A NEW MANUFACTURING MODEL FOR SUCCESSFULLY COMPETING IN HIGH LABOR RATE MARKETS: HOW TO MINIMIZE LABOR AND MATERIAL, THE CONTROLLABLE CONTRIBUTIONS TO A HIGH-TECH ELECTRONIC PRODUCT'S COST, AND ASSESS A MANUFACTURING REGION'S BUSINESS CLIMATE

摘要

This paper presents the results of a study that challenges a widely accepted tenet of industry 'wisdom.' Specifically, the axiomatic claim that to be most competitive in the global high-tech electronic product marketplace, the assembly of the product must be done in the lowest available labor rate environment. This 'given' is thought to be especially certain for high volume applications. A new assembly high labor rate model is developed on the basis of the key cost variables, LMNOP: (L)abor, (M)aterial, and NOP (N)ational (O)ut-bordering (P)redisposition). The paper demonstrates that for L: 1. The ratio of the labor cost to the total product cost can be made relatively small through the development of high yield, automated assembly processes, coupled with severely reduced non-value added costs (e.g., indirect labor, overhead, G & A, ICT, rework, et al.). 2. When labor content is minimized, the effect on total cost by even a large manufacturing labor rate disparity approaches zero. Labor rate difference in many applications is shown to be a distraction, a red herring of sorts, cloaking the true root causes of non-competitiveness and masking an understanding of the total competitive landscape. 3. To achieve this level of labor cost reduction, certain conditions must be present and several long-standing paradigms must be challenged, replacing them with principles arrived at through common sense and out-of-the-box thinking. These are: 3.1. The counterintuitive recognition that for automated, high-tech electronic product assembly it is more costly to hire low wage equipment operators than it is to hire multi-functional engineer/operators. Achieving true yield rates of 99.6% through the development of statistically capable processes, and the control of these processes by employing proactive techniques, rather than using traditional reactive strategies. 3.2. Utilizing continuous flow manufacturing (CFM) for ALL production applications. This means work-in-process (WIP) is minimized by pulling, not pushing, the product through the factory, and balancing product flow by knowing takt times for all process steps. 3.3. Designing products using the Principles of DF MATERS (D)esign (F)or (M)anufacturing, (A)utomation, (T)est, (E)nvironment, (R)eliability and (S)erviceability) 3.4. Having a multi-skilled workforce that has been taught manufacturing skills in the real world must be available. The long-term vehicle for developing this leading edge, world class workforce is a system of education that can fertilize, incubate and hatch this talent, allowing graduate to hit the ground running. 4. The traditional hierarchical organizational model with its pyramid of people into groups, groups into sections, sections into departments, and collections of departments under a director, must be totally dismantled. Just two groups replace it: a. self-managed product teams, and b. a leadership group This paper demonstrates that for M: 1. Material cost includes raw and material management. 2. Since material cost is by far the greatest contributor to total product cost, minimizing labor cost without addressing material cost is like buying a car at a low price without an engine - you've saved money, but you will not be going very far. 3. Without publicizing it, material manufacturers and their distributors have been fairly and unfairly pegging component pricing to the regions where the components are being assembled. This is not an issue for multinational corporations with global buying power, but becomes a heavy competitive burden for Tier 3,4 and 5 companies that only purchase and assemble components in high labor rate regions. 4. A low maintenance, highly reliable material planning and management system must be part of the enterprise resource planning infrastructure. Finally, the paper documents the results of an NOP analysis: the tendency of the business climate created by a country to cause a company to either manufacture or seek manufacturing outside of its borders. The conclusion is that the largely uncontrollable business climate where the manufacturing is conducted has a significant influence on cost and competition. Tax rates, cost of money, exchange rates, currency stability, regulations and other factors are addressed. The paper concludes with a discussion on the effect these factors have in typical risk/reward, cost/benefit studies by those whose capital is put at risk.