Monday, June 16, 2014

An Avoidable Manufacturing Failure?

Google announced in May that it has decided to close its Motorola MotoX smartphone plant. The Texas plant has been in operation for one year. Its smartphones will be manufactured in China and Brazil.  

One goal for this plant was to challenge conventional wisdom that manufacturing in the U.S. is too expensive.” But unit quarterly sales were so low that economies of scale could not be realized.

Keeping manufacturing operations in this country depends on several criteria:
  • Quality management down through the 3rd organization tier;
  • Disciplined strategic focus – with an honest and periodically updated Situation Analysis;
  • Superior culture with the absence of hubris and politics;
  • Best Cost Producer – utilizing Lean, Kanban and Kaizen protocols;
  • Productive, lean salaried employee organization – not just lean for hourly manufacturing employees;
  • Regular Competitive Benchmarking and Value Analysis of the product lines;
  • Effective application of capital spending – which is essential.
The photographs of Motorola’s Texas plant show an unusually large number of hourly direct labor employees assembling product. This seems excessive.

This raises questions of how effectively “Best Cost Producer” and capital spending protocols were applied to create a low cost, high thru-put operation normally found in this type of technical product. Did Google Motorola have an engineering and manufacturing team capable of putting together an equipment plan to reduce direct labor headcount and increase thru-put resulting in a profitable USA plant? Was the equipment plan supported by the correct level of capital expenditures? Advanced manufacturing technology such as robotics is fairly easy to do.

Is the Moto X smartphone competitive in features, performance and price point? CNET’s review concludes that it is a good quality and relatively competitive smartphone. Not perfect. But if the price points were set correctly and its manufacturing costs yielded positive profit margins, profitable unit sales should have been realized.

While Motorola has struggled, Google appears to be well-run. It is hard to believe that Google did not put top people and resources behind making its Texas smartphone facility successful. But did they?

Google’s failure does not bode poorly for manufacturing operations being successful in this country. It is certainly possible that the USA’s manufacturing base can be increased if the criteria for successful operations are in-place – particularly for technical products.