Archive for September 2012

Time for Robots!

At the end of the last century (I love saying that) I worked for a robot company, Adept Technology, Inc.: We manufactured and sold SCARA (Selective Compliant Assembly Robot Arm) robots, linear modules and dang incredible vision and motion controllers.  This company employed some of the very best and brightest in the field of robotics. The business and stock took off as dot-com web use heated up and the need for automation of fiber optic component assembly expanded. Then the dot-com bubble burst and the company shrank to a shadow of its former self which frankly was never that big. But while working there and even now I have to say that I love automation. How could I not? Automation, robots, manufacturing, mechanical engineering, systems…..this is the intersection of all things geeky for an ops girl like me. But alas, it was not meant to be. I left Adept behind after about 5 years and went on to the world of computers, storage, printers and outsourced supply chains.

Is change a-comin? Is it possible that now is the time to ramp up automation around the world? I think so and here is why:

1. Labor is more expensive now than ever. “Cheap labor” in China is no longer available as the wage rates have increased 5X over the last decade.  If you move manufacturing to follow the cheap labor you are moving to a riskier region with less infrastructure thus inflating other costs and even in those lower labor cost regions, the labor cost coupled with inflation is increasing.

Source: Accenture

2. Product is getting smaller and/or harder to handle. This has been true for a while but with new nano, solar and bio technologies it is impossible or at the least, not smart to handle product with hands.

3. The world is riskier. Is it time to bring some manufacturing back home? If labor is expensive but automation is available it is possible to pay once and then maintain with higher skills that we want and need to develop closer to home. Can we reduce the risk of our WW supply chains by being less dependent on labor in region with the associated political and social issues driving unrest?

4. Labor is scarce. In just about every developed or even most developing countries the birth rates are dropping.  U.S. manufacturers will be hit hard in the coming years by the absence of retiring Baby Boomers who make up much of their skilled workforce. There will come a time when companies are praised for eliminating jobs, instead of adding them.

5. Automation technology is more capable. With improvements in memory density, compute speed and material technology, automation products are able to move, see, manipulate, handle, even feel components, products and packaging more efficiently and effectively.

But here is my rule for automation. Don’t automate first. First, make your process “automatable”. Use lean sigma techniques to take waste out. Consider Poke-Yoke techniques to make your assembly processes fool-proof. Design for assembly and test. Think about both even if the product is low volume. All of these best practices will increase quality, decrease cost and get you ready for automation if the math works out.

Bring in the robots. Accelerate automation. Super-charge the process of building stuff. Make it a core competency. It will be fun. I promise.

Bring (Some) Manufacturing Back

Yesterday a riot in a Foxconn plant in Taiyuan, China got out of control and police were called in to stop the violence. The reason for the unrest is unclear. The news articles coming out of China are stating that there was a disagreement in a dormitory between guards and employees. The articles are saying that 1000 workers were involved (out of the 79,000 in this facility)…and yet 5000 police were called in. This conjures up a disquieting image.

Warning: the following numbers are my guesstimates and are just a way of framing the problem. I have read that if Apple were to build the iPhone in the USA the cost would increase by $50 which is about 2 hours of fully loaded labor. Since that is just too much time to assemble, test and package the phone I am going to assume that the $50 includes space, logistics and even a tax differential so it is an “all in” number. The consumer price of the phone is about $650. If the gross margin is 50% (surely Apple doesn’t get all of this but it is spread amongst distributors/carriers) then the total cost of goods sold (COGS) is about $325 for material, logistics, overhead, depreciation, labor, etc. Adding $50 to this is an increase of over 15% to COGS which isn’t small change. What if that increase in cost could be offset with benefits that either manifest now or in the future? Could we find a way to bring some manufacturing back to the USA? What is the tipping point?

1. Grow your own workers – There is value in having access to trained and local electronic assembly and test technicians, engineers, manufacturing leaders. We have lost the training grounds for good manufacturing prowess in the USA. The last of us “hands on manufacturing nerds” are going to leave the workforce eventually and the next generation will not have experience on an actual manufacturing line.

