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How the Pursuit of Quality Roared Back in American Manufacturing

Part Two in our series Make Formaspace part of your lean manufacturing team. In this installment, we’ll look at how the pursuit of quality has roared back in American Manufacturing — thanks in part due to the adoption of lean manufacturing techniques. Where we left off in our first article in this series, way back in 1984, American automotive manufacturers found themselves far behind the Japanese in manufacturing quality.

 

Manufacturing with Large Machine

 

What a Difference 2 Decades Makes

Since that time, the manufacturing quality principles of the Toyota Production System (TPS) have been widely adopted under the moniker lean manufacturing and whole armies of quality and efficiency experts have taken root in American manufacturing. Today these manufacturing efficiency and quality improvement programs have multiplied: Six Sigma, SCOR from Supply Chain Council, World-Class Manufacturing (WCM) at Fiat Chrysler Automobiles, Continuous Improvement (CI) and Total Quality Management (TQM) are just a few.

 

The Focus on Quality has Produced Measurable Results

Consumer Report’s Car Brand Perception Survey puts Toyota, Ford, Honda, and Chevrolet as the top brands sold in the US. (Telsa is on the rise. Ironically it’s manufactured in the old NUMMI factory in Fremont, Califorinia.)

  • Today Honda is producing so many vehicles in the US that it is now a net U.S. exporter.
  • JD Powers awarded the Toyota factory in Indiana its Platinum Plant Assembly Line Quality Award for producing models that yield the fewest defects or malfunctions.
  • JD Powers also awarded General Motors eight model segment awards, including five for Chevrolet: 2013 Chevy Impala, Silverado HD, Tahoe, Camaro (tie) and Avalanche (tie).

It’s safe to say American-made automotive manufacturing quality has roared back.

 

The Power of Increased Productivity

But there’s more to the story than just quality improvements. Lean manufacturing techniques also spur productivity improvements which can take the form of increased profits as well as improvements to the product itself (to increase product sales and/or market share.) In 2014 Chevrolet introduced its ninth generation Impala. Let’s take a look and see how it compares to the model from 1974.

 

1974 Chevrolet Impala, image by CarGurus

1974 Chevrolet Impala, image by CarGurus

2014 Chevrolet Impala, image by Monroe Nissan

2014 Chevrolet Impala, image by Monroe Nissan

 

Feature Comparison of 1974 Chevrolet Impala with 2014 Model

Chevrolet Impala 1974 Model 2014 Model
Price $4,215 ($20,000 in today’s dollars) $27,670
Mileage 10.6 mpg 23.7 mpg
Weight 4,343 pounds 3,680 pounds
Engine 5.7 Litre V8 2.5 Litre 4
Transmission 3 speed automatic 6 speed automatic
Drag Coefficient 0.55 Cd 0.3 Cd
Air Conditioning Optional Extra Included
Air Bags Not Available Included
Entertainment System Optional Extra Included (CD, Satellite, HD Radio, iPod)

Sources:  NADA, Wikipedia, Edmund’s, Oregon State Inflation Rates The 2014 Impala’s manufacturer’s suggested list price is $27,670. Careful reading of the table shows that it costs $7000 more (about $1500 in 1974 dollars) than the 1974 model. But we have to remember that in those days, nearly every extra feature was an option. By the time you added air-conditioning, power seats and windows and an entertainment system, you could easily make up the difference.

So for this comparison, we will say the price is basically equivalent. What the consumer gets in 2014 however is a radically improved automobile. The new Impala delivers more than double the fuel economy, and it includes a slew of safety features, such as  anti-lock brakes, traction and stability control, front and side airbags. It also includes what would have been considered space-age technology back in 1974 (the era of CB radio) -— satellite and HD radio as well as GM’s OnStar service which provides automatic crash notification with emergency assistance, remote door unlocking and the ability to track your vehicle if it is stolen.

 

Increased Productivity in Consumer Electronics

While the improvement between a 1974 and 2014 model Chevrolet is impressive, the world of the consumer electronics has progressed even faster in a shorter time frame. Steve Cichon in TrendingBuffalo made a startling comparison recently. He was looking at a February 1991 edition of the Buffalo News when he spied a full-page advertisement from RadioShack. What caught Steve’s eye was how many products for sale in the ad have been integrated into other devices, like the iPhone in his pocket. For example, the iPhone incorporates these devices:

  • $1599 Tandy 1000 TL/3 computer
  • $799 VHS Camcorder
  • $199 Mobile Cellular Telephone
  • $159.95 Deluxe Portable CD Player
  • $99.55 10-Channel Desktop Scanner
  • $49.95 Phone Answering Machine
  • $29.95 20-Memory Speed-Dial phone
  • $29.95 Handheld Cassette Tape Recorder
  • $13.88 AM/FM clock radio
  • $11.88 All weather personal stereo
  • $7.88 In-Ear Stereo Phones
  • $4.88 calculator

Together these devices, which retailed for over $3,000 in 1991 (about $5,250 in today’s dollars) can all fit in your pocket for under $600.

 

But Wait a Minute! Isn’t the iPhone Manufactured in China?

You might say that the productivity gains illustrated by the iPhone don’t have a place in an article about quality American manufacturing. After all, it’s true the Apple iPhones final assembly is performed by Foxconn in China. But as this amazing graphic from Financesonline shows, the iPhone is made up of components manufactured all across the globe, including many here in the US. For example, the A-series SoC processor chip for the iPhone is manufactured by Samsung right here in Austin, Texas. And the impact-resistant Corning Gorilla Glass faceplate for the iPhone is manufactured in Kentucky.

