American Pipe Dream

By Lloyd Graff

Yesterday, I received a one hour crash course from a client deep in the plumbing business on what it takes to be successful making faucets and bathroom components in America.

He works for a company that sells to big box retailers. They have made their stuff in China, but five years ago, they took on the challenge of showing the CEO and accountants of a publicly traded company that they were not only relevant, but could make good brass components in America for less money and with way less aggravation than using subsidiaries in Shanghai. In four years they reduced their hourly burden rate by one third. The employees who made the cut are making more money through production bonuses, and the shop’s old National Acmes are cranking out perfect parts on time to satisfy the numbers people at Home Depot who require a 98% inventory fill rate or they charge the companies penalties.

By reorganizing the shop floor into product cells they were able to change the standard of one operator running two machines to an average of three machines. They hooked up sophisticated monitoring equipment with predictive software that told the operators (and management) how many holes each drill made in real time, so they could change drills before they broke or made inferior parts. This dramatically increased productivity by eliminating most of the tooling wipeout that can kill a setup. The drills and taps now come out of a “vending machine” on the shop floor, not from an inefficient tooling czar, thus saving a lot of space and kibitzing time.

The tooling sales people became allies in the project, with Iscar, Kennametal and Allied reps visiting the plant every week to share best practices. They also started buying tooling from MSC, which is phenomenally efficient in getting tooling to a client quickly.

The company bought a new Fanuc wire EDM to augment their old Agie machine and improved output by 70%. It was a fast payback on a $150,000 investment, so now they are making all of their form tools in-house.

They have become great experimenters in the arcane world of coating. They love the mad scientists at Balzers who keep coming up with slightly different variations for their drills. This willingness to continually tinker with processes enables them to keep shaving costs.

The virtually complete changeover to lead-free brass in the water cooling industry has been a boon to them. Rather than complaining about lead-free, they embraced the change and figured out how to make the cranky material an ally while competitors fight with lead-free brass.

Brass prices have dropped by a dollar a pound over the last 18 months. The retailers are certainly aware of the raw material changes, but prices have held fairly solidly, which is one reason the company is prospering.

The firm does not make everything in house. They have two trusted outside suppliers who are highly skilled on lead-free brass and they have found it useful to job out about 10% of their work to reduce overtime costs and simplify their in-house operation. The outside sourcing is a safety valve and insurance against unforeseen disruptions. Price per piece is slightly higher, but it is deemed to be well worth it.

I had heard about American companies beating foreign competition, but it had never been clear to me how management in the ancient art of screw machining in the high wage market of the United States had managed the task. Wage cuts really have nothing to do with it. It’s all about the organization, tooling technology and the COMMITMENT.

Question:  Is manufacturing prospering in the United States?

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13 thoughts on “American Pipe Dream

  1. steve

    Is manufacturing Prospering in the US? i would say….sure it is? any business model can and should flourish in the U.S.? i own a CNC “job shop” in Michigan and I gladly compete with Chinese Job shops. The mis perception from some of my buyers is that CHINA is more productive, or technologically advanced such that their costs are lower? I just would like to see a “fair” playing field. The cost of labor in China is too low. It’s terrible. The Cost of Healthcare in the U.S is too high…so, trying to compete with China is very very lopsided!

    I just don’t have time to be a victim….so it’s time to get back to cutting metal!

     
    +9
  2. Erik

    In one of my plants, we manufacture complex components that actually ship TO China because my customer can’t easily source them in China, for China. The gap will close on all manufacturing eventually. Until then, we stick to complex, short lead time stuff that they can’t compete on. If it has to be right, and it has to be quick, it has to be here in the US.

    Problems are opportunities to improve or re-focus. We’re not afraid of China.

     
    +5
  3. Hans Rode

    This is good to see. Manufacturing can prosper in the US, but it takes drive and vision of senior Management to make it happen. Investment in new technology is key and empowered employees. This also takes leader ship that has long term plans for the business, not just a 3year stint. I have seen the short term leadership results that usually leaves a mess for the next person to clean up.
    Current example GM’s CEO, taking the heat for past sins.

