Small to medium-sized manufacturing companies in the USA face numerous challenges in this complex global world. Low-cost competition from China, escalating health care and other employment costs, and a continuous struggle for competitive advantage — and that’s just to name a few.
So, how are the best small and medium enterprises (SMEs) responding to these challenges? In three ways, just as large manufacturers in the U.S. are:
1. Capital investment when the cost of capital is cheap.
2. Cost reduction, to be competitive with global competitors.
3. Continuous quality improvement through Lean Six Sigma.
Calling in the Robots
A wave of automation began in the U.S. in the second half of 2009, during the rebound from the Great Recession of 2007. Manufacturers are substituting automation for labor like never before. According to The Wall Street Journal, spending on equipment and software has surged 31 percent, adjusted for inflation, while private-sector jobs have grown just 1.4 percent over the same period.
The reasons for automating:
- A low cost of capital for those companies with good credit ratings due to historically low interest rates,
- Tax breaks Congress legislated last year that allow write-offs of 100 percent of investments in the first year, and
- 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.
An example is Sunny Delight Beverages Co., which is spending $70 million to upgrade its five U.S. juice factories, a record annual investment for the company. In its Littleton, Massachusetts plant, flavors previously were bottled on separate lines scattered throughout the plants. The plant 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 percent 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 industry’s highest priority in 2012 is food safety (a good thing for us as consumers). Cost control is number two, followed by inspections and certifications, and then automation. In most industries, quality improvement combined with cost reduction is the key to success.
Quality Improvement Through Lean Six Sigma
That sucking sound you occasionally hear is your profits going down the drain. Two of its biggest causes are customer frustration with your products and services, and employee frustration in trying to make and deliver them perfectly. The most progressive SMEs now combine their Lean efforts with Six Sigma. Which is better in football, running the ball or passing it? Winning teams combine the best of both.
Lean Six Sigma is the American version of the Toyota Production System. How’s it work? Identify the eight hidden wastes that Toyota found, and that are in your processes as well, and apply known Lean approaches to eliminate or dramatically reduce them. Smaller problem areas can be addressed by teams in two-day to one-week long kaizen events. More comprehensive changes 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, is actually simpler. Find the biggest imperfections in your products, services and processes that are costing you customers and costs. Then eliminate or dramatically reduce them. More than 50 percent of the problems SME manufacturers face can be solved using Six Sigma without the “sadistics” and require only third-grade knowledge of math (the four functions). Another 45 percent can be solved using a few simple math tools most every high school student learned. 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, fast.
The key to the success of teams is the five-step DMAIC process:
- Define the problem from the viewpoints of both customers and employees,
- Measure the problem by breaking it down into its component parts,
- Analyze the highest priority challenges (using the 80-20 rule) to identify their root causes (not root people),
- Improve the process through mistake-proofing and numerous other approaches, and
- Control the win by monitoring that the improvement was actually achieved and sustained.
Perform these steps before you automate, or you could end up with a faster broken process. And when designing new products or services, employ Design for Lean Six Sigma, a different approach than the DMAIC.
Go for It
U.S. manufacturing has outpaced the broader economy since the recovery began back 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 keynote speaker, consultant, facilitator, and trainer in Breakthrough Strategy, Breakthrough Lean Six Sigma, and Execution Excellence. He welcomes comments at JimBandrowski@StrategicAction.com.