Category Archives: Manufacturing

The Return of U.S. Manufacturing?

In my recent piece on Is Your Supply Chain Reversible, I noted that the US is now a low cost country source for (Western) Europe and that those manufacturers ready to take advantage of the situation are going to lead the turnaround in US manufacturing. Shortly after, I found an article in Industry Week that wanted to “welcome back US manufacturing” on the basis that high fuel and energy prices along with rising labor costs in traditionally low-wage markets have some manufacturers rethinking how far they are willing to extend their supply chains. This article caught my attention as it pointed out that some mid-size companies are already bringing manufacturing back home, as they are unable to control shipping costs that are spiraling out of control.

The article mentions Desa LLC, a manufacturer of residential heaters based in Bowling Green, KY, as a case in point. Despite the low production costs in China, the high shipping costs, combined with the recent VAT reductions in China, give local manufacturing a lower TCO. Then there’s the relative price increases in some raw materials in China compared to the US, the falling dollar, and across-the-board energy costs. When everything is put together, the perceived advantages of China-based manufacturing for many (large, bulky) products disappear.

Of course, as the article notes, not all manufacturers are going to return to the US, since labor costs are higher than in other countries, but, as the article notes, many are likely to return to the continent and “near-shore” to Mexico (and, if the dollar rebounds, to Canada for complex products and services). But many are considering the US. A recent AMR survey of manufacturing executives found that 21% are planning to increase US-based manufacturing over the next year and Caterpillar Inc., for example, is investing 1 Billion in a multi-year capacity expansion plan for five Illinois plants.

But when you consider that the smart US manufacturers, like CEI who recently invested in an robotic palletizing system that automated a formerly manual stacking procedure, are investing in better technology that makes production more cost efficient, it’s going to make more and more sense for many manufacturers to return home. After all, it’s all about competitiveness, and those companies who invest money into new equipment, processes, and innovation are always going to have an edge. And considering that the US has been the center-point for innovation over the last few decades, there’s no reason that US manufacturers can’t bring jobs back if they put a bit of effort and investment into it.

MFGX.com – Exploding onto the Scene

MFGX.com, the first open global community for manufacturers, which came out of beta three short months ago, is poised to take the manufacturing world by storm. It already has 12 active communities with over 80 discussions, 40 documents, and 30 blog posts — which is quite a lot considering how traditionally silent the manufacturing and procurement communities are with respect to the on-line world.

MFGX.com, which was originally conceived as a companion site to MFG.com, is important because it’s the first offering in the space that’s open to all manufacturers, regardless of the marketplaces they belong to or the products they offer. This allows producers, distributors, and retailers to find the best manufacturer to fill their needs and manufacturers to find the producers, distributors, and retailers that they can have the best relationships with – creating a win-win for everyone.

Furthermore, it’s simple — composed primarily of plain old forums (discussions), wikis (documents), and blogs, it eschews all of the new social networking nonsense that plagues many other sites. Considering that most social networking sites are, at least in the doctor‘s view, a big waste of time, I believe that this is a good thing. The internet is one of the best tools for knowledge sharing that we have, and the best sites are those that promote the sharing of knowledge, not your latest anti-ephiphany. (After all, does it really matter that you think Britney should be boycotting her current fashion line because of sweat-shop utilization? And do you really want the world to know you read BritneyZone daily? [Hat Tip: Google Search] So next time you use Twitter, remember the definition of the word.)

However, the real beauty of the concept, is the fact that it serves as the foundation for Open Source Manufacturing, which, as Jason Busch also points out over on Spend Matters, is quite cool and forward looking. After all, some of the best innovations in IT have come from open source, and some of the best successes in R&D have come from open innovation networks like NineSigma, InnoCentive, and YourEncore, and crowd-sourcing has been used to successfully streamline process. Just think what open source could do for manufacturing. It could improve processes and products. Even more importantly, it could open manufacturing design up so that, if you’re an engineer, inventor, or just a tinkerer, you could build your own products and not have to worry about a manufacturer going out of business if there’s a product you really want to keep using. For example, imagine an open source car that anyone could build parts for and that anyone could maintain. You wouldn’t have to worry about manufacturer bankruptcies, or, better yet, unnecessarily high prices or poor quality. And this could be just the beginning.

Overcoming Worker Resistance in Process Improvements

Sometimes, despite your best efforts, certain members of your organization will resist change tooth and nail. That’s why a recent Industry Week article on “How to Bring About Process Improvement When Workers Resist” caught my eye. The article, about Dover Corps. efforts to reconcile processes and operations between a plant in Tulsa, Oklahoma (Norris) and in Edmonton, Alberta (Alberta Oil and Tool), overviewed a good approach that might help you convince two competing divisions, or even two businesses within the same conglomerate, to play nice.

The article started off by noting early that processes are only as good as the people who implement them, and if John doesn’t like Bill and Bill thinks John is an idiot, no change initiatives can succeed and that systems are held together by purpose, relationships, and information. This is important because, at the very least, you will need a team that is willing to work together if you are to have any hope that your efforts to integrate disparate processes will work.

Dover Corps. began its process by putting all types of employees — union factory workers, maintenance personnel, front-line supervisors, engineers, and scheduling personnel — through three programs: on-line assessments, a relationship workshop, and individual sessions with an executive coach. The goals were to demonstrate:

  • the behavioral style of each individual to them, and how their style affects their communication with people throughout the organization
  • the best way to communicate with people of different behavioral styles
  • that many communication problems can be solved by adapting your style to better understand what another is trying to say
  • the ability for everyone to learn new ways of doing things

The process was very effective for Dover Corps. Results included:

  • recognition, and improved focus, on the strategic constraint for both companies
  • increased profits, despite the fact that 33% of constraint capacity at one location had to be taken temporarily out of service for repairs and upgrades
  • 87.5% reduction in setup time at one location
  • 80% improvement in rework

Finally, the article shared some key lessons learned, which contain some useful advice:

  • Work on relationships before you work on an issue.
  • Folks are folks (are folks). Whether you’re in the executive suite or on the shop floor, relationship building should work.
  • People need to be engaged in a proactive manner before they are pushed into a new process.