2. “Next bench” experience for development engineers – The engineers who are developing the next big thing can walk down the line, ask questions, observe and learn from the people doing the assembly work.

3. Faster quality resolution – If a problem is found it is easier to be all over it if manufacturing is close at hand. Thus, faster resolution.

4. Faster ramp – Once the manufacturing expertise is solidified near the development and marketing arm it is easier to take ideas and ramp them to market. Less travel is needed. Less translation and more cooperation is possible.

5. Disruption insurance – Spreading out risk is a good idea. If all of a company’s manufacturing is in China and there is a labor strike, natural disaster, logistics event, fuel crisis you have a longer and more expensive recovery. Put your eggs in multiple baskets if you have the volume.

6. Good will and free advertising – Surely it is worth something to a company to get the good will associated with “made in America”. I know people who won’t buy an iPhone because of the “slave labor” association and noise. That is an unreasonable response since all phones and frankly almost all electronics are made in China. But there has to be some consumer value to “made in the USA”.  Maybe it would just be a willingness to buy the brand but not a willingness to pay more. But even that has value. Volume helps a company get to lower costs and more margin dollars associated with that volume helps cover more operating expense even if the margin per unit is lower.

7. Wild card government help – Maybe it is coming at the federal level. Surely there is help to be found at the state level. Look for it. Find a deal. Make a splash in the news. Start some momentum.

It is certainly time to take some manufacturing out of China and to spread it across the world. The risks are just too high in China to put all of your manufacturing in that one country. I believe it is time to bring some manufacturing back to the US. If the differential to bring work back is about a 15% hike in COGS with no mitigation let’s chunk the problem. Find a way for government to mitigate 5% with tax breaks or deals on land or capital. Be willing to eat 5% in the company if margins are good and if the future benefits can justify the investment. Pass on 5% to the consumer. Since this is 5% of COGS it is a smaller percent of the price to the consumer. Perhaps the impact shows up as a 2-3% increase. I think it would fly.

But what do you think?

Top Ten Global Supply Chain Mistakes

A global supply chain is the norm for almost any company in business today. In order to take advantage of the capabilities throughout the world and in order to reach markets around the world it is important to create a system that reaches across borders. Creating that system is a difficult process especially for smaller companies focused on technology and marketing as first priority. How do you build a robust supply chain that is a competitive weapon rather than a necessary evil? Below is a summary of mistakes commonly made.

1. All eggs in one basket: It is risky to partner with only one contract manufacturer, logistics partner or key component supplier. Comparing price, quality, locations and practices can give you the information you need to drive your supply chain toward best in class. Having some tension in the relationship will also give your partners a good reason to offer you the best prices, quality, technology and lead times. But if you don’t have the volume to support more than one supplier without compromising cost or attention, put your eggs in one basket…and watch that basket very closely. Even with one partner you can quote annually to keep the tension in the relationship and to give you additional information. Ask for a transparent cost model so that you know what you are paying for and can more easily disaggregate the work to look for the best combination of suppliers. Even if your volume won’t support multiple production suppliers of key components, qualify more than one supplier ahead of time to give you options if there is a problem later.

2. Out of sight, out of mind: Once a global supply chain is set up and running it is a mistake to assume that the job is done. Weekly conversations should be held with your partners either in person or on the phone or via video-conference. Virtual meetings can be set up to review metrics, current action items and future work. Monthly visits should be made to meet with the key players eye to eye. Walk the production floor. Talk with the people on the production line even if they don’t speak your language. Use a translator and convey your thanks and interest in their work. That will help you later when fast action is needed and you are not there to oversee. Observe and ask questions. Make sure that you are getting what you expect. Remember, people respect what you inspect.

3. Too little, too late: It is unwise to assume that a verbal contract or purchase order with legal sounding words on the back is good enough. Draw up a contract and negotiate the details. While you are unlikely to ever sue your supplier, the value of a solid contract is that you have talked over the problems before they occur. Don’t wait until you have a field quality issue to decide who will take lead and drive to root cause. Don’t wait until there is a sub-tier issue to decide who is liable for the resolution and cost. There are templates available for supplier contracts and it is okay to start there but don’t stop there. Think about what is important in the relationship and write it down. Even if it doesn’t end up in the final draft at least the conversation has been held and documented and there is some understanding of expectations.

