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Posts Tagged ‘Manufacturing’

IKEA has big growth plans. According to the Wall Street Journal, it aims to increase its revenue by €50 billion by 2020 — 74% higher than its 2014 revenue (IKEA Can’t Stop Obsessing About Its Packaging, Jun 17). Part of that growth is going to come from expanding into new markets, some may come from new formats, but a lot of it has to come from selling more stuff through existing stores. And that is going to require finding ways to cut prices to move more volume.

That’s where design comes in. IKEA is reviewing products in order to find ways to reduce their production and — importantly — their distribution costs. As this graphic demonstrates, this is pretty much a war on air.

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The vicissitudes of American manufacturing has been a long running topic on this blog. But whether one focuses on firms that have always kept their production in North America or those that have reshored manufacturing, there is the question of whether China or other Asian countries are going down without a fight. A recent article in The Economist suggests that manufacturing in Asia in general and in China in particular is going to be around for a long, long while (A tightening grip, Mar 14).

First, one has to recognize that the growth in Asian manufacturing over the last 20-plus yeas has been spectacular. Check out this graphic.

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As the article notes, these numbers get a little more extreme if one looks at “intermediate inputs,” doohickeys like displays and circuit boards that go into finished products that may be assembled elsewhere. (more…)

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Fast Company named American Giant one of its most innovative companies of 2015 (American Giant Guns For Gap By Doubling Down On The USA, March 2015). American Giant is purveyor of T-shirts, sweatshirts, and (most famously) hoodies. We have posted about them several times before. Part of American Giant’s pitch is that they make everything in, well, America. They cut and sew all of their items in facilities in California and North Carolina. This TechCrunch video offers a tour of their Brisbane, CA, facility.

Now one of the challenges of producing sweatshirts in the US instead of overseas is the increased labor cost. Check out this graphic from the New York Times (U.S. Textile Plants Return, With Floors Largely Empty of People, Sep 19, 2013)

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Assembling garments in the US roughly triples the labor costs. These are partially offset by lower duties and logistic costs, but they remain the primary reason why a US-made costs about 20% more than an Asian one.

But what can be done to make an American sewer more productive to reduce the labor cost gap? (more…)

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Have you ever thought about how drugs get made? Not your Walter-White kind of drugs but proper ethical pharmaceuticals. As the Wall Street Journal tells it, major players in the industry like Novartis and Johnson & Johnson are taking new approach to producing drugs (Drug Making Breaks Away From Its Old Ways, Feb 8).

For decades, drug makers have used cutting-edge science to discover medicines but have manufactured them using techniques dating to the days of the steam engine. …

Under the new approach, raw materials are fed into a single, continuously running process. Many other industries adopted such a “continuous-manufacturing” approach years ago, because quality can be checked without interrupting production—with weeks shaved off production times and operating expenses cut by as much as 50%.

Until recently, pharmaceutical companies have been stuck making drugs the old-fashioned way, mixing ingredients in large vats and in separate steps, often at separate plants and with no way to check for quality until after each step is finished. Any desire to modernize was partly blunted, industry officials say, by the high margins netted on the industry’s string of billion-dollar-selling drugs.

To give you an idea of the scope of what is happening, the article reports that J&J is aiming to have 70% of its highest volume products produced under a continuous-manufacturing approach within eight years. (more…)

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Sustaining manufacturing in the US (or any high wage location) has been one of the recurring themes in this blog. Manufacturing has long meant well-paying jobs for those without advanced education. The loss of manufacturing jobs consequently causes much hand wringing as policy makers and workers about how a large number of people will achieve a modicum of middle-class financial security. Consequently, firms that are finding away to compete with US-based manufacturing are interesting.

That brings us to Zuzii, an LA-based firm producing made-to-order shoes that retail for $90. Here is a video from Marketplace about the company (A visit to LA-based shoe company Zuzii, Feb 16).

Here is the accompanying radio report that has some additional information.

So what is it about Zuzii that lets them succeed?  (more…)

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What can a major company learn from the sports world? I am not thinking here about inspirational speeches from a coach or anything like that. Rather, can people with a background in sports competition actually offer ways of improving business processes?

It turns out the answer to that question is yes as the Financial Times reports in discussing McClaren Applied Technologies relationship with GlaxoSmithKline (McLaren speeds up GSK with racetrack expertise, Dec 10). That’s McClaren as in Formula 1 racing and they have turned their expertise in organizing pit crews and monitoring racing cars into a side consulting business. In the case of GSK, they have produced some interesting results.

Perhaps the clearest dividend of the partnership so far has come not in drug development but in GSK’s consumer healthcare business. McLaren was asked to scrutinise a toothpaste manufacturing facility in Maidenhead and work out how to boost efficiency.

“We noticed that they were making lots of small batches of different products with a lot of down time in between,” says Mr McGrath. “They said: ‘If you can change four tyres on a racing car in two seconds why does it take us two hours to do a changeover?’”

Within a year, lost time had been cut by 60 per cent, using principles similar to those that govern the pit-stops for Mr Button’s racing car. “It’s about everyone knowing their job and doing it well,” says Mr McGrath. “Afterwards, we analyse every detail — what went well, what didn’t and how we can improve.”

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The history of manufacturing is to some extent the history of substituting capital for labor. Devising a way of making things that is more reliant on equipment (or an organizing principle like the Ford assembly line) allows workers to be more productive and generate more output per hour worked. But capital requires, you know, capital. Adding new equipment like robots requires an upfront investment and having that investment payoff depends on scale at which the business operates. Big firms like Roger-&-Me era GM can afford robots even if they have limited capabilities but smaller firms have a harder time taking the plunge. Until now that is, if the Wall Street Journal is to be believed (Robots Work Their Way Into Small Factories, Sep 17).

Robots have been on factory floors for decades. But they were mostly big machines that cost hundreds of thousands of dollars and had to be caged off to keep them from smashing into humans. Such machines could only do one thing over and over, albeit extremely fast and precisely. As a result, they were neither affordable nor practical for small businesses.

Collaborative robots can be set to do one task one day—such as picking pieces off an assembly line and putting them in a box—and a different task the next. …

Small businesses often need flexibility “because they’re not just packaging cookies endlessly,” says Dan Kara, a robotics expert at ABI research, a market-research firm in Oyster Bay, N.Y.

Here is a graphic of describing some of the machines discussed in the article.

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