By Jim Bandrowski
Small to medium-sized manufacturing companies in the USA have been making a comeback. They are doing this despite low cost competition from China, escalating health care and other employment costs, and a continuous struggle for competitive advantage. How are the best SMEs doing it? In three ways, just as large manufacturers in the USA are:
- Investing in automation when the cost of investment capital is low.
- Implementing innovative cost reduction approaches in operations.
- Achieving continuous process improvement through Lean Six Sigma.
Calling in the Robots
A wave of automation surged in the USA in the second half of 2009 during the rebound from the Great Recession of 2007. Manufacturers of all sizes started substituting automation for labor like never before. According to the Wall Street Journal, spending on equipment and software flowed while private-sector jobs grew only nominally.
The reasons for automating:
1. A low cost-of-capital for those companies with good credit ratings due to historically low interest rates
2. Tax breaks Congress legislated that allow write-offs of 100% of investments in the first year
3. Machines can run three shifts, and don’t have health care costs or take vacations.
Manufacturers are calling on robots and mechanization rather than people to do the repetitive work. And to make the lives of operators easier and safer, manufacturers are providing workers with cobots (collaborative robots) to work with them in tandem to do the lifting and moving around of heavy parts and boxes.
An example is Sunny Delight. It spent $70 million to upgrade its five USA juice factories, a record annual investment for the company. Previously in its Littleton, Massachusetts plant, flavors were bottled on separate lines scattered throughout the plant. It now has a brightly lit filler room where machines bottle four flavors simultaneously on one high-speed line. Only two people tend the new combined line, where before each line required it own operator. At the Littleton plant, 30% of its original 140 workers will need to find new jobs.
Costs Out, Flexibility In
In addition to reducing employee head counts, small to medium sized manufacturers are pulling costs out of their operations and simultaneously adding flexibility. Rapid prototyping is being used by more and more SMEs to reduce the design and construction cycle of new parts from weeks to days or even hours. Also known as direct-digital manufacturing, companies are literally printing parts and devices using computational power. Design flaws are discovered quickly before they hit the production line, new product development cycles are dramatically reduced, and job shops are accelerating how fast they can make parts to order.
The exact challenges facing SME manufacturers vary by industry. In the case of food processors, Food Processing magazine reports that its industry’s highest priority in 2012 is food safety (a good thing for us as consumers). Cost control is No. 2, followed by inspections/certifications, and then automation. Cost reduction is best pursued in conjunction with quality improvement so you can get two for the price of one.
Quality Improvement through Lean Six Sigma
That sucking sound you occasionally hear is your profits going down the drain. Two of the biggest reasons for it are customer frustration with your products and services, and employee frustration trying to make and deliver them perfectly. The most progressive SMEs now combine their Lean efforts with Six Sigma. There is no reason to choose between the two. Which is better in football, running the ball or passing it? Winning teams combine the best of both.
Lean is the American version of the Toyota Production System. Identify the eight hidden wastes Toyota found in its processes, and that are in your processes as well. Apply proven Lean approaches to eliminate or dramatically reduce them. Smaller problem areas can be addressed by teams in two-day to one-week Kaizen Events. More comprehensive challenges such as redesigning the entire flow in your plant from functional areas to work cells can take a bit longer. To make it easier, machine tool technology now combines the skills of several machines into a single operating unit.
Six Sigma, while sounding more esoteric, at its essence, is actually simpler. Find the biggest imperfections in your products, services and processes that are costing you customers and costs. Rank them, then eliminate or dramatically reduce the biggest ones. Over 80% of the problems SME manufacturers face can be solved using Six Sigma without the “sadistics,” and requires only third grade math (the four functions). Another 15% more can be solved using a few simple math tools most every high school student learned. Leave the last 5% to the master black belts. Rather than train everyone, have multi-functional, multi-level teams address your top two to four core processes and receive “learning moments” from a Six Sigma expert facilitator. Then aim for breakthroughs in both quality and cost reduction, and implement fast.
The key to the success of Lean Six Sigma teams is the five-step DMAIC process:
1. Define the problem or gap from the viewpoints of both customers and employees
2. Measure the problem by breaking it down into its component parts
3. Analyze the highest priority challenges (using the 80-20 rule) to drill down to their root causes (not root people)
4. Improve the process through mistake-proofing and numerous other approaches
5. Control the win by monitoring that the improvement was actually achieved and sustained. Do this before you automate or call in IT, or you could end up with a faster broken process. And when designing new products or services, apply Design for Lean Six Sigma, which employs a different approach than the DMAIC.
Go For It
U.S. manufacturing has outpaced the broader economy since when the recovery started in 2009. It is accomplishing this by investing in automation, reducing costs while increasing flexibility, and improving quality in the eyes of customers and employees. Your manufacturing company can do the same. May breakthrough be with you.
Jim Bandrowski, president of Strategic Action Associates in Danville, CA, is a facilitator, consultant, trainer, and keynote speaker in Breakthrough Strategy, Breakthrough Lean Six Sigma, and Execution Excellence. He has delivered over 200 Vistage sessions, and welcomes comments at JimBandrowski@StrategicAction.com.
Originally published: Feb 27, 2012