Posts Tagged ‘manufacturing’

Insourcing: A positive trend for U.S. manufacturing

Tuesday, December 4th, 2012

For decades now, it’s been almost axiomatic: manufacturing is better offshored. Conventional wisdom, talking heads and campaigning politicians alike would have you believe American manufacturing is dead, killed off by greedy unions, high taxes, and an onerous regulatory climate. China, Taiwan, Mexico, and other emerging economies offered a seemingly ideal business climate without most of these pesky problems.
But not so fast. Paraphrasing the great Mark Twain, reports of manufacturing’s death may be greatly exaggerated. Some manufacturers are questioning the wisdom the offshoring trend and, in a move that might be called “repatriation,” some big name companies are re-establishing domestic operations here in the U.S. or simply making the strategic decision to keep operations here.
This month’s Atlantic Magazine features a must-read article by Charles Fishman — The Insourcing Boom — which talks about how General Electric is moving much of its appliance-manufacturing operations back home to Appliance Park in Louisville, Kentucky.
In the late 1960s and early 1970s, Appliance Park was the quintessential American manufacturing operation, employing 23,000 at its peak in 1973. But after years of offshoring jobs, the site became a ghost town. In 2011, the Park’s employee population was down to 1,863.
But this year, something interesting began happening. In February, the first new assembly line at Appliance Park in 55 years began making water heaters – a product line that had been previously made in China. A team of employees eliminated parts, reduced material cost by 25%, cut the work hours necessary to assemble the water heater from 10 hours in China to two hours in Louisville. It beat the “China price” price by nearly 20%. Plus, it greatly improved time to market – cutting factory to warehouse time literally from weeks to minutes.
Buoyed by this success, a second assembly line for high-tech refrigerators was launched about a month later. Plans are in the works to open a third building and a third line to produce dishwashers in early 2013. CEO Jeffrey Immelt, commenting in Harvard Business Review, said that outsourcing is “quickly becoming mostly outdated as a business model for GE Appliances.”
Fishman cites Lou Lenzi, head of design for all GE appliances, in the following excerpt:

“What we had wrong was the idea that anybody can screw together a dishwasher,” says Lenzi. “We thought, ‘We’ll do the engineering, we’ll do the marketing, and the manufacturing becomes a black box.’ But there is an inherent understanding that moves out when you move the manufacturing out. And you never get it back.”

It happens slowly. When you first send the toaster or the water heater to an overseas factory, you know how it’s made. You were just making it–yesterday, last month, last quarter. But as products change, as technologies evolve, as years pass, as you change factories to chase lower labor costs, the gap between the people imagining the products and the people making them becomes as wide as the Pacific.

What is only now dawning on the smart American companies, says Lenzi, is that when you outsource the making of the products, “your whole business goes with the outsourcing.” Which raises a troubling but also thrilling prospect: the offshoring rush of the past decade or more–one of the signature economic events of our times–may have been a mistake.

GE is planning to bring about 75% of its $5 billion appliance business back to the U.S. And it is not alone – Fishman cites Whirlpool, Otis, and Wham-O as a few examples of other manufacturers that are bringing operations back from China and Mexico to Ohio, South Carolina, and California. There are other reports of this trend too. In Everything You Need to Know About Insourcing from the White House Blog, Matt Compton says that large manufacturers like Ford and Caterpillar have announced large investments in U.S. facilities – expansions that were previously aimed at facilities in Mexico, China, or Japan. The post names other examples of smaller manufacturers and even service centers that are reinvesting domestically. it also provides these statistics:

  • Business investment is up, growing by 18 percent since the end of 2009
  • We’re exporting more goods and services to the rest of the world. As of October, American exports totaled $2 trillion — an increase of almost 32 percent above the level in 2009
  • Perhaps most importantly, the manufacturing sector is recovering faster than the rest of the economy. Through the course of the past two years, the economy has added 334,000 manufacturing job, and that’s the strongest two-year period of manufacturing growth since the 1990s.