4. It’s not my job: Don’t sit back and assume that your supplier will watch your back. Supply chain design and development remains the responsibility of the product company. The inputs to strategy are targeted markets, technology needs and growth plans. Yes, the inputs also include changes to the supplier landscape and cost shifts, but it is unwise to rely on the supplier to tell you when to modify your supply chain. I recommend an annual review of labor and logistics costs, shifts in the market, tax changes and other macro-economic factors. What are the implications to your supply chain? Is it time to manufacture in a region for tax purposes? Are labor rates changing enough to consider a shift to another region of the world? Do you have a change in your product roadmap that will require new process technologies?

5. Only sure thing is death and taxes: Death is hard to control but don’t overlook the impact of taxes. The tax implications of your supply chain decisions can outweigh the labor cost benefits. Have a tax expert examine your plans ahead of time. Understand your target markets and if there are import taxes based on manufacturing content. Are you selling into government agencies? Some have restrictions about where the product is made.

6. Count the costs: Don’t make the mistake of just looking at the price tag from your supplier. Remember the cost to move the product to the market. Remember inventory carrying costs for a longer pipeline. Remember the cost of travel to manage a remote supplier. Quality costs are higher if your pipeline is longer and if the time to resolve is longer. And finally, what is often overlooked is the cost of time. If your new product slips a month due to the challenges of remotely ramping with the wrong partner, the costs are large. Do the math on the full costs of your alternatives.

7. Time Flies: Time should be mentioned a second time because it is just that important and is often not considered when designing a supply chain. It does take longer to get work done across time zones, cultural and company boundaries. However, if managed well there can be an advantage to having multiple time zones to work a product launch or a quality problem. The key is to set up the processes ahead of time with the right responsibilities and accountabilities. It is a little like a battle strategy in that you want to consider where you position your forces and how you arm them based on where the enemy lies. With new product launches the enemy is lack of documentation, lack of information flow and lack of iteration. Launching remotely needs more of all three. Don’t neglect to make that investment to save valuable time.

8. Risky Business: When natural disasters strike, the companies best able to recover are the ones that don’t ignore the inevitability of failure. Having a documented business continuity and enterprise risk management plan in place will give the troops a jumpstart on what to do. Work with suppliers ahead of time on “what if” scenarios. Know who within your organization will run the war room. Decide how you will respond to a disaster in any part of the world. Of course you can’t anticipate every problem but you can do enough to be in better shape than others. When being chased by a grizzly bear you don’t have to be the fastest, just faster than the other guy!

9. Stunted Growth: Don’t just think about what you need now. It is a big mistake to pick partners based on what you need today and not think about their global footprint, scalability, systems strengths and capacity. There is nothing worse than having to pick up and move your processes while growing just because you didn’t partner with growth in mind. If you need one assembly line now, make sure that your partner has room to give you three without moving you to another building or location. Can you claim dedicated resources now ahead of expected growth? Have you picked a supplier who has bought into your plans and will invest with you appropriately?

10. Flee, fly or flow: Last but not least, don’t staff up with a wimpy team.  Understand the importance of picking supply chain leaders who have lived through global supply chain challenges and can bring experience to the table. Resiliency is a characteristic that comes to mind. There are a myriad of challenges that come up with a global network of suppliers. The challenges can be viewed as a necessary evil or can be managed and mitigated to bring your company a competitive advantage.

Pause Programming

While crossing the Pacific Ocean recently on one of my many journeys to Asia I paid close attention to the instructions on the screen. The sudden halting to the movie or music comes with a flash on the screen: Pause Programming. On this trip I took note and followed the directions. Usually this sign means nothing to me but on this trip I was trying to make a difficult decision about my career. The symbolism worked for me. Let me explain.

