Viewpoints: Lean Can Combat Offshoring
By Jamie Flinchbaugh
The Lean Learning Center
Even the most solidly established US manufacturing companies have no choice these days when they find themselves pitted against low-cost foreign suppliers. To survive, they must seek new ways to compete. Some will invest in new equipment to help make their products faster and cheaper. Some will go to another extreme and eliminate staff. The forward-thinking companies we've worked with have found a better way--use what you already have in a more efficient manner.
How effective an approach is this? Very effective, according to one of our clients, FEI (York, PA). Founded in the seventies as a supplier of pivot shafts, the company has parlayed new efficiencies into a brand-new business model that has allowed it to grow from a small engineering company into a $24-million onshore alternative to offshoring.
Lean allows companies to pursue new opportunities with gusto. When you have the right systems in place, change is much easier. Being proactive instead of reactive comes naturally. We're not talking, by the way, of relying on a list of tools to change the way things are done. Real sustainable change, the kind of change that allows you to truly re-invent yourself, starts with a change in the way everyone in a company thinks about what they do, how they do it, and why it matters.
FEI is a prime example. About two years ago, the proverbial lightbulb went on at their firm. The company's success with lean had shown them that they could compete and win in a big way in the line-transfer arena. They discovered that if a large company was getting bogged down with rules and policy issues, their smaller, empowered workforce could do a job more effectively. They knew that they could take a company's old equipment and --using the expertise they had gained through Total Productive Maintenance (TPM)--rejuvenate that equipment and keep production going.
And they became convinced that if a plant or line was closing down because an overseas alternative looked more attractive, they could compete successfully and keep jobs in the US by offering that company a line transfer. There's the wakeup call. Those manufacturers who think that off-shoring is THE panacea may want to rethink the idea of sending production overseas. Particularly in light of the fact that there are companies out there--with plenty of manufacturing experience--that have learned how to efficiently bring your equipment in-house, maintain it, and keep it humming for years--in the states.
Back in the 80's when FEI did its first line transfer, it basically brought the line in, put it on the floor, got it up and running--then left it alone. They are the first to admit, however, that with the lean rules and tools they have in place now and the cultural change that's gone on throughout the company, they could have done better. They could have gone back and improved through experimentation. They could have connected process steps to better understand waste and/or ways to improve line flow. The fact is, though, these tools are in place, and thanks to a passionate commitment to lean implementation and continuous improvement, their reinvention as a line-transfer expert is seeing bigger results than ever before. One example is an agreement etched out in 2003 that calls for 16,000 parts per year, involving 103 part numbers in two different families. Or, the transfer of a mature product line of over 100 sensor parts. The value of this line transfer exceeded $870,000 in annual sales, and has opened a lot more doors.
There are some lessons here. First of all, an old dog not only can learn new tricks, but must learn them to compete and to grow. Second, you can't wait for opportunity to beat down your door; you have to see it--then seize it. And once you do, you need to focus on what you can control or change. In other words, don't get caught up in issues you can't do anything about. Third, employing the culture, skills, and tools of lean will help you make that change. Like FEI--who through successful lean efforts has significantly improved on an already solid line-move strategy, and along the way has found a new method of delivering the kind of value manufacturing companies need to survive in the global economy.
This article was first published in the June 2005 edition of Manufacturing Engineering magazine.