Lisa Harrington also examines this trend in an article in Inbound Logisitics: Is U.S. Manufacturing Coming Back?. She cites further examples of work that was created in or brought back to the U.S. She explores some of the strategic decisions that need to be factored in to where production occurs. The article includes a checklist, Nine Steps to Choosing a Manufacturing Location from Stephen Rogers, author of The Supply Chain Advantage: How to Link Suppliers to Your Organization’s Corporate Strategy.
The article notes that decisions about location must take a total cost perspective. Direct costs were often factored into decisions, while other factors may have been given little consideration. One example:

Labor cost savings are just one factor driving companies to reconsider manufacturing in the United States. To compete more effectively, a growing number of manufacturers are considering shifting operations closer to customers to provide better service, reduce total costs, and enable accelerated growth, according to a survey of 287 manufacturing companies, conducted by market research firm Accenture.

Companies are realizing that the physical location of supply and manufacturing operations can have a significant impact on overall competitiveness. An unbalanced network–where regional supply is physically separated from regional demand–makes it difficult for the organization to deliver on the very customer expectations that drive growth.

Not a return to the days of yore
Fishman notes that such “insourcing” will not suit all companies – basic work processes, such as mass market clothing manufacturers, will likely never return. Relocation in the U.S. seems to suit companies with high-tech and complex manufacturing process and products that require continuous innovation and improvements.
He cautions that American manufacturing will never return to its prior peak, and he describes various ways that things have changed: “Back in the ’60s, Appliance Park was turning out 250,000 appliances a month. The assembly lines there today are turning out almost as many–with at most one-third of the workers.” But he cites the “multiplier effect” that the presence of a large manufacturer can have. We saw the multiplier effect in action when the auto industry was in risk – it wasn’t just the auto jobs that were threatened, but entire communities – including businesses as diverse as parts suppliers to luncheon delis.
Related
Manufacturing May Be Coming Back to the U.S., Long-Term – an article in Forbes by Robert McCutcheon, the U.S. industrial products leader of PwC.
The Reshoring Initiative – founded by Harry Moser in 2010, an industry-led effort to bring manufacturing jobs back to the United States. The initiative works with U.S. manufacturers to help them recognize their profit potential as well as the critical role they play in strengthening the economy by utilizing local sourcing and production.
M.I.T. Forum for Supply Chain Innovation
a community of academics and industry members whose support allows Forum researchers to provide customer-focused solutions to design and manage the new supply chain.
Investing in America: Building an Economy That Lasts – White House report

No exit, redux

Tuesday, November 27th, 2012

While many of us were planning for Black Friday shopping sprees over Thanksgiving weekend, more than 100 Bangladesh garment workers died in a Tazreen Fashions factory fire because there were insufficient exits for workers to escape. Tragic as the story is, it is not unique. Since 2006, more than 500 Bangladeshi workers have died in factory fires. The Bangladesh factory fires are what working life looked like in the U.S. pre-fire codes, pre-fair labor standards, pre-OSHA. Workers went to work unsure if they would return home safely each day. The Bangladesh fire calls to mind the infamous 1911 Triangle Shirtwaist Fire in New York, a tragic story that resulted in a huge public outcry for change. The fire gave impetus and momentum to workers compensation legislation, child labor laws, fair labor standards, building code and fire regulations, and more.
Even with our worker protections, it takes vigilance to prevent tragedy from repeating itself in the workplace next door. In 1991, a fire in an Imperial Foods poultry processing plant in North Carolina claimed the lives of 25 workers who had been locked in to prevent theft. In 2003, a New York Times investigation revealed that retail giant Wal-mart was locking night shift workers in. In addition to the “locked in worker” issue, OSHA citations for other exit-related safety violations include many familiar household brand names: Home Goods, CVS, Rite Aid, Kohl’s, Toys R Us, to name but a few.
Will the Bangladesh fire be a tipping point?
Unsurprisingly, there is public outrage in Bangladesh following this terrible event, just as there was here in 1911. Will it be enough to galvanize reforms in the nation’s largest exporting industry? The temptation might be to see this as Bangladesh’s problem to solve, but things aren’t always quite that simple. According to news reports:

Tazreen Fashions is a subsidiary of the Tuba Group, a major Bangladeshi garment exporter whose clients include Wal-Mart, Carrefour and IKEA, according to its website. Its factories supply garments to the U.S., Germany, France, Italy and the Netherlands, among other countries. The Tazreen factory opened in 2009 and employed about 1,700 people.

Photos at the scene of the fire show that clothing was being produced for Wal-Mart. The retail giant has issued statements distancing itself from the factory, saying Tazreen was unauthorized to do work for Wal-Mart, and blaming a supplier for subcontracting work.
Complex webs of subcontractors – both domestically and internationally – are an increasingly convenient way for large multinational companies to defect responsibility, but should we accept that Wal-Mart and other mega-buyers can’t better control their supply chain? Surely, American companies could join forces in leveraging their buying power to demand that safety and basic human rights are enforced if they had the will to do so. U.S. consumers and policy makers need to demand more accountability from the organizations that we buy our clothes, our phones, and our electronics from.
The following video is distressing and gruesome, but we think it deserves airing. It’s the human toll that’s paid for getting shirts for a few cents less.

Building Pyramids, Building iPhones

Monday, January 23rd, 2012

Yesterday the New York Sunday Times ran a fascinating piece on the manufacturing of iPhones. The making of 200 million phones is taking place in the far east, mostly in China. When President Obama asked Steve Jobs “why can’t that work come home?” Jobs replied: “Those jobs aren’t coming back.” The article, written by Charles Duhigg and Keith Bradsher, describes the reasons why this work will never come back home (and why we wouldn’t want them anyway).
In the months prior to the release of the iPhone, Steve Jobs carried a prototype in his pocket. He discovered that the plastic screen was easily scratched by the keys and loose change that people often have in their pockets. He informed his engineers that this was not acceptable and insisted – at the last minute – that they redesign the phone with a scratch- and break-resistant glass. Corning Glass was able to do this.
Corning (made in America!) shipped the new parts to China, where they arrived around midnight. Supervisors at the assembly plant woke up some 8,000 workers sleeping in company dorms, gave them tea and a biscuit and set them to work in 12 hour shifts installing the glass into bevelled frames. The plant churned out 10,000 phones per day.
It is impossible to envision an American workforce positioned to perform this kind of work under these conditions. We do not house our workers in dorms (except migrant farm workers). We do not suddenly change work schedules to begin at midnight. Even in the Republican dream of a post-union workforce, it is inconceivable that American workers would accept this kind of pressure – and be paid $17 per day or less.
iPhones and Pyramids
Nearly seven years ago we blogged the emerging issue of worker rights in China. While there is a bare-bones structure of rights, these are arbitrarily enforced and easily avoided. China is a single party state, run with ruthless efficiency by the Communist Party. Opposition is not tolerated; dissent is brutally suppressed; and workers are at the mercy of their employers. To enforce rights, you need a constitution and an infrastructure of laws and regulations. And you need lawyers to argue on behalf of workers. China has none of these crucial elements and, truth be told, no real interest in developing them. And that is why everything is made in China: quality is high, working conditions are whatever management wants them to be, and labor costs are low.
While technically not slaves, production workers in China labor under appalling conditions that do not and cannot exist in most western cultures. They may be paid better than the slaves who built the pyramids, but they are paid less – while working harder – than any comparable workforce in developed countries.
So the late Steve Jobs was correct: the jobs involved in assembling essential electronic devices will remain off shore. These jobs are never coming home, unless, of course, the economy collapses totally and our workers are reduced to accepting virtually any working conditions. Which leads to questions beyond the scope of a workers comp blog: what manufacturing jobs will remain domestic? What will happen to the millions of production workers in America who no longer have jobs? As the American middle class declines, how will the economy function? Who will buy the goods that drive the engine of capitalism?
Epilogue
I drove my American assembled Japanese car to the Verizon store yesterday and picked up my black 16 gig iPhone, designed by indisputable geniuses in America and assembled by an underclass in China. It’s awesome. I can’t imagine life without it.

