U.S. Companies are an Accessory to Theft

That’s right an accessory to theft of jobs in the U.S.  Companies make too many excuses as to why manufacturing is cheaper in China.

• High labor wages
• Medical costs
• Retirement benefits
• Fleixibility

And the list could go on and on forever.

These are nothing but excuses for not taking the time to look at the total cost of a value stream, including:

• Cost of quality
• Transportation
• Higher inventory levels
• Discards/Obsolescence
• And more that I have not mentioned

We need to stop making excuses and better understand the true cost issues that are occurring.  Then put in place countermeasures to lower the overall total costs.

There is no need to discuss how to hold companies like FoxConn accountable for all the mistreating of employees if companies are manufacturing in the U.S. instead of China.  The mirror should be turned on ourselves.  We should be asking how do we produce close to our customer and have the best total cost possible.

Excuses are easy.  Let’s start solving for true lower total costs and stop being an accessory to theft.

Failure Taught Me a Lesson

Recently, I had an experience where I thought I had everything thought through and designed.  I even ran my idea by a friend of mine that I trust.  Everything was a green light to go.

I designing a soap cutter.  My wife buys raw soap materials in 12 in x 12 in x 7 in blocks.  The soap has to be cut down to small chunks so it can be melted and poured in to molds.  Currently, it takes me an hour and a half to cut a block into the desired size chunks.  It is not fun but it has to be done.

In the name of continuous improvement, I wanted to design a cheap way to cut the soap quickly and more easily.  I also wanted to design and test in stages so if the design was not working it was not costing more and more money.

The first step was to get the tool to cut the block into 1 in. strips with one cut.  I made a wood frame and then threaded steel wire through the frame.  The idea would be to  push the frame down through the block using the wire to cut the soap.  The picture to the side is of the tool.

Building went well except the wire broke so I only threaded it three quarters of the way through pulling the wire tight.  I went to give it a try and needless to say, I only cut maybe an 1/8 of an inch through the soap.  The wire was being stretched and even standing on the darn thing, I did not have enough force to push it through the block of soap.

It was almost a complete failure.  I didn’t get through the soap but I learned quite a bit.  For one, I am glad that I was building the device in stages.  I had planned to cross thread the wire which would have taken another hour do to form something that didn’t work.  The last stage was to add a mechanical way use the device.  Now I know I have to move the mechanically driven portion up in the timeline in order to get enough force to drive the wire through the soap.  I also figured out I will have to weave the wire to make it stronger when I add the crossing the wire.  Think of stringing a tennis racket.

This is just a small home project but by breaking the design up and not spending a lot of time building it to complete specification, my feedback loop was quick and added learning to designing the device quicker and at a much lower cost.  I spent less than $5 on the first version and about 3 hrs including my trip to Lowe’s (what’s a project without a trip to Lowe’s).  If I would have built the entire think as I picture it in the end, it probably would cost around $100 and taken me a good 25 hrs plus to build.  I would have been severely discouraged if that didn’t work and who knows if I would have tried again, because i wouldn’t want to make that invest twice.  Now I shrugged off the failure, took the lessons learned and will apply them to a second version.

When designing a product or device, take quick less costly iterations and test and make but do it with a long term vision in mind.  Streaming TV is a good example.  It started with DVDs on the computer.  Then slow choppy video over the internet that got faster and smoother and then to HD.  Then boxes where designed to connect to your TV to receive an internet signal and view video on your TV.  Now TVs are built with internet connection built in and apps to watch video from Netflix, Hulu, Crackle, etc…  Next will be selecting a menu of things you want to watch and subscribing to it and watching live over the internet eliminating Cable TV.  Pick NBC and FOX and pay $10/month and the shows stream to your TV.

What failures have you learned from?

More Outsourcing Coming Back to U.S.

A couple of weeks ago there was an article in the Hartford Business Journal talking about more offshore outsourcing that was returning to the U.S.  The article sums up why companies are returning the best:

The argument goes: when total cost is considered, production is cheaper locally; there is less concern about quality and intellectual property theft when dealing with a domestic company; and with new lean practices, more streamlined production lowers domestic costs.

“Company after company has learned by keeping things closer together, that leads to a stronger overall value chain,” said John Shook, chairman and CEO of the Lean Enterprise Institute, based in Cambridge, Mass. “I see a lot of companies bringing things back.”

This is a hard lesson for companies to learn.  As mad as I would like to get over companies making the choice to chase cheap labor, I have to remind myself they were playing with the rules as they understood them.  Ten plus years ago, value stream accounting was not known.  The only system most people knew was the standard costing system.  This view did not take into account the quality and lead time aspects of chasing cheap labor.

