There has been a lot written recently about the state and future of making stuff in the US. Just in the past month, Strategy & Business has touted new technology and software as a way forward for American manufacturing (America’s Real Manufacturing Advantage, Jan 20) while Steven Rattner, the administration’s former Car Czar, took the New York Times pooh-poohing talk of a revitalized manufacturing base (The Myth of Industrial Rebound, Jan 25). As Rattner sees it, whatever boost there has been in manufacturing has been inconsequential and not beneficial for workers.
But we need to get real about the so-called renaissance, which has in reality been a trickle of jobs, often dependent on huge public subsidies. Most important, in order to compete with China and other low-wage countries, these new jobs offer less in health care, pension and benefits than industrial workers historically received. …
This disturbing trend is particularly pronounced in the automobile industry. When Volkswagen opened a plant in Chattanooga, Tenn., in 2011, the company was hailed for bringing around 2,000 fresh auto jobs to America. Little attention was paid to the fact that the beginning wage for assembly line workers was $14.50 per hour, about half of what traditional, unionized workers employed by General Motors or Ford received.
With benefits added in, those workers cost Volkswagen $27 per hour. Consider, though, that in Germany, the average autoworker earns $67 per hour. In effect, even factoring in future pay increases for the Chattanooga employees, Volkswagen has moved production from a high-wage country (Germany) to a low-wage country (the United States).
This all gets us to a different New York Times on Harley Davidson that describes changes the firm made to save itself (Building a Harley Faster, Jan 28). What is interesting is that Harley’s approach differs fundamentally from either of the approaches above. They are relying on humans over widespread automation and working with their existing, unionized workforce as opposed to hightailing it to a location with cheaper labor. (more…)
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A few weeks ago we had a post on 100th anniversary of Ford’s moving assembly line. Now the New York Times has an article on how the assembly line has evolved at Ford and other automakers (100 Years Down the Line, Oct 29). What stands out is how Ford and others are seeking to manage variety.
Flash forward to today, inside Ford’s five-million-square-foot, ultramodern Michigan Assembly Plant in the city of Wayne. Nearly 5,000 hourly workers staff the plant in three shifts. The assembly line is three miles long and features more than 900 robots. In the last four years, Ford has spent more than $500 million to refurbish the plant, which dates from 1957.
What makes the plant unusual is the variety of vehicles it makes. Its primary product is the Focus, one of the best-selling cars in the world. But the factory does not just build Focuses with traditional gasoline engines. It can also build them in electric and plug-in hybrid versions.
And the company recently added production of the new C-Max Hybrid — a smallish wagon that shares many parts with the Focus but has an entirely different shape and style.
Recently, as Focuses and C-Maxes hummed smoothly along the line behind him, Mr. Fleming, the Ford executive, said that the company was intent on making all its plants as flexible as Michigan Assembly.
“Within the next five years, our plants globally will be able to produce an average of four different models or derivatives of a model,” he said.
So how is Ford able to manage so much variety on one line? (more…)
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Posted in Manufacturing, tagged Ford, Manufacturing on October 7, 2013 |
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Few management innovations have clear starting points but one that does is the assembly line. One hundred years ago today, Ford’s Highland Park Assembly plant began to use an assembly line. Here is how the Ford Motor Company describes things (Game Changer: 100th Anniversary of the Moving Assembly Line):
When Henry Ford began making cars in the early 1900s, “state-of-the-art” manufacturing meant car bodies delivered by horse-drawn carriage, with teams of workers assembling automobiles atop sawhorses. The teams would rotate from one station to another, doing their part to bring the vehicle together. Parts deliveries were timed, but often ran late causing pile-ups of workers vying for space and delays in production. Fortunately for the future of industry, these archaic practices came to an end Oct. 7, 1913. …
On Oct. 7, 1913, Ford’s team rigged a rudimentary final assembly line at the Highland Park Assembly plant. Engineers constructed a crude system along an open space at the plant, complete with a winch and a rope stretched across the floor. On this day, 140 assemblers were stationed along a 150-foot line and they installed parts on the chassis as it was dragged across the floor by the winch. Man hours of final assembly dropped from more than 12 hours under the stationary assembly system to fewer than three. In January 1914, the rope was replaced by an endless chain.
By bringing the work to the men, Ford engineers managed to smooth out differences in work pace. They slowed down the faster employees and forced slower ones to quicken their pace. The results of mass production were immediate and significant. In 1912, Ford Motor Company produced 82,388 Model Ts, and the touring car sold for $600. By 1916, Model T production had risen to 585,388, and the price had dropped to $360.
