January 15, 2013
Ray LaHood, the head of the U.S. Government’s Department of Transportation, declared the the Boeing 787 is safe to fly. Yet, in the same press event, LaHood announced that the Federal Aviation Administration (FAA) will conduct a complete safety review of the 787 to reassess the electrical systems and production process/quality control. This action is unprecedented.
The FAA doesn’t have the expertise to lead or devise a definitive plan to execute this effort. Given the complexity of the plane and the task, it could take several years before a FAA reassessment plan could be designed and implemented unless Boeing is really going to lead this effort. I suspect the FAA will participate in a safety review but will not lead the effort as has been advanced.
Doesn’t Boeing have the most to gain or lose from the current problems being reported? Boeing must have an extreme sense of urgency to understand and initiate corrective action for any and all of the problems that have surfaced that represent potential threats to the airworthiness of the aircraft.
One can only imagine the setback a catastrophic failure of a 787 would represent for Boeing and the airline industry which is counting on this product to increase efficiencies airlines face serving a global marketplace.
A Japan Airlines 787 had to abort a trip from Boston to Japan due to a fuel leak in a fuel nozzle. CNN reports that the plane was later flown back to Japan for a more thorough examination. Personally, I would have flown it to Boeing in Seattle or South Carolina for that examination rather than half-way around the world. But, that’s just me.
A final thought: I’m not sure I want Ray LaHood to be a cheerleader for Boeing and the airworthiness of the Boeing 787. The effort to certify a plane is extensive and exhaustive–I wrote about it in Fast Company. The FAA has already invested some 200,000 hours in the original certification process. But, the sample size for certification is limited. It is certainly reasonable that supply chain complexities and design or producibility issues will surface as production is ramped up. Realistically, though, the burden is on Boeing. The FAA can provide oversight, but, let’s not kid ourselves: the oversight is limited.
Dave Gardner, Gardner & Associates Consulting http://www.gardnerandassoc.com
May 1, 2012
Here’s some good news on May 1, 2012:
NEW YORK (CNNMoney) — American manufacturing activity picked up in April, according to a report that showed the sector grew for the 33rd month in a row.
The Institute of Supply Management’s monthly index rose to 54.8 in April, from a 53.4 reading in March. Any reading above 50 indicates growth in the sector.
“This month’s increase is yet another sign that the U.S. manufacturing sector has been one of the most reliable sources of growth in the U.S. economy since the Great Recession ended,” said Alistair Bentley, an economist with TD Bank.
Manufacturing growth has created 120,000 jobs in the first 3 months of 2012. This is welcome news!
Dave Gardner, Gardner & Associates Consulting, http://www.gardnerandassoc.com
April 2, 2011
Issue raised on LinkedIn:
I am working on my Research Project as a part of MBA Curriculum. Title of my research project is “DOES OFFSHORE MANUFACTURING STILL MAKE CENTS?” The purpose of this project is to research and document the continued viability of off-shore manufacturing to primarily Asian countries and evaluate if time has come to return back to the United States or North America. I have come up with some questions for my project. I would appreciate if anyone can comment on some of my below questions:
1. What are the real costs components of off-shore manufacturing?
Costs that are often missed are the engineering and administrative costs associated with supporting sub-contract manufacturers. Traditional cost accounting distorts cost and potential savings as significant non-manufacturing costs aren’t included in cost accounting metrics. What a company should really concern itself with is total cost associated with getting a product into and sustaining it in the marketplace. Activity-based costing is a better approach for looking at total cost and the performance of a product or product line.
2. As companies have moved their production off-shore, have they realized all the costs savings they expected? If not, why?
I submit this is a bit like the estimated mileage sticker on a new car–the savings is never quite as good as it appears to be after you’ve purchased.
3. Can United States become a manufacturing power house again?
The U.S. is a power house today in manufacturing! No need for doom and gloom. Not all manufacturing segments are moving off-shore. Those that have moved likely will not come back. There is greater growth potential for higher-end, personalized or customized products to begin to expand with the U.S.
4. How can companies keep their manufacturing operations at home and still compete with the competitors who absorb the overseas risks?
It depends on the segment as I’ve written above. Dell, for example, has moved a lot of manufacturing out of Round Rock, Texas, to other parts of the U.S. and the world. But, as I will write in a Fast Company article in a few weeks, Dell has not reduced its office footprint in Round Rock and actually continues to create more, higher-paying jobs for knowledge workers in Round Rock than it previously paid manufacturing employees. I recently interviewed the Vice President of Corporate Social Responsibility, Trisa Thompson, about this and other issues. Dell has just announced that it is expanding in Silicon Valley, again with product development and knowledge workers. [Note: I am member of Dell’s Customer Advisory Panel, a position for which I receive no compensation.]
5. Do you think that government needs to provide some type of incentives to improve manufacturing competitiveness in North America and encourage companies to return manufacturing on-shore?
As we have seen with “green” industries, investors are loathe to invest in industries where the U.S. government offers incentives. The fear is that the market dries up when the incentives are pulled. So, we need to be careful about how the government participates. The U.S., state and local governments as well as foreign governments offer incentives to lure companies to create jobs in their area–this is routine and expected. This also allows companies to shelter profits outside the U.S. in many instances.
What do you think?
Dave Gardner, Gardner & Associates Consulting
© 2011 Gardner & Associates Consulting All Rights Reserved
June 27, 2010
The June 20, 2010, Wall Street Journal offered a terrific insight into a rather daunting challenge facing business: “Factories Grapple with How Fast to Ramp Up.”
No one wants to commit dollars to inventory for which there may be no customer yet companies don’t want to get caught flat-footed and be unable to support their customers either. While it may be difficult to increase inventory turns, you don’t want inventory turns to spin out of control.
Here is what many manufacturing companies are facing today:
- After idling capacity, manufacturers are facing a significant challenge aligning supply with an unknown and unpredictable demand and, therefore, meeting customer commitments.
- Companies have leaned and downsized to the point where they can’t respond in a heart-beat to unexpected demand without negatively impacting other customer relationships.
- Tight supplies negatively impact end-product availability which shifts revenues to other producers or forces delay in revenue growth.
- FedEx is seeing an increase in its overseas airfreight business to try to take time out of the supply chain.
This is quite a conundrum. In light of these factors, what should manufacturers do?
- Manufacturers need to align supply within what is considered by the marketplace to be a “competitive lead time.” This metric is often not well-understood by the manufacturer or its customers. The best practice is get alignment on and then do what you can to meet customer expectations.
- Communicate closely with customers to align supply with demand. There can’t be too much communication here.
- Communicate closely with suppliers about your needs. There can’t be too much communication here.
- Explore new sources of supply to back up your current suppliers. Spread the wealth and spread your risk.
- Look at the macroeconomics and consider if the actions you are taking or planning are prudent in light of other economic factors you are seeing.
- Look for ways to change fixed cost into variable costs: outsource non-core functions.
Dave Gardner, Gardner & Associates Consulting
© 2010 Dave Gardner