Making toys in the US

Last Monday I posted about Rethink Robotics’ Baxter robot which can be easily programmed to perform a variety of manufacturing tasks. And that very day, the Wall Street Journal had a story about a firm that uses Baxter robot (A Toy Maker Comes Home to the U.S.A., Mar 11)! K’Nex Brands makes a variety of plastic building sets that snap together to make any number of things. Over the last several years, they have moved much of their production from China back to Pennsylvania. There are a number of strategic reasons for the move.

By moving production closer to U.S. retailers, K’Nex said it can react faster to the fickle shifts in toy demand and deliver hot-selling items to stores faster. It also has greater control over quality and materials, often a crucial safety issue for toys. And as wages and transport costs rise in China, the advantages of producing there for the U.S. market are waning.

Robotics play a roll in this. They use the Baxter for “simple packaging tasks,” which sounds like the kind of thing that it would be impossible to have a human do more cost effectively in the US than in Asia.

But to my mind, the most interesting part of the article discusses the design trade offs that K’Nex has made to facilitate the move.

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Managing quality and variety at Lego

When I was a kid, I loved Legos. So I was, of course, pleased when my kids started playing with them. In the last year or so, my kids have outgrown them. And while having all the Legos put away makes it a little safer to walk barefoot across the family room, it does make me a litte sad. Which is why, I guess, I have a soft spot for stories about Legos.

Like, for example, a BBC story asking just how many Legos can you stack on top of each other (How tall can a Lego tower get?, Dec 3). Turns out, you can make a pretty tall tower.

Ian Johnston and the team do two more tests to be sure we hadn’t just happened upon the strongest Lego brick in existence. And in fact they were impressed at the consistency of Lego manufacture.

The average maximum force the bricks can stand is 4,240N. That’s equivalent to a mass of 432kg (950lbs). If you divide that by the mass of a single brick, which is 1.152g, then you get the grand total of bricks a single piece of Lego could support: 375,000.

So, 375,000 bricks towering 3.5km (2.17 miles) high is what it would take to break a Lego brick.

Here’s a graphic to help visualize 375,000 Lego bricks.

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Apple versus Samsung: Is Design or Business Model the sustainable advantage? What does that mean for Outsourcing?

Apple, the world’s highest valued company, and its relationship, both competitive and cooperative, with Samsung provide a wonderful setting to discuss some fundamental questions that relate to strategy and operations:

FIRST: Which one is the more sustainable provider of Apple’s competitive advantage: design or the business model?

• Daring Fireball’s John Gruber wrote three beautiful paragraphs to argue his view on what he termed “The New Apple Advantage“:

So let’s be lazy for a second here, and attribute all of Apple’s success over the past 15 years to two men: Steve Jobs and Tim Cook. We’ll give Jobs the credit for the adjectives beautiful, elegant, innovative, and fun. We’ll give Cook the credit for the adjectives affordable, reliable, available, and profitable. Jobs designs them, Cook makes them and sells them.

It’s the Jobs side of the equation that Apple’s rivals — phone, tablet, laptop, whatever — are able to copy. Thus the patents and the lawsuits. Design is copyable. But the Cook side of things — Apple’s economy of scale advantage — cannot be copied by any company with a complex product lineup. How could Dell, for example, possibly copy Apple’s operations when they currently classify “Design & Performance” and “Thin & Powerful” as separate laptop categories?

This realization sort of snuck up on me. I’ve always been interested in Apple’s products because of their superior design; the business side of the company was never of as much interest. But at this point, it seems clear to me that however superior Apple’s design is, it’s their business and operations strength — the Cook side of the equation — that is furthest ahead of their competition, and the more sustainable advantage. It cannot be copied without going through the same sort of decade-long process that Apple went through.