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The potential of additive manufacturing has been a recurring theme on this blog. There is no denying that 3D printing is an intriguing technology that holds a lot of promise. To date, however, most of its applications have been in low volume settings such as making prototype parts or custom fitting items for medical applications. How do cost fit into that decision? I have yet to see a clear explanation of just how the variable costs of 3D printing stack up. Now the Economist provides at least a partial answer (3D printing scales up, Sep 7).
Additive manufacturing has other limitations. It can be slow—taking several hours to print, say, a body panel for a car. But speed is relative. What may be too slow for a large production run might be fine for a one-off item which would take weeks to make in a machine-shop.
Material costs are also high. Acrylonitrile butadiene styrene, better known as ABS, is the most common 3D-printing material. A mass manufacturer using plastic injection moulding might buy ABS in bulk for about $2 a kilo, but as a bespoke powder or filament for 3D printing it can cost as much as $80 a kilo, says Anthony Vicari of Lux Research, a Boston company that tracks emerging technologies.
In part the price difference is due to higher standards of purity and composition required for 3D printing. But mostly it is because 3D-printer manufacturers require users to buy materials from them and mark up the price, as with the inks for 2D inkjet printers. Mr Vicari thinks this strategy is not sustainable long term as third-party suppliers enter the business. Moreover, some big manufacturers, like GE, are developing bespoke 3D-printing systems which are not dependent on a single supplier of equipment or material.
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At first glance, simple products like metal baskets or paint brushes should not be made in America. These should be simple to make, the product should be standard, so production should go to a low-cost location. But that ain’t necessarily so. A pair of recent articles discusses how some small US manufacturers are managing to compete in seemingly staid, boring industries.
The first story is from Fast Company and focuses on Marlin Steel, a firm that once focused on wire baskets for bagel shops (The Road To Resilience: How Unscientific Innovation Saved Marlin Steel, Jul/Aug). That’s a business that eventually went to hell as cheap imports came into the market. The fortunes of the company changed with an order from Boeing.
The job that rescued Marlin Steel was small–20 baskets, a $500 order. Greenblatt was handling sales in 2003, so he took the call himself. “It was an engineer from Boeing,” he says. “He didn’t think I was in the bagel-basket business. He just needed custom wire baskets.” The Boeing engineer, who had seen a Marlin ad in the Thomas Register, a pre-Internet manufacturing directory, wanted baskets to hold airplane parts and move them around the factory. He wanted them fast. And he wanted them made in a way Marlin wasn’t used to–with astonishing precision. For bagel stores, says Greenblatt, “if the bagel didn’t fall out between the wires, the quality was perfect.” The Boeing engineer needed the basket’s size to be within a sixty-fourth of an inch of his specifications. “I told him, ‘I’ll have to charge you $24 a basket,’” says Greenblatt. “He said, ‘Yeah, yeah, whatever. No problem. When are you going to ship them?’”
It turns out that the guy from Boeing was not alone in wanting custom baskets for use in a factory. Further, lots of other buyers were much more concerned with getting just the right basket really soon than with whether the price was as cheap has possible. The image above is something used in a GM factory to hold pump housings when they are being cleaned. (more…)
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One of the challenges of growing a business through acquisitions is how the buying firm can create added value that the acquired firm couldn’t create on its own. One possible solution is that the acquirer can bring some operational expertise that the acquired firm lacks. That, according to the Wall Street Journal, seems to be the case with Honeywell (Honeywell’s System Sensor Plant Declares War on ‘Seven Deadly Wastes’, Jul 1).
The article describes the efforts Honeywell has put in to improve operations at a plant in its System Sensors unit that it inherited when it bought Pittway Corp in 2000. So what did things look like when they bought the place?
The 1,000 workers inherited at the St. Charles plant struggled to align output with demand. The facility often produced too much, anticipating demand that didn’t materialize. Overproduction and excess inventory are two of the seven “deadly wastes.”
“You couldn’t see the plant floor because there was so much inventory stacked up,” says Karl Odegaard, System Sensor’s director of manufacturing.
Sounds like classic case of push production scheduling, right? Here are some of the steps that they took to improve the process. (more…)
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It is tempting to label everything involving data as big data these days as if the qualifier makes the topic inherently sexier. The Wall Street Journal is guilty of this in recent headline on “manufacturing execution systems” (How Many Turns in a Screw? Big Data Knows, May 15). While the headline may be hyperbole, the basic idea of these systems is pretty cool.
