With mounting evidence that the US is poised for a "manufacturing renaissance," product development experts are building a case for methodologies such as lean and design for manufacture and assembly (DFMA). They tout them as critical tools to help engineering organizations prepare for, and even accelerate, what most laud as a long-anticipated, widely-heralded shift, only a few years away.
A recent report by the Boston Consulting Group says a number of factors, including a 15 percent to 20 percent rise in Chinese wages, will put China's labor rates for manufacturing on par with US rates by 2015. In addition to the narrowing wage gap, flexible work rules and government incentives are making states like Mississippi, South Carolina, Alabama, and others increasingly attractive as low-cost bases for US manufacturing.
In a separate report, consulting giant Accenture found that 61 percent of 287 companies surveyed said they may need to move operations closer to customers and their end markets -- a finding many experts say could portend a more rigorous examination of overseas outsourcing practices for US-based manufacturers in the future.
What's the connection between these findings and engineering organizations? Speakers at the recent 2011 International Forum on Design for Manufacture and Assembly, a conference on manufacturing and DFMA practices hosted by Boothroyd Dewhurst, spoke emphatically on how embracing DFMA and lean practices early on in the product design phase can further close the gap and make it more attractive for companies to bring manufacturing back to US suppliers.
That was certainly the message from speaker Harry Moser, founder and president of the Reshoring Initiative, a non-profit aimed at championing the cause of bringing manufacturing back to the US. Moser says most companies make the decision to outsource on a pure cost basis, not properly considering the total cost of ownership (TCO) and hidden costs around outsourcing manufacturing to China and other overseas regions. "A lot of big companies don't really understand what it costs them when they offshore," he says, noting they ignore about 20 percent of the total costs of outsourcing related to expenses around travel, shipping, duties, tariffs, and even inventory, since overseas suppliers typically deliver parts in larger shipments that need to be kept in warehouses.
As part of his mission, Moser has created the TCO Estimator, an Excel spreadsheet he offers for free on the organization's Website, to help companies account for those expenses and calculate the real cost of outsourcing to suppliers in other countries. While Moser isn't claiming all manufacturing that's been offshored comes back to US soil, he says there's about 20 percent to 30 percent of the cases where it makes sense to bring it back now. He says 50 percent should come back in the next three or four years.
The BCG study, which also advocates taking the TCO approach to evaluating outsourcing decisions, found that goods that are labor intensive and produced in high volume (for example, textiles and many electronics) will continue to be best produced overseas. However, products that require less labor and are only produced in modest volumes (think household appliances and construction equipment) would benefit from a shift back to US production.
Moser and others say tools and methodologies like DFMA come into play because they can help manufacturers make better design decisions early on that reduce parts and materials costs. According to data gathered by Boothroyd Dewhurst, while most companies focus their decisions to outsource primarily on cheap labor, labor accounts for only 4 percent of a product's total expenses. In comparison, the Boothroyd Dewhurst figures show that cost around parts and assemblies contributes to 72 percent of the total tab.
"So much of the product cost is around materials and process, but most companies don't bother to attack that first -- the first thing they go for is labor," says Dave Meeker, a consultant with Neoteric Product Development and an MIT lecturer on mechanical engineering, who also spoke at the recent DFMA Forum. "A lot of products don't even have a lot of labor any more. If there's not a lot of labor, the cost is driven by materials and parts and assembly. The best part is the one that you're not buying, and DFMA helps you get rid of parts."
Boothroyd Dewhurst customers tout some impressive numbers around reduction of parts, and assemblies and cost savings. Well-known companies like Dell, Whirlpool, Harley-Davidson, and others have active DFMA programs in engineering and are touting laudable results, including cost reductions of 50 percent, 45 percent-shorter product development cycles, and part count decreases of more than half. There are other, less-publicized benefits where DFMA's ability to reduce part counts resulted in savings in areas like warranty and service, CAD and PDM, and assembly documentation.
Practicing DFMA early on in the design cycle is key to unleashing its potential. Meeker says 75 percent to 90 percent of the final cost of a product is locked in after only 5 percent to 10 percent of the initial design process is done. "You lock in a lot of the cost even though you haven't done much of the design work," he says. "With DFMA, you can look at more alternatives and examine everything in front of you in more detail, making more precise tradeoffs."
@prasadb1: I think you hit the nail on the head in terms of why companies don't do a thorough TCO analysis on expenditures. I think the lesson here is that even a less formal TCO with not as much rigor can really deliver savings in the long run.
Thank you. TCO -- is the acronym, I was looking for. Many companies were not able to apply more rigors in adhering to TCO evaluations basically due to 3 main reasons:
(a) It takes too much time & cost to dig into such fine details – more than what a typical schedule normally allows.
(b) Often such information is not available or inaccessible (e.g., not in public domain)
(c) Other business priorities, such as downsizing, cost cutting, reduction in head counts, cost overruns, etc., creates undue pressures on management for a quick decision without a full TCO at hand.
As a result, net savings associated with such decisions are often short-lived.
Total Cost of Ownership (TCO), whether it's used to evaluate outsourcing decisions or technology expenditures, is usually a slippery slope. It also seems that companies have a hard time figuring out the right methodology and then an even tougher time putting them to work and employing TCO on an on-going basis. I'm sure that's why we don't see more rigor in adhering to TCO evaluations of strategic decisions, for outsourcing partnerships or anything else, for that matter.
I agree when companies consider the total life-cycle cost from inception-to-support, then they realize that they would not be able to realize the benefits as expected.