Health Wonk Review’s Recess Edition and news from the blogosphere

Thursday, August 6th, 2009

Congress may be on vacation but the dedicated health policy bloggers are certainly on the case so you should face no shortage of wonkery. Jaan Sidorov has posted the August Recess Edition of Health Wonk Review at Disease Management Care Blog – well worth your perusal.
And as long as we’re on the topic of health care, kudos to the folks at Kaiser Family Foundation who have put together an interactive tool that allows for side-by-side comparisons of two or more healthcare reform proposals across a number of key characteristics and plan components. It will be regularly updated to reflect changes in the proposals and to incorporate major new proposals as they are announced.
Other news from the blogosphere and beyond
OSHA – President Obama has nominated David Michaels as Assistant Secretary for the Occupational Safety and Health Administration, Department of Labor. David Michaels, PhD, MPH, is an epidemiologist and is currently Research Professor at the Department of Environmental and Occupational Health at the George Washington University School of Public Health and Health Services. In addition to his biography in the release, read more about him in his biography at George Washington University. The folks at OSHA Underground have more and this nominee is also welcome news to The Pump Handle gang as evidenced by the comments in the announcement post.
In more OSHA news, Heidi at The Facility Blog posts about OSHA’s new national emphasis program (NEP) on recordkeeping. The NEP was prompted after congressional hearings last year which raised the issue of under-reporting. The program will institute a policy that prompts recordkeeping inspections at employers’ establishments with low incidence rates in historically high rate industries and will also incorporate inspections of a sample of construction firms. See Heidi’s post for more details on the program.
Pharma – Freshly back from his vacation in the Tanzanian bush, Joe Paduda offers his take on the workers comp implications of the Administration’s drug deal.
Lean claims handling – Roberto Ceniceros has made lots of good posts over at Comp Time this week. Read about how the manufacturing trend to streamlined processing is surfacing in insurance as “lean” claims handling.
Firefighters – August 17 to 21 is National Firefighter Health Week. Despite the dangers that they face on the job every day, the real threat to their health is heart disease – nearly half of all firefighter deaths are caused by heart attacks. The National Volunteer Fire Council sponsors a site with resources and programs designed to encourage first responders to learn their risk factors, commit to making healthy lifestyle changes, and keep the momentum going all year.
NY construction training scam – a new law in New York City requires 10 hours of training for all workers hired at high-rise buildings begun after July 1. The New York Daily news reports that fake 30-hour construction training cards are surfacing. Apparently, three companies in New York and one in Nevada have been busted for issuing these bogus cards and a few dozen other companies are under investigation.
Lighter sideConsumer Insurance Blog posts an amusing video of clever ads from Bangkok Insurance which do a good job illustrating the concept of probability.

To hell and beyond: Dave Holland’s terrible story

Tuesday, August 28th, 2007

Survival stories are a magnet for many and I am no exception. Whether they be stories of people who escaped death by seconds in the World Trade Center, shipwrecked sailors who spent weeks on a life raft, or cancer survivors who prevailed, there’s something inspiring and fascinating about the indomitable will to survive against all odds. But no prior accounts quite prepared me for the utterly gruesome story of Dave Holland’s survival of a work-related accident. Be warned, unless you are a physician or someone similarly inured to severe injuries, his story of being scalped by an industrial drill is a difficult read.

