Disruptive Manufacturing “technology”
Apple Logo; Source Wikimedia
This week the New York Times had an extensive article about “Apple, America and a Squeezed Middle Class” which focused on the reasons and economic impact of Apple’s choice to move the majority of manufacturing to China. In the article the author and managers discuss a decided lack of the right skills among the American workforce. Apple claimed that the work force wasn’t providing the required skills.
This brought two points of contention to mind. The obvious was, if the skill set is lacking why isn’t training being supplied by the company to ensure their workforce keeps up with the skills required for the job?
I believe that this does take place though. In my previous experience I was given 6 weeks of training, with all the new college graduates, of how DRAM was manufactured and how it works. Pretty extensive. Then, once I was in my department I was given training on how to operate Scanning Electron Microscopes by one of our specialists. This was the same training that any employee in our department (including many Manpower contract laborers) would experience. I was then given training on how to disposition DRAM wafers hit by defects and eventually given training on how to create ways to detect the defects on the wafers. By the time I actually was working as an engineer at least 3 months had passed. For a typical new hire it was at least a month before they were able to work alone without supervision by a more experienced specialists.
Sure, this is one anecdotal piece of evidence, but this was at a factory that was discussed in the article. It was at the factory that makes processors for Apple in Austin Texas. At the time we didn’t manufacture those products, but the training will not have changed. Companies that want to do business in the US will figure out a way to make sure the people have the proper skills. People are willing to learn to compete.
Silicon Wafers; Source Wikimedia
One of the biggest points of contention in the article relates to the working conditions of the employees. This isn’t anything specific to the Chinese or Foxconn. In fact, while working at Samsung, I was able to visit South Korea and our sister fabrication center. There were dormitories for young women, which ensured that the girls were well protected. This is something that the workers, at least on some level, actually desired. It wasn’t to force workers to get out of bed at midnight. Which wasn’t necessary, because the workers worked 12 hour shifts from 7:00-19:00 or 19:00-7:00. Would American workers work this shift?
For someone to ask this question is somewhat shocking to me. Of course people will work that shift. All semiconductor factories are open 24 hours a day including those of Intel, AMD, and Samsung. I worked a night shift while there as an Engineer. There is the requirement to work these hours because shutting off the tool requires hours and hours of qualification to ensure quality for the product. There are plenty of other manufacturing positions that require that and white collar positions such as nursing and doctors. Typical white collar positions don’t require it, but there are plenty of jobs for night owls.
So, if we remove these two arguments as reasons for the inability to compete, what are we left with? I argue that the US left with an inability to compete with a manufacturing management technique. This is not the first time that the US manufacturing has been faced with a crisis like this. GM used to manufacture all of their cars in the United States. Now, much of the manufacturing is being conducted outside the US. Why? Because GM couldn’t compete with Japanese competitors on price or quality.
The Toyota Production System (TPS) was a disruptive technology and lead to an innovators dilemma at GM. The TPS was based upon ideas created during the Japanese reconstruction and based upon skills developed by Industrial Engineers in the US. These skills were developed and refined into a machine that gave a great deal of responsibility to the line worker and required no defects. If a defect was detected, the line was stopped and the defect dealt with immediately. This lead to immensely higher quality. The desire to prevent defects went down the supply chain and drove down costs and ensured the right quantity of materials at the right time at the right place. This required the US auto manufacturers to figure out how to innovate in production or die. As recent history has shown, they should have died if not for the intervention of the US government. To this day the techniques adopted by Toyota have only made small inroads into auto manufacturing. However, it is being adopted by other industries through something called Lean Manufacturing.
Toyota Manufacturing a Car. Plant; Ohira, Sendai
It has taken nearly 30 years for this type of manufacturing to become somewhat mainstream in the US. It should be considered a disruptive technology because it allowed Toyota to create a lower and distinct cost structure from GM. Allowing them to enter the low end market and then move upmarket into luxury cars. In fact, this difference in cost structure has allowed Toyota to manufacture many of the vehicles sold in the US, entirely in the US.
With this in mind, I started to think about the techniques that are described in the story. Essentially, the author argues that because of the rapid ability to prototype, change manufacturing lines and redesign processes the Chinese are able to manufacture whatever US companies need. Returning to the car analogy, GM would typically make only right doors for a day and then switch to making left doors. Toyota developed a way to rapidly switch between making right and left doors so they could make only the required number of doors. Which means less inventory and the ability to adapt to a change in manufacturing needs.
When a company has the ability to rapidly redesign a screw and then run into full production, this indicates the same sort of flexibility of manufacturing. This does not have to do with the skills of the workforce per se, more to do with how the manufacturing center is managed. This type of manufacturing requires a completely different mindset that is developed around the fact that the company manufactures nothing for itself, only for customers.
In the semiconductor industry there is a parallel, it is called a foundry. The company rapidly has to be able to manufacture high quality wafers from several companies at the drop of the hat. The company also needs to be able to changes product mixes as required by their clients. There are plenty of companies in the US and around the world, that are able to do this (the largest being Taiwan Semiconductor Manufacturing Company TSMC).
From a skill perspective there is no reason why US (or for that matter any other country) cannot manufacture the same way as the Chinese. From a worker salary perspective, Toyota has shown it’s profitable to manufacture in the US and Germany has some of the highest paid workers in the world and is rapidly growing. Working hours also do not limit the ability for workers to manufacture. It is a mindset against working in this fashion that is the root of the problem. Manufacturers the world over are experiencing a disruptive technology in the manner that the Chinese are working. Companies in the US and around the world need to learn how to adopt.
World has become a large factory and Global companies establish themselves in every nook and corner to take advantage of cheap labor and manufacturing cost.
That's true, but not every country is able to manufacture with the same capabilities. it does matter what skills the work force has. I think labor will have less and less impact on the cost of manufacturing a good. In the book Race against the Machine, there is a lot of discussion about this.
Very interesting article on ZDNet in relation to these issues: http://zdnet.com/blog/btl/apples-supply-chain-fla...
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