     
    +1
  4. Toppers

    Pockets of prosperity only. Our manufacturing and stamping plant is surviving the foreign competition, but I would not use the term “prosperous” to describe the environment. If the market were prosperous, new plants would be under construction, wages would inflate, apprenticeship programs would be expanding, and capital expenditures would be increasing. I don’t see any proof of that in a broad sense. The danger in my opinion, is that some who are successful continue to ignore the poisonous impact of macroeconomic politics. The trade deals, the currency manipulation, and our overbearing regulatory system all impact this industry in a way that is not favorable for general sustained growth. Until we as an industry collectively demand an end to these practices, even the best run plants are subject to the call I have recieved from too many of my best customers, “Sorry we are moving to China.”

     
    +3
  5. Karl

    Is manufacturing Prospering in the US, you bet it is, can you say thank you President Obama. Without his vision and programs Bush would have emptied every plant.

     
    +21
    1. Kiwisceptic

      The Globalist magazine reports:
      ‘At the end of 2013, there were still 2 million fewer manufacturing jobs and 15,000 fewer manufacturing establishments than in 2007, the year before the Great Recession, and inflation-adjusted manufacturing output (value-added) was still 3.2% below 2007 levels.

      ‘Although the US manufacturing sector has grown since 2010, resulting in 520,000 new jobs and 2.4% real value-added growth, almost all of this growth has been cyclical in nature, driven by just a few industries that contracted sharply during the recession.’

       
      +29
    2. VoteRigger

      Seriously? I’m not one for political mudslinging. It just gets everyone’s clothes dirty, but really? I’m not sure if it was the post, or Karl Marx’s audacity to try and make it look popular, but I have to reply. It’s not just ACORN that can rig the vote. You can do it too. Just press the thumbs up on your own post 17 times and the sheeple will follow. Go ahead, try it. It works about as good as the hanging chads did.

       
      +54
    3. Ed

      Ask yourself am I better off than I was at the end of the Bush years. For the me the answer is a Very Big YES, 5 new machines, added a second shift, new customers and old an old loyal customer base.

       
      +1
  6. Bryan

    Prospering, I don’t know. Can it yes, if there was a level playing field. I know one large multi-national corporation sent a product line to China knowing it would cost more to produce than in the U.S. The product consumption is 98-99% North America. Unfortunately this is not uncommon. Often there is a misconception that off shore is automatically cheaper, or taxes are enough less to justify the move. CEO short term strategy and ignorant purchasing staff drive this trend.

     
    +1
  7. Dave Bradley

    All we need to do is remove the accounting based leadership and replace with Engineering based leadership. The accountants need to get the hell out of the way and make sure they can get their hands on money to fund improvements as manufacturing and engineering sees fit. Accounting is a minimum wage position. They bring nothing else to the table.

     
    +8
  8. Kiwisceptic

    Whilst you can always find a niche market exception the reality is there is no way manufacturing can compete with Asia . Just look at Detroit and ask yourselves how many computers , running shoes , back-up drives , clothes , etc etc are make in the USA .
    Whilst the “Titans of industry ” control the politics and
    A)China is allowed to “peg” the yuan to the USD . ( in the real world any country running a massive trade surplus has a ever strengthening currency until it evens out )
    B) Asian is allowed to run unsafe factories using slave wages, no leave , no maternity benefits , no health care etc etc (which before the titans ruled mean’t their parts would be dutied to make up the shortfall )
    there will be an unstoppable movement of jobs to Asia until the USA reaches European unemployment levels.

    We used to refuse to trade with dictatorships , now ,as long as they help us pay for our SuperYacht in Monaco (so I don’t have to pay tax on the superprofits I make from being the genius to know costs are so much lower in China ) I’ll keep telling you globalisation is good for you .
    40 years ago a man on a production line earned enough to live the American dream with the wife at home . NOW – two incomes – both working 10 hours a day and still University is unaffordable and life is a struggle .
    DUTY – countries who manipulate exchange rates
    DUTY – parts made in countries with unfair advantages /treatment of employees
    bring manufacturing back until when you order more bullets to take on the communist dictatorship – they say NO.

     
    +111

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