By Jack Healy, Director, Manufacturing Advancement Center, [email protected]
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.