Most of the initial cost justification looks good on the paper, because they are often based on tooling costs (labor-intensive), which is only a part of the cost story. Often such justifications failed to consider cost of delay, cost to poor quality, cost of defective material or travel and delivery, transportations, etc. I agree there's no doubt that political pressures (to cut rising costs of production) play some role in maintaining outsourcing relationships and developing strategies.
Thanks for sharing that great real-world example, Dave. I'm sure there are countless other companies that have had similar experiences. Along with initial cost justifications, there's no doubt that politics plays in on-going role in maintaining outsourcing relationships and strategies when there may be evidence that they're not delivering benefits as expected. Perhaps with the TCO approach Harry Moser's Reshoring group is advocating, companies can be convinced to take a more wholesale look at their strategies, which will promote better decision-making in the long term.
At a previous employer, there was an aluminum casting which was purchased in Taiwan and machined in the U.S. About 30% of the castings had to be scrapped for porosity after machining. (Despite being labeled 100% x-ray inspected" by the supplier - we joked that maybe they were x-raying the castings, they just weren't looking at the x-rays). This meant that an entire shift of labor was being wasted, not to mention an entire shift of machine time. I found out that the piece price from a U.S. foundry was actually cheaper than Taiwan. The only reason we went with Taiwan was the tooling cost. Of course, the difference in tooling cost was more than offset by the scrap cost, wasted labor cost, wasted capacity cost, etc.! I tried to explain this to my boss, but to no avail. Of course, he was the person who had introduced Asian sourcing to the company, so maybe he didn't want to understand. I spent over a year trying to get the Taiwan foundry to improve their process, but they were uncooperative, and when I left, the castings weren't much better than when I started. Maybe reshoring is starting to gain momentum because companies are starting to realize that they can't engage in this foolishness if they want to survive.
Another cost of off shoring manufacturing is the security risk involved. A few years ago a couple of hard drive manufacturers found viruses had been added to the manufacturing process. Many products have some computer component as part of the system, if a virus is added what is the cost to the consumer - more compromised data, hackers that can gain access to your system. What if its your car? Your computer? Smart Phone, printer... It may be time for the consumer to demand trusted manufacturing sources as part of the packaging of the products.
Beth, thanks for the great information on this. I had not heard of about ReshoreNow.org before now. I've seen firsthand what the race to the Asian labor market can do to an American company culture and morale. As a mechanical engineer in the Pro and Consumer Audio Products industry, the benefits that were sought by off-shoring were only fractionally achieved and, in my opinion, falsely heralded as a win for company profits since the time and energy required for engineering and manufacturing oversight is rarely accounted for when the books are closed on a project. I know that reshoring has been getting a lot of media attention lately and it is great to know that the initiatives are gaining momentum!
DFMA is not just about design with plastics or reducing fasteners; it's about how to design with the right mindset that focus on achieving the design intent with minimum number of parts. I call it Smart Design.
Reducing the number of fasteners is proportional to the number of parts you are developing. Fewer fasteners means fewer parts you will need to design, which will impact on cost to manufacture, assemble and stock. This will bring manufacturing to the US
As for plastics, don't blame poor results on plastics; blame it on poor design. New technologies in plastics are now so advanced that you can use them in many applications reliably. I can provide you with a large number of examples were plastics have performed in both aesthetics and structural applications satisfactory. The plastic shopping cart is a good example for structural application.
Sam Mikhail- speaker at 2011 international Forum on DFMA
Those are exactly the points reshoring proponents make when suggesting the real possibility of a US manufacturing renaissance. Toss in the high-cost of transportation and escalating fuel costs and it builds a nice story for keeping production close to home, as Rob points out.
By experimenting with the photovoltaic reaction in solar cells, researchers at MIT have made a breakthrough in energy efficiency that significantly pushes the boundaries of current commercial cells on the market.
In a world that's going green, industrial operations have a problem: Their processes involve materials that are potentially toxic, flammable, corrosive, or reactive. If improperly managed, this can precipitate dangerous health and environmental consequences.
With LEDs dropping in price virtually every year, automakers have begun employing them, not only on luxury vehicles, but on entry-level models, as well.
From Dell / Intel® New Paradigms in Design Work Scott Hamilton, vertical market strategist for Dell Precision workstations, 5/2/2013 5
Early in my career, I worked as a draftsman and remember the days of drawing on vellum with numbered pencils and Mylar with plastic lead. This was a fun experience in the sense that I ...
I've been using workstations for more than 10 years and love finding ways to get more performance from my system. With demanding professional applications that require more power each ...
A lasting memory from my first job as an engineer in an auto assembly plant is standing on hard concrete at six in the morning, vending-machine coffee clutched in hand, listening to ...
A quick look into the merger of two powerhouse 3D printing OEMs and the new leader in rapid prototyping solutions, Stratasys. The industrial revolution is now led by 3D printing and engineers are given the opportunity to fully maximize their design capabilities, reduce their time-to-market and functionally test prototypes cheaper, faster and easier. Bruce Bradshaw, Director of Marketing in North America, will explore the large product offering and variety of materials that will help CAD designers articulate their product design with actual, physical prototypes. This broadcast will dive deep into technical information including application specific stories from real world customers and their experiences with 3D printing. 3D Printing is
To save this item to your list of favorite Design News content so you can find it later in your Profile page, click the "Save It" button next to the item.
If you found this interesting or useful, please use the links to the services below to share it with other readers. You will need a free account with each service to share an item via that service.
Tweet This
3 
