Proximity makes a difference

On a flight to a manufacturing event last week, I read an article in BusinessWeek that got me pretty down. The headline on the magazine cover screamed, "America's Manufacturing Crisis." The topic: Why stuff's invented stateside and sent abroad for manufacturing.

"While the Japanese, Koreans, Taiwanese, and Chinese plowed billions into megaplants to churn out commodity products, America steamed ahead in more lucrative pursuits, such as software, life sciences, and financial services," the article stated. "As for companies such as Dell and Apple, they could still reap high profits by focusing on marketing and design while letting offshore contractors handle the grunge work."

Overlooking the term "grunge work" (another example of manufacturing's image problem), I went on to subsequent paragraphs that described outsourcing trends, which have changed significantly in recent years. High-tech start-ups that represent "the best hope for a manufacturing renaissance find it almost impossible to achieve scale in the U.S. ... Cheap Asian labor has little to do with it. Unlike other industries that fled to low-cost offshore havens, these emerging tech goods are made on highly automated production lines." The article added that thanks to kinder tax laws and government incentives, companies find it more lucrative to set up these automated lines abroad.

Once the plane landed, I trudged to get the rental car and sped off to the industry event, at which point I began to smile again, because I realized the article glossed over one thing that's becoming critical to our post-Great-Recession manufacturing: quick-response, engineered-to-order, high-mix, low-volume work. The trip was for Mazak Corp's R3, Refocus, Rediscover, Reinvent event at the machine tool company's U.S. headquarters in Florence, Ky., just south of Cincinnati. The company touted new products, as well as its production methodology adapted from lean manufacturing. Mazak can churn out a machine tool in several weeks, and a look at the factory floor explains why. No grunge work here.

The most poignant moment for me was touring the company's sheet metal fabrication department. After a laser cutting line, I saw a one bin full of parts and a larger bin filled with scrap. Why so much scrap? To achieve single-piece part flow, the company produces only what it needs and no more. It would actually cost Mazak more to nest additional parts in the sheet metal and transport those excess parts (that is, WIP) to inventory. It's not about volume. It's about customization and quick response—in other words, how fast a product can be transformed from raw material into a finished, high-quality product.

Jim Goddard knew this too. He's the plant manager at Rotek Inc. a bearing manufacturer and Mazak customer that happens to be down the street from Mazak's Florence campus. He pointed to bearings for products such as portable brain scanning devices for stroke victims. The devices are installed on ambulances that cover rural areas: all customized, highly engineered, relatively low-volume work. Like its machine tool vendor, Rotek has adopted lean practices.

"It's still a learning process for our operators," said Goddard. "It's always been, 'One machine, one man, get as many parts done as you can.'" Early in the lean transition, operators "would tell me they could get 20 parts through the machine per shift. That's fine, but [in a downstream process] I can only gear-cut four a shift. I don't need your 20 parts. I need your four parts, and then go on to the next job."

Rotek has seen orders increase over the past three months. So has Mazak, which is significant news in the hard-hit machine tool business.

Sure, I'm not happy with a lot of the domestic manufacturing roadblocks, including "corporate taxes [that] are among the highest in the industrialized world," according to the BusinessWeek article. But it doesn't mean U.S. manufacturing is doomed. Innovation and entrepreneurialism happen here, and all the tax breaks, government incentives, and cheap labor can't change the fact that two oceans separate us from much of the rest of the world.

When it comes to engineered-to-order and quick-response manufacturing, proximity makes a difference.