Tag Archives: Manufacturing

Family Business Gives $6.6 million in Bonuses to Workers

The PEER Bearing Company (a manufacturer of bearings based in Illinois) was bought out by a Swedish company this year. The family that had owned the company gave surprise bonuses of $6.6 million to the 230 employees of the company (an average of over $28,000).

family thanks employees with surprise bonuses

Family members signed two thank-you cards to each employee, one in Spanish and one in English, expressing gratitude for “the loyalty and hard work of our employees over the years.” “They treated us like extended family,” said Maria Dima, who works at the company along with her husband, Valentin. “We won the lottery.”

On the day the checks were distributed, Valentin Dima watched as co-workers broke down in tears over their bonus checks. He drove home first, then opened his envelope: $33,000. His wife received a check for a smaller amount, and the two Romanian immigrants have since taken a Caribbean cruise to celebrate.

The new owners intend to operate the company based 40 miles north of Chicago as a wholly owned subsidiary. Workers have been told that most will keep their jobs.

A small bit of good news for these troubling times. It is nice to see true respect for people being practiced. The family also created the Spungen Family Foundation, 2 years ago.

Related: Tilting at Ludicrous CEO Pay 2008Focus on Customers and EmployeesPeople are Our Most Important AssetManufacturing Continuous to Increase in the USA

Invest in New Management Methods Not a Failing Company, 1986

Invest in New Management Methods Not a Failing Company by William Hunter, 1986

I predict American Motors will stop making cars in Wisconsin in the near future, whether or not the state’s money is used for a temporary propping-up operation.

These competitors are beginning to understand how essential it is to take a long-term view of their businesses. Toyota, for example, took its top 40 managers on a two-day retreat to ponder what their corporation will look like in the 21st century. They are studying totally new methods of management [20 years later large portions of these “new” methods are still ignored by many – John]. These methods take continuous quality improvement as a central, guiding principle.

Investing in American Motors now, in any form, is a mistake. If Wisconsin is to become a trend-setter in economic development, we need some long-term thinking in forming wise, creative policies.
It is difficult, I know, for legislators and other elected officials to take a long-term view when the tangible reward is re-election and elections come around quite frequently.
Our founding fathers are remembered for their long-term vision. We need to change the way our democracy works so that long-term visions is an integral part of all important discussions on economic development on the local, state and national level.

Don’t reward shortsightedness by James Cook

In 1985 I assumed the role of plant manager of one of the world’s foremost automotive tool manufacturers in a small northern Iowa town. It was then that I was introduced to W. Edwards Deming. At the time, the company had a greater market share than any of its individual domestic or foreign competitors, but ominous and encroaching signs from abroad began to threaten its pre-eminence in the automotive aftermarket. So steps had to be taken to arrest this incursion that could mean the end of its reign.

It was then, as I began my tenure at the company, that we began with Deming’s concept of Statistical Process Control, later changed to Quality Control, and the practice of Toyota’s kanban cell manufacturing techniques that would enhance the already high-quality standards that had defined the company for decades.

If we had listened, if we had followed him, if we had incorporated his thinking not only in the automobile industry but in government, in the ubiquitous economy collapsing around us and in our private lives, we would now be far better for it.

Related: At Ford, Quality Was Our Motto in the 1980sFord’s Wrong TurnCould Toyota Fix GM (2005)Ford and Managing the Supplier RelationshipNo Excessive Senior Executive Pay at ToyotaCreating Jobs

Ford’s Camaçari Plant in Brazil

photo of Fords' Camacari plant in Brazil

Brazil’s Camaçari plant is model for the future

This state-of-the-art manufacturing complex in the northeastern Brazilian state of Bahia is not only the centerpiece of Ford’s Brazilian turnaround plan, it is also one of the most advanced automobile plants in the world. It is more automated than many of Ford’s U.S. factories, and leaner and more flexible than any other Ford facility. It can produce five different vehicle platforms at the same time and on the same line.

At Camaçari, more than two dozen suppliers operate right inside the Ford complex, in many cases producing components alongside Ford’s main production line. Having those supplier operations on-site allows Ford to take the concept of just-in-time manufacturing to a whole new level. Inventories are kept to a bare minimum, or dispensed with entirely. Components such as dashboard assemblies flow directly into the main Ford assembly line at the precise point and time they are needed.

