Magazine

The Flexible Factory


In the midst of the longest manufacturing recession since the Great Depression, U.S. managers and workers face a grim trade-off. To avoid shifting production offshore, they have to make factories at home more efficient. Yet while productivity improvements are key to survival, they also mean that fewer workers are needed to do the same job. Call it the paradox of productivity.

The stark terms of this trade-off have never been more evident. Since the manufacturing sector tipped into recession in mid-2000, it has shed 2.1 million jobs, leaving fewer industrial workers in the U.S. than at any time since the early 1960s. The past three years "have devastated the manufacturing job market," says Daniel J. Meckstroth, chief economist at the Manufacturers Alliance/MAPI, a trade group based in Arlington, Va.

Yet the productivity paradox means that smart survivors -- manufacturers able to preserve their U.S. bases -- are more competitive. Most are effective at using technology, including the clever integration of networked computers and machine tools, to slash costs and boost quality. At the same time, many have shifted from simple mass production to the use of flexible plants that make each product to order. Says David Huether, chief economist at the National Association of Manufacturers: "The companies that can hang on [in the U.S.] will emerge as world-class players."

No single strategy suits all survivors, notes Norman H. Wesley, chairman and CEO of Fortune Brands Inc. His own $5.7 billion conglomerate has taken a multi-tiered approach. It recently moved its labor-intensive Master Lock operations to Mexico while opening two cabinet-making factories in North Carolina and Alabama, where each order is processed to spec. Fortune Brands also spent $40 million to upgrade and expand its automated Titleist golf-ball plant in Massachusetts.

For many companies, the strategy centers on building flexible facilities able to implement small runs of high-margin products. One master at this game is Timken Co., a $3.9 billion maker of industrial bearings in Canton, Ohio, that has remained profitable through the downturn. At its Asheboro (N.C.) plant, Timken cranks out advanced bearings for heavy-duty industrial machinery. But this prototype facility is going one step further, serving as an incubator for technology that can be grafted onto production lines at Timken's 76 bearing plants around the globe.

In the early 1990s, Timken watched as rivals shifted high-volume manufacturing to low-cost emerging markets overseas. It followed suit -- up to a point. But Timken also committed $150 million to build the most sophisticated factory it had ever attempted -- the Asheboro plant, which can manufacture small batches of goods without refitting machine tools between runs.

Central to Asheboro's flexibility is a growing library of digital 3-D models of components. These allow technicians -- Timken calls them shop-floor associates -- to pull up the digital designs for an existing product, tweak them, and get the computer numerical control instructions into the networked machine tools. It all takes 15 to 30 minutes, depending on the modifications, vs. half a day the old way. Gary Endres, Timken's director of order fulfillment, says Asheboro can go from a work order to a finished part in four hours, down from six to eight weeks in a traditional setup. Down the road, data used to machine a part will also become a marker, helping workers track defects, fix them in the field, and plan product revisions. What's more, digital designs from one facility can be zapped in an instant around the world to any other plant.

Advanced technology is also generating quality gains that can help U.S. players distinguish themselves. By digitizing the control of its factory, privately owned Latex Foam International boosted its capacity, productivity, and quality -- and turned a disaster into a success story. In the wake of a May, 2001, fire that destroyed its only plant, LFI managers resisted the temptation to take the insurance money and close up shop. LFI's ruined plant was the sole remaining U.S. factory making a special, spongelike foam that can be formed into an enormous range of densities. In recent years, Latex foam has emerged as as a premium alternative to spring-based mattresses.

LFI rebuilt the plant at a cost of $35 million and, in the process, vaulted ahead of foreign rivals. Its new 208,000-sq.-ft. facility in Shelton, Conn., is a state-of-the-art digital plant. Using a factory-management software suite from Siemens, LFI's engineers can monitor all the factory's operations -- from the mixing of latex and the distribution of liquid rubber into molding beds by mantis-like hanging robots to the heating, cooling, cleaning, and drying of finished foam cores. "I can manage [the plant] from my notebook, even at home," says Frank Before, vice-president for technology.

The facility quickly achieved a 30% efficiency gain over its predecessor and boosted capacity by 50%, all in a smaller space. Where the old factory employed 224, the new site will peak at 150. And the manufacturing system lets LFI track every mattress, right to when robots prod it to test for firmness with numerical precision.

Survival isn't just a matter of smart machines. Workers have to get smarter as well, and show "a willingness to learn new technologies," says John A. McFarland, CEO of Baldor Electric Co., the largest maker of industrial electric motors in the U.S. A versatile corps of workers has helped Baldor ride out the manufacturing recession without a layoff. And even though sales have shrunk by 12% from their 2000 peak, Baldor has stayed in the black through the downturn, reporting profits of $23.9 million on sales of $549 million last year. In the past year, the company paid out over $200,000 in education and training reimbursements, more than ever before. "We don't believe in layoffs," says McFarland. "You're just sending all that investment and expertise out the door."

The investment in skills is bearing fruit at Baldor's Fort Smith (Ark.) plant. There, the company spent two years and $4 million to create a facility that has virtually eliminated the sorts of undesirable jobs that are prone to turnover. Computer-controlled trolleys move the motors-in-progress through the assembly line. Robots wind the copper wire around the rotors and assemble and weld the finished motor. The process slashes production time by more than 90%. "We think we have one-tenth the number of people running these lines," compared with rivals in Mexico or China, says McFarland. The savings make Baldor's commercial motors, in the $40-to-$60 range, competitive with models produced manually offshore.

U.S. manufacturers that have weathered the recession keep investing in technology. And to compete with offshore plants, they also continue to shed labor. "A more efficient factory, even with fewer workers is better than the alternative," says James W. Griffith, president and CEO of Timken.

There's no way to make up for lost jobs, but there's much to be said for preserving a manufacturing base. During the 1980s recession, efficient Japanese companies took the lead in one industry after another, says Gary Herrigel, a specialist in U.S. industrial evolution at the University of Chicago. This time is different. The manufacturing survivors "don't have a lot of fat to live off of," he says, "but at least there are world-class competitors in the U.S." By Adam Aston in New York, with Michael Arndt in Chicago


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