In the movie that is my life things move along rapidly almost without time for reflection. That isn’t a bad thing in normal times but what if I don’t know about the emergency landing instructions or the oxygen masks? There is value in knowing ahead of time what an appropriate exit strategy is. What should trigger a job reconsideration? When should I trade-off loyalty for self-preservation or even for happiness? What are my values and what would compromise them? Giving this some serious thought ahead of a major crisis on the job is wise and saves a lot of time when time is in short supply.

Do I know what cabin I belong in? While in flight you can’t move out of your cabin without breaking the rules. There are always exceptions to the rules so sometimes it is a good idea to seek out the better wine in business class. Doesn’t hurt to ask. But during a “life programming pause” it is important reevaluate my aspirations. Is my goal to be an employee or to work for myself? Do I want to work on a business or in a business? Is my job the focus of my life or do I want to have several things to juggle and develop?

When turbulence comes along in a career it is best to have a plan. Certainly it is a good idea to buckle in and face the issues. Dealing with crisis is a true test of one’s character and it is a test of a company’s real capabilities. Turbulence in a career is both a threat and an opportunity. If you are prepared and safe (financially and with strong networks) it can be either a non-event or a chance to grow.

Finally, when the movie is paused for the landing instructions and for information on the gate and other connecting flights it is good to listen. The career analogy here is to manage transitions before getting there.  What is my financial situation?  Can I afford to start my own business? Can I take a break and train in a new area? When can I afford to retire and what does that retirement look like? Nurture the network. Who do I know and what do they do? Where do my interests lie and then what can I do to prepare myself for a transition?

Bottom line advice:  Pause programming every once in a while. Don’t be caught reacting without the knowledge that is available if you pay attention. Keep yourself up to date on the rules, options, gates of life, destination details. Be ready for change because it is going to come up. Don’t go through life without thinking.

Thinking is the hardest work there is. That is why so few people engage in it.          HenryFord

Vulnerability: weakness or strength?

At the age of 8 Dawn Hanson and I rode our bikes down to VanDriel’s, our local drugstore, bought penny candy, made kool-aid and set up the best refreshment stand in Mount Prospect. Of course we marked that candy up and ended up with quite a profit between the candy and the high margin kool-aid. This worked well until a couple of bullies dropped dry ice in our kool-aid and ran off with our candy. At least they didn’t get our money but all in all the day was a bust. The entrepreneurial experiment was not. We went back at it on future days with our kool-aid covered and our bulk candy safely hidden. I don’t remember if we told on those boys (yes, they were boys) but I also don’t remember them returning. Success? All in all, I think so.

Given my story you can see where I land in answer to the title question. In business it is important to step out and take risks even though that makes you vulnerable and likely you will get pounded at one point or another. However, without that vulnerability you will not grow in understanding of yourself or your business. Let’s take this one step further. How do this impact us in the realm of career management and personal growth?

While I might be one of the first to celebrate the value of predictability, analytical approaches and execution to commitments, there is room and critical value to ambiguity, risk taking and vulnerability. How do you stuff those opposing characteristics into one being? Practice and mindful development is the answer I have found.

The word courage is from the latin root word “cor” which means heart. That is why this whole process gets personal. There is a need in leadership and in business to be self-aware of your heart and what you are feeling. You need to be willing to open that heart up to failure and to criticism. Practicing is all about stepping forward into areas of discomfort in order to exercise that vulnerability. We can’t protect ourselves from scrutiny if we are to be open-hearted, vulnerable leaders.

The base on which to build is one of self-awareness and a sense of worthiness. I am enough. I am capable. I have something to offer to the world. Yes, I have weaknesses and I make mistakes but those do not stop me. Here is what I need to ask myself regularly:

1. What would I do here if I wasn’t afraid?

2. What is the very worst that could happen and can I handle that downside? (I would not say that risk should be taken without weighing the consequences and mitigating within reason.)

3. How am I influencing others through this action? Do I really need to step out and be seen in order to set the right example?

4. Am I holding back based on shame or based on what others might think? What is driving that?

This idea of being vulnerable and allowing oneself to take bold risks is important to the success of people in general but I submit that this is a key challenge and sticking point for women in business. I will come back to this in later posts but for now I would like to say that I, like many of my peers are inhibited by fear. Some fear is helpful so that we avoid picking fights with wild animals and walking alone down dark alleys. But fear to expose all of who we are and let others see our warts and vulnerabilities is fear to eliminate in order to become all that we can be. Easy to say and hard to do. Let us begin!