Unlike many U.S. auto plants, where workers’ responsibilities are strictly limited to specific job classifications, workers like Silva dos Santos are encouraged to learn as many different skills as possible.

Here is an interesting video [the broken link was removed] on the plant. It is sad how poor management at GM, Ford and Chrysler has created such a bad situation for those working at those companies, their suppliers, the communities that support their production… GM and Ford had the advice they needed to succeed from Deming in the 1980’s but they chose to focus on the short term, large executive payments, accounting gimmicks instead of continual improvement…

They each have improved over the years, but the standard is not just improving but doing so effectively and enough and they failed at that. The UAW shares some responsibility for failing to successfully lead their workers to a promising future but management is much more responsible for the failure in my opinion (the video and article try to say Ford wants to be innovative in the USA but the UAW won’t let them). It is management’s jobs to focus the organization on cooperation and success for all stakeholders. When management is more concerned with getting themselves huge payoffs (from the pockets of the other stakeholders) and then try to blame one of those other stakeholders for fighting management is disingenuous. Executive’s contempt for other stakeholders leads to the other stakeholders feeling that they should be just as greedy as management.

Related: Ford’s Wrong TurnFord and Managing the Supplier RelationshipGlobal Manufacturing Data 2007Toyota’s New Texas PlantWomack Podcast on GMVW Phaeton Manufacturing plant

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Global Manufacturing Data 2007

The updated data from the United Nations on manufacturing output by country clearly shows the USA remains by far the largest manufacturer in the world. UN Data, in billions of current US dollars:

Country 1990 1995 2000 2005 2006 2007
USA 1,041 1,289 1,543 1,663 1,700 1,831
China 143 299 484 734 891 1,106
Japan 804 1,209 1.034 954 934 926
Germany 438 517 392 566 595 670
Russian Federation 211 104 73 222 281 362
Italy 240 226 206 289 299 345
United Kingdom 207 219 228 269 303 342
France 224 259 190 249 248 296
Korea 65 129 134 200 220 241
Canada 92 100 129 177 195 218

See manufacturing data for more countries.

The USA’s share of the manufacturing output of the countries that manufactured over $200 billion in 2007 (the 12 countries on the top of the chart above) in 1990 was 28%, 1995 28%, 2000 33%, 2005 30%, 2006 28%, 2007 27%. China’s share has grown from 4% in 1990, 1995 7%, 2000 11%, 2005 13%, 2006 15%, 2007 16%.

Total manufacturing output in the USA was up 76% in 2007 from the 1990 level. Japan, the second largest manufacturer in 1990, and third today, has increased output 15% (the lowest of the top 12, France is next lowest at 32%) while China is up an amazing 673% (Korea is next at an increase of 271%).
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Idle Workers Busy at Toyota

Idle Workers Busy at Toyota

Instead of sending the workers home, as the Detroit makers often do, Toyota is keeping them at the plants, though. The employees spend their days in training sessions designed to sharpen their job skills and find better ways to assemble vehicles.

At its Princeton plant, by contrast, Toyota is using the down time to hone its workers’ quality-control and productivity skills. The company has pledged never to lay off any of its full-time employees, who are nonunion.

Jim Lentz, president of Toyota Motor Sales, the company’s U.S. sales unit, said the company believes keeping employees on the payroll and using the time to improve their capabilities is the best move in the long run. “It would have been crazy for us to lose people for 90 days and [then] to rehire and retrain people and hope that we have a smooth ramp-up coming back in,” Mr. Lentz said.

In Princeton, senior plant manager Norm Bafunno said he can already see the benefits of the training. Mr. Bafunno cites a Teflon ring designed by an assembly worker during the down time that helps prevent paint damage when employees install an electrical switch on the edge of a vehicle’s door.

Mr. Mason, a 40-year-old former firefighter, added: “One of the major things that everyone is grateful for is that they thought enough of us to keep us here.”

Toyota continues to show intelligence, long term thinking, respect for people… in their management decisions. I worry they may capitulate and make explanations about how the economy forced them to abandon their principles. I hope they prove that cynical fear in me to be wrong, in their case.