Value Stream accounting is now more widely known, thanks to efforts like the Lean Accounting Summit.  If companies continue to chase the cheap labor costs, I really don’t have any sympathy for them.  The article lists other reasons Arcor sees offshoring as not a good idea:

Arcor has advantages over offshore companies when competing for local work, Francoeur said. Particularly when a client is developing a new product, there’s a lot of back and forth between Arcor and the customer, which would be slowed significantly if the client had to wait days for a project to be shipped from an offshore company.

New products tend to be more sensitive to copying and intellectual property concerns, and clients trust local companies more when dealing with sensitive information, Francoeur said.

With more and more companies learning total cost is better the more local you are to your market, no matter where in the world you are located, hopefully, it will be come the norm to stay local. We have to continue to talk about total costs and keep pushing the topic with leaders in our companies.  We can use the companies that left and came back as examples and eventually we will get there

One Reason Our Healthcare Costs Are Increasing

One industry that lean is starting to penetrate is the health care industry.  After experiencing a story of a relative last week, it made me sick to hear how insurance companies don’t help the situation of increasing cost.

The person is on a medication that is extremely hard to get approved for by the insurance companies.  Approval from the insurance companies is a must because most people can’t afford the medication without it.

A few years back the person was approved for the medication after a 4 month process.  When they started the medication the expectation was they would be on it for at least 15 years or so.  It basically is part of their life at that point.

Fast forward to present day.  The person has responded incredibly well to the medication.  In fact, they responded so well, there is thought that the person may not have to take it anymore, but the doctors can’t take the patient off of the medication because if they do and the patient does need the medication the doctors will not be able to get the patient approved a second time.  At least it has never happened yet.

Because of the pain and inflexibility of the insurance companies, the patient and the doctors are in a tight spot.  Do they keep the patient on the medication even though they may not need it or do they go a few months without the medication but still filling the prescriptions and holding on to the medication so the patient doesn’t loss eligibility?

Either way, it is money out of the patient’s pocket that could be saved.  Plus, additional cost to the insurance company of a VERY expensive medication.  In either of these cases, more costs will be added causing insurance premiums, medications, the whole health care system to increase.

This just isn’t right.  The system has made it nearly impossible to do the right thing and extremely easy to do the wrong thing.  As a country, we have a long way to go to fix some deep rooted issues with our health care system, which I believe is still one of the best in the world.

Guest Post: What is Lean?

Joe Wilson has worked in a variety of continuous improvement, problem solving and engineering roles in manufacturing and distribution functions  in the automotive, electronics, and food/grocery industries. He was responsible for site leadership of Lean implementation during the launch and ramp up of becoming a supplier to Toyota and was able to work directly with their personnel and the Toyota Supplier Support Center.   His training background includes courses in Lean/TPS through TSSC and the University of Kentucky’s Lean Systems program.  He is a Six Sigma Black Belt and a Shainin Red X Journeyman in addition to training in Kepner-Tregoe problem solving techniques.  Joe also has a BS degree in Engineering Management from the University of Missouri-Rolla.

If you are asked to explain Lean in simple terms to the uninitiated, how do you do that?  Here’s my take:

As a tookit, Lean is about establishing methods to define and solve problems in your business.

As a business philosophy, Lean is about providing your customers the best possible value for their money (Quality, Cost, Delivery) while maximizing the company’s profitability (or viability for a NFP) for the short and long term.

As a mindset, Lean is about constantly striving to (or believing that) you can be better at everything that you are doing than you are right now.

What do you say?  Am I oversimplifying this or leaving something out?  Is this straightforward enough to make people want to learn more or at least not reject it out of hand?

Local Production a Necessity to Keep Costs Down

I am a Purdue University graduate and a Big Ten die hard stuck in the middle of Big 12 country.  My saving grace is the Big Ten Network.  Last week I was watching the Purdue University 30 minute show called “University Showcase”.  This is where I saw the clip below about the students creating a low cost transportation solution for underdeveloped countries.

The part that I found the most interesting was listening to college students talk about creating the vehicle from local materials in order to keep the cost down.  They mentioned producing the vehicle locally with local materials keeps the cost under $1,500.

The team makes the case for local production versus off-shoring.  I hope they remember this as they graduate and head out into the corporate world.

Redbox Produced In the U.S. Using Lean

As I continue to focus on manufacturing here in the U.S. this week, I thought I would combine two of my favorite things…..Lean and movies.  An international company, Flextronics, has a manufacturing plant in Creedmoor, NC.  This plant produces the Redbox movie dispensing machines that are popping up all over the U.S.  It is a small facility that is using lean.

