2022 State of the Company
From the Owner.
This is the company’s annual report on the state of Freedom Forge Armory LLC to investors, employees, and customers.
We’ve reached the end of another year. The theme for this year was “That didn’t at all go as planned.”
What happened this year.
Q1 2022 In the first quarter of 2022 growth slowed but profits remained steady. Even as the firearms market stabilized, long delays in shipping and material shortages continued to plague operations. I invested in a second CNC machine and tooling to speed up production with a projected delivery late in Q4 2022, based on projected variance manufacturing contracts and new product plans.
Q2 2022 In the second quarter of 2021 I implemented new software solutions to better track jobs and to manage the acquisition and disposition records. These investments increased productivity by cutting down on the time needed to manage customers jobs and required records by 75%, while incurring minimal cost and improving accuracy. Plans were in place and tooling was purchased to introduce a line of M1911 pistols manufactured completely in house with one prototype built and successfully tested.
Q3 2022 In the third quarter, the company took a major hit to operations. The ATF implemented new rules on 80% receivers and parts reclassifying these parts as firearms. Many of the forges that we used, made the decision to cease production of 80% receivers and parts, and to pull them from the market. This shut down new variance manufacturing contracts in July, and rendered the CNC machine obsolete overnight. This was a devastating loss of revenue for Freedom Forge Armory. The contract for the second CNC machine and tooling was canceled as a cost saving measure. Current variance contracts with materials on hand were manufactured and shipped. Notification to our customers was sent out late in the third quarter that no more variance contracts would be accepted, prices would be increasing, and shipping delays couldn’t be avoided.
Q4 2022 Fourth Quarter 2021, Early in the fourth quarter the company rapidly shifted back to firearms transfers, gunsmithing, and customization work. The remaining variance manufacturing contracts were executed and the CNC machine was prepared for long term storage. The rising inflation and slowing economy had a significant impact on our customers and prices. Late in the fourth quarter one forge came back on line offering 80% receivers again at a much higher price than what we were previously paying, the decision was made to cautiously reenter the variance manufacturing market with some new stipulations.
A look the company right now.
Gunsmithing work slowed throughout the year and the company is still backlogged by two to three months. Much of the delay has been due to supply chain issues and shifting priority to manufacturing during the first and second quarters of 2022.
The loss of variance manufacturing for part of this year, rising inflation, and a slowing economy affected company profits and caused me to reassess the planned expansion. It has been decided to delay the new building and expansion for at least a year, possibly two. M6E production was halted early in the fourth quarter due to a lack of raw materials but resumed late in the fourth quarter. Plans for the new low-cost aluminum suppressors and M1911 pistols have been placed on hold indefinitely.
The company’s website was updated to offer parts and assemblies. When the variance manufacturing contracts ended, I took the opportunity to rework the website and add SEO information that was missing from a large portion of the website, this has driven website traffic up 100%. New categories were created offering rifle sub-assemblies and parts. With the downturn in the economy, I anticipated sales in this area would be slow allowing the company to rely on drop shipping of parts. Offering parts and sub-assemblies gave the company a fall back position and additional revenue stream.
The company has cautiously restarted variance manufacturing operations with the understanding that the raw materials could be suddenly pulled from the market again.
Our partnership with LaserUS LLC remains strong and their help was instrumental in developing and testing the new process for variance marking. Plans to expand into a shared space have been placed on hold due to the economy and not being able to find a space that worked for both companies.
All current R & D projects have been placed on hold to focus on current gunsmithing work and manufacturing of current products.
Plans to attend SHOT and SAR East were canceled and will be reevaluated in 2024.
Financially the company is maintaining. Previous years income growth and smart reinvesting in the company helped to maintain the company coffers, even as 2022 profits fell below 2021 levels. Every aspect of operations is being evaluated for cost and time saving measures. No solution is off the table.
As always there were some setbacks, but we managed to find solutions. Our biggest setback this year was the temporary shut down of our manufacturing capability. It was sheer luck that one forge made the decision to resume production and sales on 80% receivers. I took the opportunity to examine and fix the problems that showed up in our variance marking process before offering the service again. Many of the lessons that were learned from the Mk5 rifle, that were applied to the M6 rifle, were implemented in the variance program. The problems that were identified were, too much back and forth email communication, emails were getting missed and customers were left hanging with no information. There were to many steps in the set up process with each one being a potential failure point. To many options for customization, there was no standard and every job was different, this led to delays in getting price quotes back to customers and production delays as machines had to be retooled and reprogramed each time. A quote based system that required a lot of time generating those quotes for potential customers that did not result in more sales. Over extending our capability by not placing a cap on the number of receivers we could manufacture in a reasonable amount of time. These factors effected profits and turn around times. To solve these problems new controls were put in place. Customers can now create their own order on the website for the product they want, see the price, and place an order all in one step. Options were limited to quantity, finish color, and selector markings, Layouts will now follow the same format every time. A prefilled marking variance application was added to each product allowing the customer to fill in their information and email it back to us, there is no longer the need to create a new application and spec sheet for customer approval for each job. An email address was created just to handle variance applications and communications. Clear customer instructions were added to each product. Minimum and maximum fixed quantities were added to control prices and production times. These new processes were tested before it went live and have simplified our materials procurement, controlled costs, and reduced errors to almost zero.
M6E rifle production was halted in July 2022 due to raw materials being pulled from the market. Production resumed in late August utilizing marking adaptation, only two rifles were manufactured using this technique before production of M6E receivers resumed in house. If materials are pulled from the market again there is a plan in place to continue production with marking adaptation.
What we’re looking to in the future.
The focus in 2023 will be shifting back to what got us here, gunsmithing, repairs, manufacturing, and custom work. I am planning for a slowdown in that work due to the economy. I am cautiously optimistic about our return to the variance manufacturing market.
Decisions on the acquisition of new manufacturing machinery will be placed on hold until Q2 2024, pending the results of several law suits against the BATFE rule on 80% lowers and other firearms parts, and national elections.
The plans for a larger building and expansion have been put on hold for at least a year and will be revisited in Q2 2024. The rising costs and scarcity of building materials has put the new building out of reach for the moment. With that in mind I am still looking into larger more capable machines that can run raw forgings into complete receivers should 80% receivers be pulled from the market again.
Due to the plans for new building being halted a complete remodel of the current building is set for 2023. This remodel will make better use of the limited space and increase productivity. The remodel is expected to take one or two months to complete and begin in Q2 2023.
A new local gun dealer has opened up in the area talks were started in late Q4 to carry Freedom Forge Armory LLC products.
I wish that I had all good news to report from 2022, but things just didn’t go our way this year. I believe the company is in a stable position for the moment, we will survive these hard times, and come out stronger in the end.