Related: Bad Management Results in LayoffsToyota Management Not Close to Being DuplicatedToyota’s Commitment to CustomersPeople are Our Most Important AssetJim Press, Toyota N. American President, Moves to Chrysler

Guess What? Manufacturing in the USA is a Good Idea

More people learning about manufacturing truths lean thinkers have known for a long time. Made (again) in America

Thomasville Furniture and Exxel Outdoors, a maker of camping gear, have both said they now are making products in the U.S. that they once outsourced to China; both have attributed the move to the soaring cost of transporting goods.

But other longtime outsourcers, such as Regal Ware Inc., a 500-employee maker of high-end cookware (sets go for as much as $4,000), have discovered that manufacturing abroad has another drawback: it isn’t nearly as efficient as they had hoped.

“We either had too much inventory, or not enough” of the products Regal Ware outsourced to China, says Jeffrey Reigle, CEO of the Kewaskum, Wisc.-based company. “We figured there had to be a better way.”

The better way, it turns out, proved to be right under his nose, at two Wisconsin plants where Regal Ware has produced stainless steel pots and pans for more than 50 years.

Learn more about lean manufacturing.

Related: Lean Manufacturing Saving Jobs AgainMade in the USA (2006)Workplace Management by Taiichi OhnoNew Look American ManufacturingWisconsin Manufacturing

Future Directions for Agile Management

Agile management (agile software development specifically) is something that makes a big difference in my work life. David Anderson consistently provides great ideas on agile management and he does so again in this 90 minute presentation on the future directions for agile. As I learned about agile software development, what I saw was a great implementation of management improvement practices focused on software development that was very compatible with Deming’s management philosophy and lean thinking practices. The Agile manifesto:

Individuals and interactions over processes and tools
Working software over comprehensive documentation
Customer collaboration over contract negotiation
Responding to change over following a plan

The first line can seem to be at odds, but I think in practice it is not – though I admit it may seem that way based on the importance placed on process by Deming (I think you have to read on agile to understand why this is the case). For my use of agile software develop, a highlight of the most important ideas is:

  • Deliver working systems quickly (with limited features, add features based on user needs) – [management improvement practice: PDSA, pilot ideas on a small scale, go to the gemba (don’t sit in conference rooms talking about what might be an issue for the computer application you want to see in 6 months, create working systems and then continually improve it)]
  • Build systems that cope well with uncertainty and allow for constant continuous improvement of processes (with IT systems that can adjust as needed to changing business conditions and desires) – [continual improvement – what is good enough today is not good enough next year]

Important concepts addressed by agile management: highly collaborative, risk tolerance, systems thinking, customer interaction, craftsmanship ethic [joy in work], eliminate waste. Great quote from the webcast:

What we know about knowledge work, and software engineering, is that coordination cost grow non-linearly with batch size. We’ve known this since Greg Brooks published the Mythical Man Month, probably longer than that. So that is a key difference with manufacturing, coordination costs do not grow with batch size in manufacturing.

Related: Kanban In Software EngineeringManagement Science for Software EngineeringImproving Communicationwebcast of David Anderson talking about applying Agile and Deming’s ideas at MicrosoftWhat is Agile Software Development?

Outsourcing To America

Outsourcing To America

Toyota (TM) began operating in North America in the mid-1980s. It currently operates seven automotive plants there, four of which are in the U.S. A fifth plant is under production in Mississippi. Toyota employs 40,000 manufacturing employees in North America.

In addition to the manufacture of cars and trucks, Toyota runs four unit factories in the U.S., where they produce such parts as engines, transmissions and wheels. Toyota also has a wholly owned subsidiary, Bodine Aluminum, an aluminum casting company, which operates three factories in Tennessee and Missouri.

BMW began operations in the U.S. in 1994, when it opened a plant in Spartanburg, S.C. “Some natural hedging was always a part of the long-term strategy, but also we have a corporate strategy of having production follow the market,” says Robert Hitt, BMW’s manager of public affairs. “Our original plan was to have about 2,000 workers here by the year 2000. We are now at 5,400 people here on the site.”

Besides the actual manufacturing of their cars and trucks, Toyota and BMW are using domestic suppliers to provide parts and services for their operations. BMW has over 200 suppliers in North America, 52 of which are located in South Carolina, and 41 of these are new companies started for the purpose of supplying the plant. In South Carolina alone, suppliers of BMW’s Spartanburg plant employ over 14,000 people.

