Comfort Those Who Mourn for U.S. Manufacturing

If you read more consumer magazines than business-to-business titles like MH&L and IndustryWeek, it’s easy to conclude that America is in trouble when it comes to manufacturing competitiveness. That’s why we in the trades like to showcase the native talent of business people like you and your colleagues—not only to convince the world that the U.S. is still tops when it comes to industrial ingenuity, but to remind YOU.

We all sometimes need spirit boosters to get us through a tough week, so I thought I’d conclude this week by boosting American manufacturing. IW, MH&L’s sister publication, just announced the winners of its 23rd annual "Best Plants Awards." This program salutes outstanding North American manufacturing facilities that are leading efforts to increase competitiveness, enhance customer satisfaction and create stimulating and rewarding work environments.

The 2012 Best Plants, profiled in IW’s January issue, are (in alphabetical order):

Patricia Panchak, IndustryWeek's editor-in-chief, says these companies set a high standard of performance and show that operational excellence continues to prosper in manufacturing. In addition to applauding them in print, IW will honor the winners during an awards ceremony at the 2013 IndustryWeek Best Plants conference, where the winners will also share their stories. This will happen April 22-24 in Greenville, SC.

Pat asked me to help develop the supply chain track of this conference, and when I started thinking of manufacturers from the world of material handling to join the program, Crown was one of the first that came to mind. This material handling company, headquartered in New Bremen, Ohio, is not only family-run, but it designs and manufactures about 85 percent of its forklift components.

While making arrangements for Crown’s participation I spoke with Jim Mozer, Crown’s senior vice president, about the value of vertical integration vs. outsourcing components. Take electrical components, for example. The reason Crown started making their own was that there were times when off-the-shelf components were not available in quantity or quality to meet their needs. The same principle applies to stampings, but there’s an interesting back-story to how Crown got into that, per Dave Beddow, Crown’s vice president of manufacturing operations—who’ll be going into further details at IW’s Best Plants conference.

Seems the supplier for some of the company’s stampings went out of business on a Friday, leaving Crown at a critical point in its production process—at such a critical point that this lift truck maker sent its Advanced Manufacturing Group to the facility to assess the supplier’s assets and capabilities. As a result of that assessment, Crown decided to acquire the company. It then sent in a Quality Engineering Team to work over the weekend and get the company up and running as a Crown facility. Crown maintained the workforce and implemented its own quality systems.

How was this cost justifiable?

“Considering the time it takes to ramp a supplier up, educate them on our specific needs and the reliability and quality centers we have vs. doing it ourselves, sometimes it’s just easier for us to do it ourselves,” Mozer told me. “That way we have the confidence and control that it will meet our engineering standards. I would find it very hard to ramp an outside supplier up in a matter of days vs. just doing it ourselves.”

Crown’s being a privately held family-run company meant this kind of decision could be made quickly, without having to approach shareholders.

Another benefit of vertical integration is what it brings to talent development. Mozer says it gives employees a wider choice of opportunities, making it easier for them to navigate toward a career path and making it easier for Crown to hang onto talent. And when there are staff shortages during critical times, it’s easier to find cross-trained talent to fill those gaps.

So the next time you hear someone crying about how China is eating America’s lunch when it comes to manufacturing capabilities, point them to IW’s Best Plants issue. If that teary discussion happens before April, suggest they go with you to the Best Plants conference. Then put a check mark next to that “do a good deed” item on your New Year’s Resolution list.

Oh, and if you have your own success story to tell, there’s still time to be considered as a presenter in the supply chain track. Just contact me (tom.andel@penton.com) and we can flesh out your story. If you get on the program it might take care of half of that resolution about becoming rich and famous.

Discuss this Blog Entry 1

This is the third time in the last 25 to 30 years that I have seen manufacturing swing to lower cost labor areas. There was the Thailand/Burma/India period, the Mexican border period and now the China swing. In my opinion this is a normal economic cycle (hurts sometimes to live through it, but normal). A new region is opened with cheap land and labor and no environmental controls and manufacturers flock.

With this said what winds up leaving the US is usually the commodity type products which in their product development cycle are fully mature and often on the verge of declining. For example textiles are gone. Cheap land, labor and little care for the environment means it will stay off-shore. That is except for specialty or new products which are in the accelerating growth part of their development or is too expensive logistically to import due to lack of quantity in its early stages.

Put it in perspective. I remember paying $35 to $50 dollars for a pair of pants growing up. Today the same manufacturer 30 years later is selling the same jeans for around $25 to $30 a pair. This isn't magic. It's a commodity and it is easy to produce jeans in a low cost manufacturing region. Quality control on a pair of jeans isn’t the same as electronics or semiconductor.

What you are seeing now is the new products out of R&D are being manufactured in the US. Plus the products, due to supply chain costs really weren’t cheaper to manufacture so far from its consumer market. Every $5 dollars that a barrel of oil increases is a major uptick in supply chain costs. Every quality control issue that “bubbles up” once sold to consumers is a major hit in the pockets to the manufacturers (Mattel and Boeing come to mind quickly). The real issue will be when the new “in” region or country of choice can consume as much product as we do in the US the dynamics will truly turn. However, I suspect this will lead to dual or triple region manufacturing as we see in many industries (automotive comes to mind).

Welcome to today’s economic reality and cycle. You can run around calling it a disaster or problem. I prefer to call it opportunity.