Three years on, sleep still comes uneasily. His head hits the pillow and he flashes back: Caught up in the spinning and metallic screaming and the wet cracklepop sound of tearing flesh. The coppery tang of blood. The thing dragging him closer. The fear and the pain.

Beyond the sheer horror of his story, the article resonated on many levels: the medical miracle that was his survival; the window into the fierce will to live that kept him alive; the detailed account of the steep toll of an industrial accident, both when it occurs and in the aftermath; and the case history of post traumatic stress disorder. In reading this, it’s also hard not to wonder about his co-workers. How does one return to the workplace after witnessing an event of this kind? How does one get over the fear of the environment?
Dave’s survival may make him unique, but an injury of this nature is unfortunately not unique. I recall sharing a table with claims managers at an insurance trade event a number of years ago, and losing my appetite as they exchanged stories of “worst claims” cases they’d handled, such as scalpings and deglovings. Machine-related injuries are commonly recorded as caught or crushed injuries or the more prosaic contact with objects and equipment. These types of accidents result in about 18% of all work fatalities each year, as well as tens of thousands of injuries that do not result in death, such as Dave’s.
In reading other reports of “caught or crushed” injuries, there are some recurring themes: The worker is often working alone. The worker often wasn’t trained to use the equipment, or hadn’t been alerted to the dangers. The worker was often young. The equipment often didn’t have safeguards, or sometimes those safeguards had been manually overridden by either worker or boss. Hair and loose clothing were often the first point of contact. Ponytails and braids are particularly troublesome – a few strands may give way, but a thick plait that is caught could well be a death sentence.
There’s not a lot more to say beyond what Dave’s story already imparts: workers, be safe – speak up if you have unease or need training, and don’t work with hazardous equipment while alone. Employers, ensure that your workers are safe – you don’t want a Dave Holland on your conscience.

Workplace safety: the moral mandate of protecting young workers

Tuesday, February 3rd, 2004

Candace Carnahan lost her leg to a conveyor belt when she was 21 years old while working at a Canadian paper mill. She’s thankful to be alive – if a co-worker hadn’t heard her screams, she would have been pulled into the machine to her death. She now devotes her time to bringing the workplace safety message to the 18 to 24 year old age group. In this mission, she’s teamed up with Paul Kells who lost his 19 year old boy to a horrific on-the-job gasoline fire.

This article moved me for several reasons. First, because many of us in the industry talk about safety and claims every day, but there is nothing quite like a first person account to drive home the horror that can lie behind those words. And yet serious workplace injuries and deaths are events that happen daily. And these are events that not only claim life or limb, but that haunt the affected families and co-workers for a lifetime…how can you ever feel good or safe about your job again when you watch a worker die beside you? And if you are a supervisor or manager on that shift, how can you ever assuage the guilt?
Second, this article hit on a topic that is near to my heart – keeping kids safe at work. I’m thinking of those nieces and nephews of mine who are embarking on their first new jobs…they aren’t alone. Every year, legions of green, callow kids begin work in the kitchens of our fast food restaurants, on our factory floors and behind the counters of our retail shops…and just about every two minutes, one of them is injured on the job. Protecting young workers is a moral mandate that we all need to embrace.

Training is paramount. What may be obvious to an adult may not be obvious to a teen. Employers need to be explicit about job hazards and the things that could go wrong, to explain safety policies and procedures, and to ensure that these policies are enforced. Supervisors and managers should also be trained to focus special attention on the safety of young workers.

Think back to your teen years and your first job…remember that false sense of invincibility you had? Remember peer pressure? Remember how you hated to look dumb or ask for help? Eager to prove themselves on a first job, kids may not want to admit they don’t know how to do something. Young workers often don’t have the stamina, the work hardening, the judgment, or the experience that older workers have. Employers might do well to buddy young workers up with an older safety mentor.

Learn more about what you can do to keep our kids safe at work.
CDC’s Young Worker Safety and Health
DOL Youth Rules
Passport to Safety