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.

Avoiding a Common Manufacturing Problem

Otis Elevator’s costly move of its Mexican plant to its South Carolina plant is a common problem in manufacturing. Sadly it is an elementary, “Manufacturing 101”, process that seasoned manufacturing managers know how to avoid.

Contrary to Otis’ reasoning that “…it was trying to do too much”. The principal cause was most likely that the “manufacturing fundamentals” were not accurate.

This would include inaccurate bills of material and routings in its cost system:

Bills of Material not accurate:

When the daily production plan is published and individual product (SKU) orders are released to the plant floor component parts are taken from inventory and sent to the production floor. If the bills of material for the SKUs are not accurate, some of the parts necessary to produce the product will be missing resulting in production delays. As a result, hourly production employees are idled incurring costly labor variances.

Inaccurate bills of material complicate an operation further because supply chain does not know what component parts to purchase to support sales and production. Supply chain uses the bills of material and sales forecast to decide what raw materials to purchase.

When moving production to a different plant, if the bills of material are not accurate, the necessary component parts to produce a product will not be transferred or on-hand at the new plant.

Not everything may have been captured in the older, long-used manufacturing plant’s bills of material. There may be an informal system in-place which long-term employees know from experience what parts are needed to produce a product – although these parts are not included in a cost system’s bill of material.

Routings incomplete:

Routings are simply the timed steps a product (SKU) takes from start to finish in the production cycle. It is possible that the older plant’s routings were not accurate. But experienced employees may know how to successfully route product through production.

However, if routings are not completely accurate when a plant is moved, it will be virtually impossible for the new plant’s management and engineers to establish the correct order of steps and tasks to produce product.

It would be the same as when we assemble a new bicycle for one of our children. We open the box and find only a completely disassembled bicycle – only parts. But there are no instructions included on how to assemble the bicycle. We may eventually figure out how to put the bike together, but it will take a longer time with hits and misses.

It is not much different asking production managers and engineers to produce product with inaccurate routings.

Once a cost system is in-place it is fairly easy to maintain it daily by manufacturing and industrial engineering and cost accounting allowing supply chain to maintain the requisite inventory supported by a bar coding system.

Wall Street Journal’s Market Watch article: “Otis finds 'reshoring' manufacturing isn't easy”