The Secret Order of Supply Chain Chaos

In all chaos there is a cosmos, in all disorder a secret order. Carl Jung

On March 11, 2011 the Great East Japan earthquake, magnitude 9.0 kicked up a wall of water 133 feet tall that hit Miyak0 in the Iwate prefecture. This tsunami traveled 6 miles inland leaving destruction and death in its path. The Fukushima Daiichi Nuclear Power Plant experienced a level 7 meltdown. The ports and airports and roads and factories shut down in northern Japan. This was the worst earthquake in Japan’s recorded history and damages are estimated at over $30B. Chemicals, semiconductor and automotive manufacturing happened to be concentrated there thus crippling several industries with one big natural act.

In the fall of the same year the record rains in Thailand coupled with the mismanagement of the water flow out of key industrial regions caused flooding north of Bangkok. Damages were estimated at over $3B. Key global disk drive manufacturers happened to be concentrated there thus impacting the electronics industry for almost a year.

In 2011 and 2012 the labor rates in Southeast China increased an average of 17% per year.  With the RMB strengthening against the dollar at a steady rate (7.3 RMB per dollar in 2007 and 6.3 RMB per dollar in 2012) we spend more dollars to buy that RMB worth of labor.

A barrel of oil has increased from $55ish per barrel in 2007 to $95ish now. Logistics costs have therefore increased at a similar rate.

Yes, there has always been change but the rate of change in the world is increasing. It is not simply right to follow the old norms. It is not simply right to outsource to China. It is not simply right to outsource. The defaults that used to rule the day (and plenty of momentum still exists) are no longer good enough. Now it is important to know the inputs and outputs and to understand the trade-offs prior to making a decision. While I’ve not seen a perfect model out there, there are helpers available through most contract manufacturers. It is in their best interest to steer you to the right geographies ahead of you looking into it on your own. If you decide that Vietnam is the place to put your next product and your CM doesn’t have a plant there that is an open door for re-quotes and loss of business. Can you trust the models your partners offer? I say no, not fully.

Here are a few of the questions to ask when deciding how to design (or re-design) your global supply chain:

  1. What is the value of a shorter lead time?
  2. What is the cost of your product and therefore what are the inventory implications of your SC design decisions?
  3. What are the tolerances of your product? Can you pull it off from a distance?
  4. Are you selling to any government agencies with restrictions on origin of manufacturing?
  5. What are the tax implications?
  6. How smooth are your new product ramps? Can you do that from a distance? What is the cost in travel and time?
  7. Are their advertising advantages to building in one area or another? (e.g. made in Japan makes a big difference in the Japanese market)
  8. Can you reduce your packaging costs with a shorter logistics path?
  9. What is the expertise of the local supply base? What is their productivity? Are your current partners manufacturing their already?
  10. Is it important to keep some manufacturing expertise in-house or close by for that “next bench” learning and design improvement?

Some of these questions are answered using models but final decisions should be made using structured decision-making methodologies. I recommend a must/want sort coupled with a weighting process. While it won’t be precise it should yield the right discussion based on analytical input.

As the quote at the top infers, chaos leads us to opportunity. The last few years have been non-stop chaos but this can lead us to reconsider default answers. There is a secret order to the chaos given the right approach.

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Partnering Eastern Style – Part Two

I discovered the hard way that I don’t like natto. Fermented soy beans are only good when buried deep in other flavors. Eaten alone I grimace which is not a good look on me. And figuring out how to spit something out without embarrassing the host is an art form. That, my friends, is what the combo “cough/napkin to face” move is all about.

Overall, the food experience in asia is a good one, assuming that you like fish and savory flavors. It is important to embrace the food since this is a very important part of the relationship experience. Think about it this way:

1. Asian dining involves eating raw fish – Open up and listen to the words and actions around you. The most basic decisions such as where others are sitting around a table, will clue you in on status. What is not said is as important as what is said. Pay attention to the raw data.