Downstream Supplier Performance Management

As per a recent Industry Week article, collaboration in the 21st century must be a tightly coupled relationship, not only between retailer and manufacturer, but also between manufacturers and all downstream suppliers and stake holders; including logistics, raw material, sub-contractors, packaging and quality / validation services, and, yes, even legal and finance. Otherwise, the chances of the right product hitting the right place at the right time are not very good, and neither are the chances of the final costs being on target. To this end, if you are to manage downstream supplier performance effectively, you need to be aware of the issues and trends. According to the author of the Industry Week article, Phil Friedman of QAD, there are four key issues and trends that consumer product manufacturers and retailers need to be aware of if they are to effectively manage downstream supplier relationships. They are:

  • Your raw material suppliers need visibility into your current demand plan.
    A root cause of missed delivery dates is a raw material supplier’s lack of visibility into a manufacturer’s current demand plan, which is often a constantly changing target in a demand-driven supply network. If a raw-material supplier believes a slowdown is coming, when in fact an upswing is just starting, delivery dates will likely be missed. Similarly, packaging suppliers need to align production, delivery, and, sometimes, design and art to support a manufacturer with tight schedules.
  • You need in-transit visibility since being in transit doesn’t guarantee you’ll get your shipment on time.
    You need to be aware of where the item is and whether there are any variances with respect to the original schedule. Otherwise, you won’t know that an item is going to be late until its late. However, if you know that your shipment sat on the dock three days longer than expected, and that it is going to be three days late, two weeks before the expected delivery date, you can adjust production schedules accordingly.
  • You need to know that supplier material meets quality standards before it is incorporated into your product.
    As recent years have demonstrated, poor quality materials can lead to massive recalls and significant hits to your brand and your bank account. Your suppliers should be able to prove to you that their materials meet specifications before they ship them to you, possibly through independent third party testing and validation.
  • You need to get all of your regulatory and business requirement ducks in a row well before you need the first shipment.
    As the article points out, orders are often missed not because the product is not ready, but because letters of credit are in error, quality assurance liability bonds have not been signed off by legal, and one delay after another causes raw material or contract manufactured products to sit and wait.

So if you make sure you are working in concert with your suppliers, distributors, partners, and internal counterparts, you can be sure that you’ll be a lot less likely to miss your delivery dates.

Design Cost Out with Akoya

Last year, I gave you a formal introduction to Akoya (acquired by I-Cubed) in my post Ahoya, Akoya and their unique solution for reducing direct material spend, which was described by their co-founder and president Brett Holland in his posts on “Getting Ahead of the Product Cost Management Curve” and “Taking Control of Cost Management for Engineered Direct Materials” over on Spend Matters. (With additional information to be found in their short paper on why “analytically derived should-cost information is critical for improving product margins”.)

When I was back in the mostly windy city recently, I had a chance to catch up with Akoya and discuss their new product offering, currently in beta with a few select customers, which is designed to complement their existing product offering and help organizations save even more on their manufactured part purchases.

Their current product offering, Category Workbench, allows a company to identify which parts it is likely paying too much for using a technique Akoya calls “competitive banding”. By extracting identifying features and product composition information from part designs, Akoya’s Category Workbench can automatically group parts into categories by common design elements and raw material composition and extrapolate average prices. Using this information and market costs, it can also statistically extrapolate expected prices for each part in a category and identify those parts that are currently being sourced at below market price, at market price, and above market price. This allows the company to identify those parts that present savings opportunities through re-sourcing, re-negotiation, or re-design. With this information in hand, a company not only knows where its sourcing teams should direct their sourcing efforts, but where it’s engineering teams should direct their redesign efforts. Considering that re-design and re-costing of even a simple part through a system like MTI Systems’ Costimator or Apriori’s Virtual Product Environment* can take a design engineer the better part of a day at the low-end, and a few days at the high end, and that their time is very expensive, this is very important as a company that sources thousands of direct parts can only attack a few hundred parts in a given year, and the wrong choice (based simply on a spend analysis by volume, supplier, or cost) can cost a company more money than the redesign effort will save.

Akoya’s next product, Designer Workbench, is going to allow a company to dive into those parts where the Category Workbench indicates a potential savings opportunity in a way that’s going to allow the company to determine the potential extent of the savings opportunity in minutes instead of hours, or even days. In addition to a number of new search, costing, and CAD data support features, which I plan to dive into at a later date after the product is generally available, one of the significant new features that this product is going to include is a new “What If” Analysis Tool. Using market pricing and price data from other products in the competitive band, this tool is going to allow an engineer to quickly create virtual variants with different features, treatments, processes, and raw materials and calculate estimated costs in real-time. In a matter of (less than 15) minutes (on average), a design engineer is able to iterate through a number of options and identify not only a lower cost alternative, but the high level design features that the lower cost alternative needs to have. In beta tests with an existing client, the estimated costs produced by the solution have been found to be accurate within 95% or more (when compared with detailed Costimator analyses which take an average of 6 hours for the customer in question). Needless to say, these are some amazing results, and I suspect that a forward thinking company that properly utilized this solution in conjunction with complementary solutions would see incredible returns. But that’s also a subject for a later post.

* Although re-design and re-costing through Apriori’s Virtual Product Environment can be done in a matter of minutes once the environment is configured and appropriate cost information entered, setting up one of these environments usually takes days, and often requires the assistance of Apriori personnel.