The 250 employees led by general manager John Mainey use the Six Sigma Lean manufacturing techniques designed to cut waste, reduce excess effort, address defects and keep the assembly line moving.

Mr. Mainey seems to be a believer in keeping manufacturing in the U.S.

He contends that American manufacturing declined as firms compared production costs in the United States with production costs in locales like China and Mexico, couldn’t see how to reduce spending — much of it related to labor — threw up their hands and said, “We’ll just send it overseas.”

Instead, manufacturers need to “apply Lean and eliminate waste. Recognize that labor is just one cost, and that they must be flexible. If we can do this, then manufacturing will stay here in the U.S.,” said Mainey.

I’m glad to see that Flextronics sees the total cost picture.  The most intriguing part of Flextronics is they are an international company so doing the manufacturing overseas can be done very easily.  Instead, they see the value in producing the product where the product is used.  Therefore, the manufacturing plant is in the U.S. in North Carolina.

I can’t claim to know this is what they are thinking by deciding to producing the redbox units in the U.S.  But it seems like at least part of the equation, since the Creedmoor plant’s parent company is based in Singapore.

The Creedmoor plant is one small part of Flextronics, a massive Electronics Manufacturing Services (EMS) firm based in Singapore with 160,000 employees in 30 countries.

The plant is focused on reducing waste with the production of each individual redbox unit.    The unit is produced on an assembly that moves at 4 inches per minute.

Workers use the supplies in the cart to assemble their portion of the kiosk, constantly referring to a station video monitor that details steps for that station. While steps may be memorized over time, the monitor is necessary because workers shift from station to station and the process changes, says Mainey.

“The monitor reinforces the steps for me,” said Sharon Estes, an assembly line worker. “I’ve worked at seven stations in the last year. I couldn’t possibly remember all the steps for each.”

It sounds like the cart is a kitting tool to make sure the kiosk gets all the right parts.  The assembly line worker also states another great reason for standardized work…job rotation.  The Creedmoor plant rotates employees and the standardized work is there as a reminder as to what tasks need to be performed at that station.

“We’ve been doing the redbox for five years. We still look at ways to improve. There’s no end state,” said Mainey.

Sounds like Mr. Mainey is driving the plant to continually improve.  I hope Flextronics keeps with this thinking and lets the Creedmoor plant prove you can reduce total costs while paying higher wages.

Manufacturing Can be Competitive in the U.S.

I came across this article about how manufacturing can be competitive in the U.S.  It was very well written and seemed to capture that lean is more than just waste reduction and continuous improvement tools.  It highlights how companies are going against conventional thought and turning to cheap labor overseas.

An increasing number of domestic manufacturers are countering the notion that one must turn to cheaper labor to reduce their expenses. Instead, they have turned to lean manufacturing, which has increased their productivity, strengthened customer relationships and most importantly, kept jobs at home. To top it off, they don’t have to worry about paying the skyrocketing transportation costs that come with shipping those foreign-made parts back to the United States

While transportation costs are rising, due to oil prices as well as technology that is being used to decrease the water travel time, it is not the only cost that improves by “on shoring”.  Other benefits are improved quality, increased productivity, and lead time decreasing due to better communication of issues and opportunities.

Lean manufacturing is effective because – when done right – it can make a business flexible and integrate its supply chain, which streamlines production flow and assists just-in-time delivery. But we should remember that although the continuous improvement philosophy behind lean manufacturing has seemingly limitless potential; it is not an immediate fix-all. Businesses must make holistic and long-term commitments to these principles to stay on a profitable course. Companies who have truly embraced lean manufacturing have incorporated it into their culture by focusing on improving cash flow, enhancing their organizations through leadership and continuous improvement, driving out operating waste and building a profitable sales pipeline.

This is one of the best paragraphs I have seen in the media about lean.  The author makes note that when lean is done right, showing an understanding that organizations are doing it wrong.  It is mentioned that lean manufacturing “assists just-in-time delivery.”  I read this and believe the person has some understanding of how the lean principles and thinking get to solving problems that allow JIT practices.  The author also understands lean is not a silver bullet and while limitless in potential is not going to fix everything right away in one swoop.  He also talks about improving leadership and continuous improvement.

When reading so many articles written by people you can tell have no understanding of lean, it s very refreshing to find one where you can tell they have a strong understanding.

Here is a good example of when going overseas is a good idea.

