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From the Desk of Jack Healy

Training Does Matter

By Jack Healy, Director, Manufacturing Advancement Center, jackh@massmep.org

For the past three years we have heard about the loss of manufacturing jobs, but little on the loss of manufacturing firms. The National Census, just issued, revealed the loss of 18,570 manufacturing establishments between 1997 and 2002.

The loss of Massachusetts manufacturing firms is more than twice the rate at the national level. While we will not see the 2002 State Census report until year end, we do know that from 1997-2001 Massachusetts lost 995 of our own manufacturing establishments or 10% (over four years in this period) vs. the 5.4% national loss over the five year period. We fully expect that when the State's 2002 Census numbers do come out, we will see a loss of manufacturing establishments closer to 15%, or three times the National average.

So why does Massachusetts lose it's manufacturing establishments at three time the national rate? Is it poor management? Obsolete products? High structural costs? It may be all of these issues, but it also may be a matter of size.

Manufacturing in Massachusetts is a small business, with 82% of our firms having 49 or fewer employees. Two thirds of our firms are under 20 employees. Regardless of size, manufacturers in Massachusetts, large and small, are facing an explosion of challenges. From extreme pricing pressures from low cost countries, to finding enough skilled, knowledgeable workers, to ever-rising health care costs whose premiums now exceed the net profit for most small manufacturing enterprises. Such challenges, coupled with the inherent problems of any small enterprise with limited access to capital and limited managerial and systems capabilities, means that the small manufacturing community as a whole will continue to struggle to make on-going productivity improvements just to remain competitive.

Couple this with the fact that most small manufacturing enterprises lack any degree of scale as they provide only parts and subassemblies to their larger customers, and you end up with most small manufacturers being 1/4 to 1/3 less productive than larger firms.

Incremental Optimization
In response to such limitations, we have seen a widespread implementation of Lean Manufacturing Methodologies and the beginnings of a benefit beyond simple cost cutting. Firms who have been on their Lean journey are starting to see what is termed "incremental optimization." This happens when the elimination of some waste leads to greater efficiency, which in turn allows the firm to develop greater efficiency, thus providing with more flexibility to meet customer requirements. The bottom line is a higher level of competitiveness.

This type of development was recently described in the Fall River Herald News in an article about Chace Leather Products, a manufacturer of leather goods (see the details in the Chase Leather case history).

"Before the lean seminar, we were having a tough time meeting the customer demands on time, " said Chase President and CEO Larry Walsh. "A demand for 50,000 units would take us normally three weeks to complete. That number now, with our new set-up , is down from three weeks to now taking us only three days to complete, and has reduced our inventory by 50% which frees up our cash flow. It also increased our sales per employee more than 35%. The change our employees made was unbelievable." Since then, Motorola Corporation of Germany, one of Chase's biggest clients, has informed the company that it is now outperforming all of their other suppliers worldwide.

Making a Difference
This shows us that the small manufacturing community is still one place where an individual can indeed make a difference leading a company. However, unless the person leading invests in training, the effort will not be sustainable. After all, who can do anything with unmotivated and uneducated workers who are ignorant of the company's goals.

For those companies interested in becoming Lean, the MassMEP offers the TimeWise Lean Manufacturing Certificate Program. TimeWise is a completely integrated and self contained CEU approved educational program that consists of five, eight-hour courses that simulate shop floor work environments. Teaching is interactive, accomplished through hands-on experience with the benefits of becoming Lean.

This "learning by doing" Certificate Program can be delivered at your firm, on your schedule. The program will provide the necessary knowledge, skills, and methodologies that your personnel needs in order for your organization to become Lean and world competitive. For more information, call Mike Prior at (508) 831-7020.

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