it.”

She adds, “A lot of the talent we are interviewing, they have a huge gap in their theoretical knowledge. They don’t know how to calculate feeds, speeds, angles. If we really want to be competitive with reshoring as a manufacturing group, we need to rethink how we can prepare our workforce for these jobs. . . . Some items we teach on the job, and we also partner with NTMA and CMTC.”

She highlights a third challenge for her company: “Smaller companies and small businesses face the same challenges as big corporations. I call it ‘big data on a small budget.’ . . . A lot of the giant companies like Siemens do this kind of work. We don’t have as massive budget as a smaller company so trying to get the most out of your MRP providers with data collection and how we can improve our decision-making based on data.”

Sephton calls it “a constant battle,” and adds, “My background is in industrial engineering, so it’s all about optimization of the processes and optimization of the data, and how you can take advantage of technology so you can make better decisions.”

Opportunities: Government contracts. Sephton says aerospace and defense look like long-term growth drivers for M&R Engineering.

Another opportunity involves reshoring, with the asterisk she described as part of the company’s challenges. “Reshoring is a great opportunity, but if we don’t focus on how we can provide more value to our customers, at the end of day if it’s penny for penny, the pennies in Asia look a lot cheaper than they are in the U.S. So we have to find a way as a U.S. manufacturing group to be more competitive.”

Sephton says she’s also looking at California-based manufacturers for potential acquisitions. “COVID-19 I think will really accelerate the exit of Baby Boomers from the machining industry, and there are going to be lots of opportunities for acquisitions,” she explains. “People are going to hang up their hat and say, ‘This is it. It’s going to take way too long and be way too hard to come back.'”

Needs: New avenues to connect with potential customers in the COVID-19 era. “Trade shows and other things are canceled right now,” says Sephton. “We need an alternative that brings buyers and manufacturers together.”

She strikes a familiar refrain: “Longer term, it’s the same old story of qualified talent. We have a long way to go if we want to be successful in reshoring,” says Sephton. “Bringing things back to the U.S., smaller quantities, shorter lead times, the ability to hold your inventory for your customer will come in handy. M&R Engineering is already prepared for that. We already do a lot of extension of supply chain and VMI [vendor managed inventory] programs. . . . It’s very beneficial for our customers in terms of working capital: You’re not paying for inventory until there’s a need.”


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