Toyota uses roughly 500 major suppliers in North America. “We’ve always had the philosophy that we should build vehicles where they are sold, so it makes sense to have suppliers close to your manufacturing operations,” says Mike Goss, external affairs manager for Toyota’s engineering and manufacturing division in North America.

Foreign production in the U.S., however, is not limited to the automotive industry…. In fact, almost 1 million Americans get their paychecks from Mexican companies, says Ton Heijmen, senior adviser for outsourcing and offshoring for the Conference Board.

Related: Top 10 Manufacturing Countries 2006Moving Jobs to Silicon Valley from IndiaGlobal Manufacturing Jobs DataToyota in the United States of America EconomyChina Outsourcing Manufacturing to USA

China Outsourcing Manufacturing to USA

Chinese firms bargain hunting in U.S.

Liu is investing $10 million in the Palmetto State, building a printing-plate factory that will open this fall and hire 120 workers. His main aim is to tap the large American market, but when his finance staff penciled out the costs, he was stunned to learn how they compared with those in China.

Liu spent about $500,000 for seven acres in Spartanburg — less than one-fourth what it would cost to buy the same amount of land in Dongguan, a city in southeast China where he runs three plants. U.S. electricity rates are about 75% lower, and in South Carolina, Liu doesn’t have to put up with frequent blackouts.

About the only major thing that’s more expensive in Spartanburg is labor. Liu is looking to offer $12 to $13 an hour there, versus about $2 an hour in Dongguan, not including room and board. But Liu expects to offset some of the higher labor costs with a payroll tax credit of $1,500 per employee from South Carolina.

“I was surprised,” said the 63-year-old president of Shanxi Yuncheng Plate-Making Group. “The gap’s not as large as I thought.” Liu is part of a growing wave of Chinese entrepreneurs expanding into the U.S. From Spartanburg to Los Angeles they are building factories, buying companies and investing in business and real estate.

True this is still a relatively small macro economic factor. However, it is growing. The primary push so far is economic – not a move to lean manufacturing (as far, as I can tell) to put manufacturing close to the customer. What is the biggest factor? The USA is spending more than $400 billion every year more than it produces. The only way to consume more than you produce is to borrow (and take an obligation to pay back those that lend you money) or sell the stuff you own to those that are producing more than they are consuming. China is producing more than $200 billion more than it consumes every year.

For decades foreigners have taken debt from Americans that promise to pay back later (to pay for what they consumed). Now many are deciding that these debts are not attractive investments and are looking to own productive assets in the USA (companies, factories…). Which is smart on there part in my opinion.

Related: The Budget Deficit, the Current Account Deficit and the Saving DeficitMoving Jobs to Silicon Valley from India$2,540,000,000,000 in USA Consumer DebtHow to Keep the USA ManufacturingTop 10 Manufacturing Countries 2006

Warren Buffett’s 2004 Annual Report:
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Gary Convis is the New CEO of Dana

Another former Toyota USA leader is talking a leading role at another company. Gary Convis from Toyota retired last year.

Related: articles by Gary ConvisToyota Management Speech by Gary ConvisToyota Management Develops the New CamryQuality Conversation with Gary ConvisJim Press, Toyota N. American President, Moves to Chrysler

Dana Holding Corporation Names Gary L. Convis Chief Executive Officer

Dana Holding Corporation (NYSE: DAN) emerged from bankruptcy recently and today announced that it has named Gary L. Convis, 65, to the post of Chief Executive Officer. Convis was appointed to Dana’s new Board of Directors in January 2008 after retiring from Toyota Motor Corporation, where he had spent more than 20 years culminating in his role as Chairman of Toyota Motor Manufacturing, Kentucky.

“We are delighted to welcome Gary as Chief Executive Officer,” said Dana Executive Chairman John Devine, who had served as the company’s acting CEO since January. “Gary is widely respected as one of the leading experts in lean manufacturing and management systems, including the Toyota Production System. Along with his strong leadership and global industry experience, we believe he is an ideal choice as our new Chief Executive.”

“I am honored by the Board’s confidence in me to lead Dana,” Convis said. “I’m also eager to join with our people in establishing world-class manufacturing systems and returning this great company to the leadership ranks of the global automotive supply industry.”
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