For example, a Switzerland-based supplier of measuring instruments with U.S. headquarters in Greenwood, Ind., has exemplified this focus. Ninety percent of its products are manufactured in the United States and the company are currently expanding its Greenwood facilities. The manufacturer credits much of their success to its commitment to lean principles.

This is a good idea, not because it came to the U.S., because the company moved manufacturing to where the consumers are.  There was one time I was pushed to build a new plant and move manufacturing to China.  The plant would service our customers in Asia.  It was closer and we could eliminate shipping a boat to China from Wisconsin.  It just made sense.

If we are talking about serving the U.S. market, the manufacturing should be done here.  The U.S. was built on the backs of strong manufacturing labor.  We can rebuild the strength of the U.S. by getting back to our roots as I mentioned in a previous post.

Apple vs. PC – Keyboard Waste or Value

I’m not a Mac user and never have been.  Not because I don’t like them.  More because I have never had the opportunity to use or need one.  I have always received a PC laptop as a work computer.  The company I work for now uses about 50% Macs and 50% PCs so I am getting more exposure to them now.  One glaring physical difference was the keyboards.  I noticed how thin the Mac keyboard was.  The picture is below.

Notice the keys are very low profile, the whole pad is extremely thin, and there are no bells and whistles on the keyboard.  There is no place to turn the volume control up or down or shortcuts to mail, files, etc…

In contrast, the picture below is the PC keyboard that is attached to my docking station.

The PC keyboard keys are much taller and the entire keyboard is thicker plus has the bells and whistles on it.

Is the PC keyboard waste or is the Apple keyboard not meeting the expectations of the customer?  For me, I see the PC keyboard as waste.  There is more plastic per key used and the keyboard panel has more plastic also.  This seems very wasteful to me.  What would the savings be if the PC keyboards were as thin as the Apple keyboards?

I don’t use all the extra shortcuts on the keyboard so the manufactured over-processed the keyboard to give me more than I need.  If you are a person who uses all the extra shortcut buttons on the keyboard then you may see the Apple keyboard as not meeting the value needed by the customer.  Even if the Apple keyboard had all the extra shortcut buttons on it, I think it would still be thinner than the PC keyboad.  What do you think?

Waste or not meeting customer needs?

Walmart Changing Transportation Strategy

Walmart has decided to breakdown some of the orthodoxies that it has always had when it comes to shipping product (article here).  No longer will they wait for the supplier to deliver the product to their distribution warehouses.  Now Kelly Abney says,

“…it’s all about squeezing out costs by keeping Wal-Mart’s own trucks busy and by accepting delivery of merchandise at the supplier’s loading dock instead of at a Wal-Mart distribution center.”

This seems like the right thing to do.  Distribution centers are non-value added for the consumer which means they are nothing but a cost (or waste) for Walmart.  Does this mean they won’t have any distribution centers?  The article does not say what it means for the DCs.  My thoughts are there would still be DCs but maybe they need to be smaller because less is going through them saving on equipment, manpower, land, etc…  Also, what is mentioned but now focused on, is Walmart is trying to utilize its resources and not just source out everything and let their resources have waste in their processes.

Abney also says it allows suppliers to,

“focus on what they do best, manufacturing products for us.”

The main reason for this change is Walmart is having a big enough problem with receiving errors at the distribution centers.  Errors like:

“…missing pallets or delayed shipments.”

How does Walmart picking up the goods at the suppliers’ dock help?

“…when a Wal-Mart driver picks up a load at a supplier’s loading dock that same driver will have to scan each pallet’s RFID tag as it’s loaded. The driver will then transmit the data so it can be matched up in real-time with EDI documents that specify what’s in the shipment. Sending that data ahead doesn’t just give Wal-Mart the inventory information a few hours earlier. It gives the retailer the chance to have unpleasant inventory surprises corrected in minutes at the supplier’s loading dock, not days later.”

I like the concept.  Quicker feedback into the loop.  I still have a lot of questions though.  It is great that the problem is identified right away, but what if they don’t have the correct product or remaining amount available?  Is the data collected by the driver given to the supplier after every pickup so the supplier can track trends in types of errors in order to problem solve?

Once the pallets are on the truck, Wal-Mart also gains complete control over when that truck will arrive at the distribution center. Such knowledge creates much more predictability for arrival times, which in turn produces better scheduling options for the loading dock. It also means faster turnaround times. And, stores will know what they’re getting, and when.

Predictability is something that lean organizations strive for.  It creates less waste in resource availability.  Once this is accomplished, Walmart could take the next step in leveling the flow of trucks throughout the network.  I would bet by owning their own trucking and creating predictability they will create more savings then they even realize.