Cadalyst MCAD Tech News #123 (June 17, 2004)

16 Jun, 2004

This is the final of a three-part series on overseas outsourcing. The first article focused on the human issues of outsourcing, and the second looked at many of the hidden costs that are often overlooked. I'll conclude by looking at ways you can compete without sending jobs to cheap labor markets.

Many of the ideas presented here may not be new to some of you. My goal is to get as many thoughts into this piece as possible and use it as the foundation for a new forum on the topic of how to compete without outsourcing overseas and against overseas manufacturers. You can find the forum, Outsourcing, at Wohlers Report that focuses on rapid manufacturing and tooling, told me about molds made overseas that rusted together after a very limited number of shoots.

In any case, the purpose of this piece is not to complain about lack of overseas quality, but to show you how to use it to your advantage. A few weeks ago I was in Chicago visiting Life Fitness, a manufacturer of gym equipment such as treadmills, stationary bicycles, and elliptical trainers. Years ago, the company made the decision to focus on satisfying customers with quality. Senior mechanical designer Mark C. Termion noted, "And with that quality comes improved safety, ergonomics, and more." These are important points -- make sure your customers know that your products meet or exceed all the latest safety standards and are designed with biomechanics in mind. A cheap knockoff product manufactured overseas most likely can't make the same claims.

Improved quality just doesn't happen -- it must be planned for. To this end, you can improve quality by implementing a strategy such as Six Sigma. As some of you may know, this is a flexible quality improvement strategy -- sort of a statistical yardstick for measuring quality. It involves the use of statistical problem-solving tools to gather data, measure and analyze a company's operations, and thereby improve quality.

High-quality products are most often created with the highest quality tools, whether those tools are the latest CAD/CAM software or state-of-the-art CNC machines. My guess is that if you are reading this newsletter, you're probably already up to speed in the CAD/CAM area, but what about your manufacturing tools and processes? What about the computers employed on the shop floor -- are they still running Windows 98? Peter Dickin, marketing manger at DELCAM, a developer of CAM software, sees this as a major problem. "You wouldn't believe the number of companies that spend $200,000 on a new high-speed machine tool, but then can't generate toolpaths fast enough to keep it working because they 'can't afford' $2,000 for a new computer to calculate the toolpaths faster," he says. In short, having the latest technology is the first key to innovativeness.

The second ingredient in the innovation recipe is continued education. Thomas W. Eagar, materials engineering and engineering systems professor at MIT, said recently, "In order to create new technological innovations, our workforce must understand existing technology. Education is a lifelong process, and we must be endowed with technical knowledge to promote continuous improvement." This means that to compete, those of us in industrialized countries must continue to learn. Whether it's to study the latest version of your CAD program or new innovations in manufacturing, materials, processes, sending your employees for training is a good start. In addition, getting our future workforce excited about design, engineering, and manufacturing is very important. This can start with youngsters as young as six and is one of the goals of a group I head called The CAD Society. Feel free to contact me at the e-mail below for more information about this organization.

Along with technology and education, capital is a key to innovation. Most innovative products can take 10 to 20 years to reach market, but most large corporations -- those with the funds to see such an endeavor through -- are interested only in short-term profits. They've lost their financial motivation to innovate. Though the government funds a lot of innovative research through organizations such as the NSF (National Science Foundation), getting the best ideas into and past the development stage has proven extremely difficult. This is why development has been called the "valley of death."

Crossing this valley can be tough, but is essential if industrialized nations are to continue to enjoy a high standard of living. If manufacturing jobs continue to leave these countries, it won't be so bad if new, better, high-tech jobs are waiting.

So though the burden of innovation on small and midsized companies may be great, the rewards can be substantial. The May issue of "Technology Review" featured an article on innovativeness, and one point it made is how investments in innovative companies yield, on average, a return ten times greater than that of a typical S&P 500 corporation. The article also had good news for those innovative companies that need funding to see their ideas move past development and into production: venture capitalists are now looking to invest their money into companies with real inventions and patents. (This is opposed to the investing they did in the late 1990s -- Internet companies that offered no real innovation).

In addition to private funding, it's also important that government programs such as the MEP (Manufacturing Extension Program) and ATP (Advanced Technology Program) continue to be funded at past levels. ATP is designed to help bridge the "valley of death" referred to earlier. It is also essential that you get involved -- voice your opinion to any local, state, or even your Washington representative on issues that affect you -- whether it's the cutting of programs like ATP, the addition of tariffs, unfair trade agreements, or investments in new research. Also think about joining organizations that fight to protect the jobs of workers involved in technology. Washtech is one such group.

