The days a lot of media attention is being given to the U.S manufacturing industry. Outsourcing in particular is a topic of interest. A few articles defend outsourcing on the basis of maximizing company profits. An example is this one, written by Dan Ikensen and appearing in Forbes. Many take the position of improveing the health of manufacturing in the U.S.through small, fast, start-ups. An example is this article by James Fallows from the December 2012 issue of the Atlantic. But I was particularly taken by the article by Charles Fishman in the same issue, entitled "The Insourcing Boom", which I mentioned in my last post, because it occurred in a large established company in the U.S.
The media is so dazzled by high technology, rapid growth, and quick money, that it is somewhat overlooking more traditional manufacturing and larger, established companies. Granted such things are exciting, but many of the things we depend upon are both important and major factors in our economy and come from more traditional sources. We have gotten used to expecting radical changes in our digital devices and associated software (the internet, apps) and are accepting the cost of upgrades to hastily produced products and the associated time expenditure in learning new moves and tricks to operate them. Would you like to see similar change in automobiles, refrigerators, and home furnaces? At first glance, change is associated with better performance, and is good. But people need control as well as creativity, and tradition as well as innovation. So for many of our products, including many of the important ones, we would like long-term reliable service without needing constantly to learn new tricks to use them.
That is why I was happy to read Fishman's article about bringing manufacturing back to the U.S., which featured General Electric’s decision to essentially re-open their large Appliance Park complex and the gains that they found from doing so. I did not find the gains that surprising. In the making of complex products, requiring large numbers of specialists working together, these is a tendency to find tribes forming around functions and disciplines, who do not understand the complexity of each other’s work, and tend to blame other tribes for shortcoming. During the days of obsession with manufacturing quality in the U.S., this was found to be particularly true between design, manufacturing , and business. This tribalization has a large negative impact on product quality. It can be reduced by such things as cross functional/disciplinary teams and flatter organizations. Quality is always improved by integrating people from design, manufacturing, and various business functions. In a small company working in a single location, this tends to happen automatically. In a larger company, especially one working across national boundaries, it does not.
I particularly liked the example of the moving of the manufacture of a particular water heater from China back to Appliance Park. The water heater was a sophisticated and complicated one, cutting energy cost by utilizing a heat pump to use the surrounding air to help heat the water. It was originally designed by G.E. in Louisville. and then the design was sent to China for manufacturing. When brought back to Appliance Park for manufacturing after several years in China, the manufacturing engineers re-designed it, because it seemed to them too difficult to make. The quoted reaction in the article from the manufacturing engineers was “This is just a mess. In terms of manufacturability, the design is terrible”—a typical reaction of manufacturing people who have not been actively involved in a design, and usually a valid one. The problem was probably perceived as even more serious than it was, because during the time the water heater was being manufactured in China, G.E. had ceased making water heaters in the U.S., and in the words of the author, "had forgotten how to make them"
In the re-design, the team managed to make the water heater much easier to manufacture, and in the process eliminated 20% of the parts, cut the cost of materials by 25 percent, and cut the hours necessary to assemble the heater from 10 hours in China to 2 hours in Louisville. The result was that the retail sticker price of the heater made In China was $1,599, and that of the heater made in Louisville was $1,299. A demonstration of improved quality through involving manufacturing people in design and vice versa. Despite the miracles of modern communication, this is more difficult to do across an ocean than across a desk or over a coffee cup.
Go Appliance Park.
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