• James Allworth, co-author of How Will You Measure Your Life?, adds an important dynamic component to the argument by applying Clay Christensen’s theory to this question:

The design part of Apple’s equation is to their ability to redefine new industries as they did with the iPhone. Whether they go after the TV market next, or something else, it’s this integrated design component that will be crucial to their initial success. But compared to the business side of Apple, design actually generates much less sustained strategic advantage in any one product category, once performance in that category becomes “good enough”. The tech industry has always revolved around copying. Once folks work out how it’s done, everyone piles on. And at that point, it becomes much less about design than it does about how you operate your business.

• In summary: the answer to whether design or the operating model is the more sustainable competitive advantage is the typical MBA response to a tough question: “it depends.”  The rather sophisticated reasoning involves the fact that products and services over time improve and then become “good enough” and the dimension of competition shifts. Notice that I did not say that design is a commodity and fully copyable (my personal favorite question: why can’t Lexus designs have the timeless sophistication and elegance as Mercedes?); rather, another dimension overtakes it in importance.

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Two ways to take cost out of cars

We’ve got two stories today that illustrate ways of taking cost out of building cars but they come from very different parts of the auto market. One is about making high-volume, low-cost cars at Renault. The other is about high-end, low-volume electric cars from Tesla.

The Renault story comes from the Wall Street Journal (Renault Takes Low-Cost Lead, Apr 16). Renault launched  a low-cost model called the Logan in 2004 with the intention of selling it in developing markets but subsequently expanded its entry-level offerings (see the graphic) and started selling them in Western Europe. They now account for 30% of Renault’s sales and supposedly sport a profit margin more than double the margins on the rest of Renault’s line.

So how do they do it?

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The StreetScooter: A Crowdsourced Electric Car

I just finished teaching Operations Strategy where we discuss many interesting decisions, including the impact of design complexity on outsourcing and the mechanisms to foster innovation in existing organizations.  The StreetScooter is a project that hits on both these topics: this is a modular car (not a scooter!) that is designed and manufactured in Germany through collaboration by more than 50 companies.  A prototype of the 5,000 euro vehicle with a 120km/hr top speed has been presented and production in Europe is slated for 2013.  Here’s the 1min promotional video:

In class we discuss electronic designs as perfect candidates for modular design: after all, each electrical connection only needs a few variables (e.g., volt, amps, and frequency). These variables are easily specified and define the interchangeable interfaces that then form the input or constraints in the design of each module (using, say, CAD programs).  This gave rise to the disintegration of the computer industry and all the wonders that followed.

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Digital inkjet printing on textiles and electronics

Each year we design new ‘kits’ (uniforms) for my cycling team and have them manufactured.  During that quest, I’ve started to put premiums not only on quality but also on minimum order size and response time.  The typical leadtime for custom pro-level cycling wear is about 8 weeks and several manufacturers have minimum order sizes of 10 units (which is not helpful to get replacement kits after the inevitable crash).

Like many other industries, the textile industry has been digitizing to allow smaller batch sizes and faster turn-around-times.  Digital inkjet printing became the norm for small batch sizes.  Sublimation still the higher quality but for larger batches.  Apparently, the technology has now sufficiently advanced to bring the same flexibility to higher volumes (and hence lower cost per unit).

According to industry expert Debra Cobb, high speed developments now have led to new printing capabilities:

At ITMA in September 2011, the array of inkjet printing developments generated strong interest amongst attendees. While high-volume printing is generally considered to be better than 200 m2/hr, new printers have moved way beyond this benchmark.

Stork Prints highlighted their new Sphene 24 digital printer, which is said to realize speeds up to 555 m2/hr on virtually any fabric; including tricky substrates such as polyamide/elastane swimwear knits. Durst Phototechnik AG launched its Kappa 180 inkjet printer, said to reach speeds of over 600 m2/hr with a resolution of 1056 dpi x 600 dpi.

Xennia Technology’s Osiris high speed digital printing system, also introduced at ITMA, is said to be one of the fastest inkjet printing systems in the world. It is capable of printing up to 2880 m2/hr, with up to 8 colours; its speed gives mass market fashion printers a competitive edge by allowing them to react quickly to new fashion trends.