2. Eating takes a long time – Embrace the process as you negotiate. If results are what you want the best outcome will only happen with full appreciation of the dance leading up to the bow at the end. Look for a mutual win.

3. Sharing dishes is common – Give and take is part of a successful process. The asian partners I’ve worked with have moved toward western culture and style as the relationship matures. Each person will change and the optimal outcome is a compromise and realization that there is indeed synergy.

4. Ordering is often done by the host – Try not to do all of the leading. Stand back and let your partner take a leadership role to get the balance of ownership shifted. I’ve found that if the western culture side of the table dominates there is more resistance to change.

5. One pours drinks for fellow diners not for yourself – Again, the relationship is key. Be very aware of what is in it for the other side of the table (and usually they are all on the other side of the table; no mixing it up except when dining). Know how your partner is measured. Find your common ground.

6. The best french food I’ve eaten was in Japan – Asia is changing rapidly. It is not the same as it was a decade ago. Don’t assume that it is. The global nature of business has impacted every nation to some extent. Realize that as you are trying to understand your partner, they are doing the same with you and probably have a much better understanding. Western culture is splashed all over the entertainment and fashion world. They see us better than we see them.

Enjoy the food and recognize the patterns.

Partnering Eastern Style – Part One

When I was a young manager at HP my team partnered with Samsung to develop a workstation to offer to the global market. The idea at the time was that the two companies could come up with better design than either company could alone. The key engineer on the project was an older gentleman who had developed a good repore with the Korean team. Hugh was big, tall, older, and he commanded attention. But I was his boss. So, when we met with the Korean team I had to establish my position in order to get my job done. High heels and shoulder pads on my dark-colored jacket would not suffice. We put a little play act together for the first meeting. Hugh deferred to me on just about everything. He only spoke when I asked him a question. He let me enter the room first and carefully introduced me to the participants. I even think he slumped his shoulders a little to appear smaller. That still didn’t prevent the awkward situation of having a couple of the engineers refuse to shake my hand. I was just a woman and it was not comfortable for them.

I’ve traveled extensively in asia since those days and have spent countless hours on airplanes crossing the ocean. During those long flights I’ve reflected on the differences between the western cultures and the asian cultures. Yes, there are multiple cultures in each part of the world but there are some common themes that seem consistent. The topic of working successfully in the far east is not new. Many books have been written. My perspective is from a woman’s point of view. Different? You decide.

1. Value the presentation – In Japan, food is usually presented with great artistic flare. The small portions are positioned carefully on a beautiful small plate with touches of color and spice. Even in countries where sameness is part of the corporate drill, artistic flair is appreciated. Perhaps this is an advantage for a woman. Color and style are valued. Bring that Gucci handbag. Wear the red pumps. Remember the operative words: touches, tasteful, flair

2. Time is relationship – Time is not money if it sacrifices the relationship. This is where a female has an edge if approached correctly. The skill of getting to know someone beyond the job title and work tasks helps get the eventual job done. Ask questions. Listen. Be curious. Open up about your own life. Do this over drinks if possible but watch what you drink. Whisper to the waiter that you would like water in your sake glass. Pour quickly for others…drink slowly yourself.

3. Failure is not ok – When a young person takes their university exam in Japan they have one chance on one day at one time. Sickness doesn’t get them out of it. If they fail, they fail. There are no “re-dos”. Surely that scars a person. Even if you do well, you are trained to really be ready for something and iterations are not the norm. This translates into a “Yes, and” mode of communication. Yes, I agree with what you are saying AND I would like to add my points in addition. Save face. Confirm and build. Agree with as much as you can and if you can’t agree at least acknowledge.

4. Women are an underutilized HUGE asset to tap – If you find an asian woman in business make the connection. Because they are not as common in high places, when they get to higher levels they are very special. If you are a woman, they will want to make a connection because it is unusual for them to find a peer. Much can be learned and shared.

5. Play your position – Be a leader. Be someone to look up to. Be confident in your expertise and direct as appropriate. If you step up you will be followed. Title is taken seriously but if you don’t act the part you will be ignored.