Raytheon is one of many manufacturers installing more sophisticated, automated systems to gather and analyze factory-floor data. The company uses software known as manufacturing execution systems, or MES, which has been around since the 1980s. Semiconductor and other high-tech companies were early adopters, but now “others are catching up,” says Tom Comstock, an executive vice president at Apriso Corp., one of the suppliers of this software. …
Manufacturers are looking harder at data partly because of increasing pressure from customers to eliminate defects and from shareholders to squeeze out more costs. Regulators are also demanding more data collection to trace safety problems. The cost of computers, scanners and other hardware has also come down, and technology for storing and moving data has improved.
At the same time, factory equipment has “got smarter,” says Mike Lackey, a vice president at SAP. The newest equipment comes with computerized controls that make it easier to collect data and share it with the rest of the company or suppliers.
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Posted in Manufacturing, tagged Manufacturing on February 16, 2013 |
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Not sure how I missed this on Valentine’s Day, but The Atlantic has a great bit on how the New England Confectionery Company (aka NECCO) makes more than 300 billion Sweetheart candies in a year (How a Sweetheart Is Made: The Epic Industrial Odyssey of the Most Famous Valentine’s Day Snack, Feb 14). Spoiler alert: They produce year round.
Since have to produce 7 million pounds of hearts annually, we have to make hearts all year. We’re making hearts right now for next year. We hold most of the hearts in these supersacks, which are marked and stored in our warehouse.
The most interesting part of the story deals with printing:
PRINT THE CUTE MESSAGES. “You can see words written on the yellow sheet of dough (it’s a banana flavor). That’s because we actually print the words before we cut the hearts. We paint a piece of cloth with red food dye and stamp the sheet of dough with a metal print plate with all of the sayings.”
BRIEF ASIDE: MOTHER I’D LIKE TO APOLOGIZE TO. “The misprints can lead to some pretty funny stories. Our Ps sometimes look like Fs, so we can’t say anything like “Pucker Up” for reasons you understand. Last year, we received a letter from a parent with a picture of a heart that was supposed to say “Smile.” But because of the way the print came out — no S, a messy E — it ended up looking more like “MILF.” Her son had no clue what that was about, so he asked his mom. She said, “I don’t know what you people are doing.” Anyway, we do our best to avoid things that have the Ps in them. This is the human element.”
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Posted in global operations, Manufacturing, Operations Strategy, outsourcing, Supply Chain, tagged GE, global operations, Manufacturing, Operations Strategy, outsourcing, Supply Chain on December 6, 2012 |
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The cover of this month’s Atlantic proclaims Comeback Why the future of industry is in America. It features two articles (The Insourcing Boom and Mr. China Comes to America) on how companies are “insourcing,” moving production back from other parts of the globe (primarily China) to the States. They make some interesting points. The Insourcing Boom focuses on General Electric’s decision decision to repatriate a significant amount of its appliance manufacturing to Louisville, Kentucky. Before you dismiss this as a bit of window dressing to provide some political cover, you should know that Jeff Immelt and company are dropping $800 million to make this happen. I’m sure Mr. Immelt likes political cover and good press as much as the next CEO, but he didn’t get to be head of GE by spending nearly a billion dollars on a whim. They really believe that they can make this work.
The article points out several factors that have come to favor producing in the US.
At Appliance Park, this model of production—designed at home, produced abroad—had been standard for years. For the GeoSpring [water heater], it seemed both a victory and a vulnerability. The GeoSpring is an innovative product in a mature category—and offshore production, from the start, appeared to provide substantial cost savings. But making it in China also meant risking that it might be knocked off. And so in 2009, even as they were rolling it out, the folks at Appliance Park were doing the math on bringing it home.
Even then, changes in the global economy were coming into focus that made this more than just an exercise—changes that have continued to this day.
- Oil prices are three times what they were in 2000, making cargo-ship fuel much more expensive now than it was then.
- The natural-gas boom in the U.S. has dramatically lowered the cost for running something as energy-intensive as a factory here at home. (Natural gas now costs four times as much in Asia as it does in the U.S.)
- In dollars, wages in China are some five times what they were in 2000—and they are expected to keep rising 18 percent a year.
- American unions are changing their priorities. Appliance Park’s union was so fractious in the ’70s and ’80s that the place was known as “Strike City.” That same union agreed to a two-tier wage scale in 2005—and today, 70 percent of the jobs there are on the lower tier, which starts at just over $13.50 an hour, almost $8 less than what the starting wage used to be.
- U.S. labor productivity has continued its long march upward, meaning that labor costs have become a smaller and smaller proportion of the total cost of finished goods. You simply can’t save much money chasing wages anymore.
That’s a compelling list but all in one or another come around to saying that the US is cheaper (or China is more expensive) than you would have thought. But the article also makes the case that there are further benefits. (more…)
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