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Factory of the Future: VW’s innovative “Transparent Factory” in Dresden, Germany

I love to see how things are made and VW makes that especially joyful in their novel “transparent factory.” This is a completely new approach to factory design and architecture with several noteworthy innovations that make this a perfect fit-in for a center location in beautiful downtown Dresden:

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Carving or printing replacement parts

How do you get replacement parts? In a developed country the answer is pretty simple. For some things (e.g., car parts), you may need to go through a dealer or specialized retailer. For others, you may be able to just stop by a general hardware store. But what if you are in a developing nation? Then you might have to get creative.

Markplace had a fun report about craftsmen in Mozambique carving replacement parts (like the gear above) out of ebony (Ebony woodcarvers learn to craft machine parts, Oct 3).

Young Makonde sculptors apprentice for years, sanding and polishing the works of their teachers. They study the ornate canes and traditional busts that are still a bestseller to tourists. But the expert woodcarvers are also finding a market for more “functional” sculptures. Manuel Xavier is a customer here at the woodcarvers’ collective. He repairs gas stoves for a living but has trouble finding spare parts.

MANUEL XAVIER: Here in the north, there is a lack of equipment for gas stoves.

A month ago, Xavier got a call from an unhappy customer. She said that the knobs on her stove had broken off.

XAVIER: I told the woman who owns the stove, “That part isn’t sold here in the North.” Not in stores, or anywhere else. So I decided to have them made out of Pau Preto.

Pau Preto is what the locals call the wood in Portuguese. In English, it’s known as African blackwood, or ebony. …

And versatile. Sculptors have carve parts for espresso makers, sewing machines, and motorcycles. For film projectors, and even computers. Patterson says that storekeepers in Mozambique don’t have the capital to keep spare parts in stock.

The article goes on to report that doing replacement parts is harder than doing creative sculptures. For the latter, there is no formal standard of perfection. Replacement parts, however, must conform to what they replace for them to be useful.

It’s a cute story, but does it have any relevance in the West? We’ll never have hand carved replacement parts, but what if they could printed on demand?

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Integrated versus Modular: Ridley’s first brake that lets you ride faster!

As a Belgian, I am partial to Belgian products…  Belgium has a rich cycling heritage and by far the most active racing development programs and scene in the world, producing riders like Philippe Gilbert and Jurgen van den Broeck who are doing well in the Tour so far.  (I am rooting for a podium for Jurgen…).  However, it seems that Belgium has lagged in bicycle and/or component design and sales–I would argue the Italians have done better…

But perhaps this may change: the Belgian bicycle company Ridley surely is making deep investments in new design, technologies, wind-tunnels, etc.  It just announced “F-brake”: “The first fully integrated brake!  The first brake that will let you ride faster…”

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Saving pennies on pants

Some eye candy from Businessweek (Cost-Cutting Is Rampant in Fashion, May 26).

So the question is what does it take to save money in apparel? With material costs rising, pennies matter. Eliminating a few features to simplify assembly can make a significant difference in the profitability of the product.

Because only so much can be cut out of a garment, cost savings amount to a few pennies here, a few pennies there: eliminating cuffs and pleats, scrimping on linings inside coats, switching to coarser material for pockets. Fabric comprises as much as 50 percent of a garment’s costs. Cutting it more carefully to reduce waste can reduce by 50¢ or more the cost of a pair of $195 men’s wool dress slacks, Brown says. Zippers that come in a big roll are cheaper than ones custom-made for specific garments.

“For big apparel companies that make hundreds of thousands of men’s suits a year, saving 20¢ or 50¢ a garment is a lot of money,” says Salvatore Giardina, a men’s suit designer and adjunct professor at the Fashion Institute of Technology in New York.

I see two interesting parts to this.

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