Capital is a key component in innovation, but we must also change how that capital is distributed. For instance, companies reward managers for improving the bottom line, not for developing far-reaching plans. Universities reward those who perform vital research, but not those who want to develop it. "I could not get tenure at any major university in this country if I worked on development projects. It is not scientifically acceptable at the universities," says Professor Eagar.

From the standpoint of design and manufacturing companies, other issues influence innovation. Some complain, "Why should I put resources into being innovative if my idea can be essentially stolen within a few months?" It's almost impossible for a large corporation with teams of high-priced lawyers to sue when such a situation arises, and small to midsized firms have even less legal recourse. I did some research into this and though there are many small business associations, few seem to use their clout to represent members in legal situations like these. I did come across the Legal Club of America , which has an association with NASE (National Association for the Self-Employed), but I don't know enough about them. Perhaps if you have experience with this group or any other, this could be a discussion issue for our Outsourcing forum. Again, though such legal satisfaction is rare, at least some large representation is better than nothing.

In addition to possible legal help, groups like the NASE and the SBA (Small Business Association) may help you reduce other costs, such as health benefits. In fact, the SBA recently announced two new tools to help small business reduce these costs.

High-quality and innovative products are usually more complex, and this too can be turned into a competitive advantage. As Bob Cape and others have said, the inability of overseas manufacturers to produce complex tooling is where firms such as mold designers in industrialized countries can step in and compete. Rapid prototyping expert Wohlers frequently talks about the ability of laser sintering machines to manufacture high-quality, complex parts -- parts that would be almost impossible to make with traditional manufacturing methods. Called rapid manufacturing, this method is ideal when production numbers are low. The complexity and low volume of these components makes it impossible for overseas producers to compete using traditional manufacturing means, even with their unfair wage, labor, and environmental standards. In addition, almost 100% of these new rapid manufacturing systems have been sold in industrialized countries.

Rapid manufacturing lends itself to idea of mass customization, which may be the niche your company needs to thrive. Though Pella Windows doesn't yet employ rapid manufacturing, its ability to provide a high degree of customization helps shield it from cheap foreign copies. Other companies have found it helpful to eliminate smaller and simpler products. The following may not be the best example, but if you are making televisions, your 5-inch model may be an easy target for competitive foreign manufacturers because it's lighter and therefore less costly to ship than your 50-inch version. Or it may be a more difficult target because of the smaller, more complex electronics involved. The point is: evaluate your entire line and try to eliminate those products that are an easy target for unfair foreign competition. A more radical step is to redefine your manufacturing operations - just as some makers of CRT displays eventually migrated to LCDs and are now moving toward developing 3D stereoscopic displays.

To some, lean manufacturing simply means eliminating waste material and reducing inventories, but it also includes setting up your factory floor in ways that make it more productive and flexible. I would also stretch the definition here to include innovative manufacturing techniques called DFM/A (design for manufacturability and assembly). The following DFM/A example recalls the issue of robustness -- a sheet-metal part that is a single, more complex component, rather than several simple components that have to be fastened or welded together. Because of the increased complexity, the design and manufacturing setup time may be a little more, but the assembly time is reduced to zero, thus saving costs.

I would also like to nominate your actual factory building as a candidate for lean manufacturing. Though you may not have the $2 billion that Ford just spent on a green redesign of its River Rouge complex, you don't have to spend that much to incorporate many of its principles. These include water reuse via natural filtration, passive and active heating and cooling systems, and more. Obviously, the more you can lower you water and energy bills, the better you can complete with lower priced overseas goods.

While many of the ideas presented so far involve periods of months or years, one change that can be made almost immediately is improving your customer service and support. A huge potential advantage that you have on overseas producers is the ability to get to know your consumer and provide superior technical support. Termion at Life Fitness told me about the extensive surveys the company conducts to find out what new features the users of their equipment desire. They then make sure the best ideas are implemented as soon as possible.

Also, make sure you evolve as your customers evolve. Take advantage of your shorter design cycles - thanks to your expertise in robust design (see above) -- to always stay months or years ahead of those who may be looking to copy or "improve" your latest idea.

In addition, though it may involve a little more editing, make sure that any manuals included with your product are clear and well written. Use your existing 3D technology to produce snazzy interactive animations that show how your product goes together. Take the time to ensure phone support teams speak clearly and are very knowledgeable. Customers seem to appreciate these factors almost more than anything else.

There are many other ideas that may help you maintain a competitive edge. For example, you can look for ways to promote your company as one that doesn't outsource, using that fact to generate positive PR and hence increase sales. Let's keep the ideas flowing. Share your thoughts in the Outsourcing forum.