Apple CEO, Tim Cook, addressed this issue in a 2012 interview with Brian Williams, and he had an interesting point of view:

“The consumer electronics world was really never here,” Cook stated. “It’s not a matter of bringing it back, it’s a matter of starting it here.” He went on to promise: “we’ve been working for years on doing more and more in the U.S. Next year, we’re going to do one of our existing Mac lines in the United States.”

 

Mac Pro Manufactured Here in Austin, Texas

That promise has come true. This past December, Cook announced: “We have begun manufacturing the Mac Pro in Austin…It’s the most powerful Mac ever.” “We don’t want to just assemble the Mac Pro here, we want to make the whole thing here. This is a big deal.” Indeed it is!

 

In Our Next Installment, We’ll Look at How You Can Kick Off a 5S Quality Program at Your Facility

Formaspace is a part of the quality revolution in American manufacturing. We can help you make your workspace, laboratory, manufacturing facility, school or government/military facility more productive. We create custom furniture solutions (workbenches, laboratories, casework, sorting tables) that boost your productivity and quality — and save you money in the process. Plus it’s protected by our famous 3 work shift, 12 year guarantee, the best in the furniture industry. Call us now at 1-800-251-1505 or contact a representative online.

 

custom manufacturing workbench

Manufacturing Workbenches with Orange Pegboards

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Will the Proposed ISO 55000 Standard Improve Workplace Safety?

In our previous article making the business case for safer workplaces, we talked about how it’s sometimes difficult to calculate the actual return on investment for improved workplace safety. In that article, we referenced a survey of CFOs that reported a majority of finance executives believe that every dollar invested in increased safety provides at least two dollars of benefits in return.

 

ISO 55000, image by backspace.technology

ISO 55000, image by backspace.technology


Business Process Management Tools Identify Cost and Benefits in Capital Expenditures

However, that was just a survey of executive opinions. To extract more detailed financial numbers, it’s necessary to either conduct some very thorough case studies or to leverage some of the new generation business planning tools that more and more industries are adopting. Some of these newer planning tools include business process management (BPM) frameworks, such as Six Sigma or SCOR from the Supply-Chain Council (PDF file, opens in new window), which are designed to help logistics teams, financial planners and other key operations managers establish standard performance metrics within their organizations.

This in turn helps them make better business decisions that maximize profits while mitigating business risks, like supplier delivery interruptions, manufacturing equipment issues or failure to maintain health and safety in the workplace. Quite frankly most of these BPM tools weren’t originally designed to measure the specific return on investment for improved workplace safety or the benefits of sustainable business practices. Instead, they were designed to standardize and measure best practices within an industry (or across different industries) by establishing a common language– a standard set of process descriptions, workflows and other business process management concepts.

 

SCOR Racetrack, image by APIC

SCOR Racetrack, image by APIC


European PAS 55 Standard Takes Workplace Safety and Environmental Impact into Account

However, there is another business process management framework, PAS 55, which does take workplace safety and environmental impact measurement as a primary consideration. PAS 55 is less familiar to North American business community, but (as we’ll discuss below) that may soon change in 2014. PAS 55 has been in use in the UK for many years. First published by the British Standards Institute (BSI) in 2004, PAS 55 was developed over a six-year period by an industry group of over 50 public and private entities–  primarily in the utilities (electricity, gas, water), mining and public transport sectors.

 

What is the Goal of Asset Life Cycle Management?

PAS 55 comes at the problem of risk management and worker safety from a different direction– it’s based in the asset management side of the equation. PAS 55 addresses the underlying question of what is the optimal route between risk, cost and performance for capital assets. This is particularly important for the type of industries that originally helped define PAS 55, such as the utilities sector. Utilities are very capital intensive and they have to meet very high performance standards, e.g., no downtime for consumer electrical service; zero contamination of public water supplies; no tolerance for injuries or deaths caused by public transport.

As an aside, the term ‘asset’ in PAS 55 has a very broad meaning: it refers to something that has potential actual value for organization. This could include patents, personnel, business goodwill and reputation, among many other things. Assets in PAS 55 are not solely limited to the way your accountant might define as asset, e.g. as a physical item has a value for a period exceeding one year.

Taken from the PAS 55 viewpoint, it’s imperative to maintain each asset for the entirety of its life span. This is known as the Asset Responsibility Period. It starts with the identification of need, the acquisition or creation of the asset, the utilization and maintenance of the asset, the disposal and renewal of the asset, and finally the residual liabilities from the asset.

 

 

PAS 55 Lifecycle Management, image by Plant Services

PAS 55 Lifecycle Management, image by Plant Services

 

PAS 55 Adopted by London Underground and New York City Transit System

Immediately you can see this approach takes into account the entire life cycle of an asset, including its proper disposal. (Think sustainable business practices!) Overall, PAS 55 provides a sophisticated mechanism for planning. Efforts are directed toward trying to mitigate risk, while getting maximum benefit from the capital expended on an asset. A quick example of this approach: PAS 55 planners familiar with maintenance costs will generally tell you that each $100 expended on planned maintenance becomes a $150 expenditure if it’s an unplanned maintenance and a $300 expenditure at the point there is an equipment breakdown.

Moral: if you miss the maintenance window, you are suddenly 300% over budget… Two well-known public transport organizations, the New York City Transit system and the London Underground, are enthusiastic early adopters of PAS 55 thanks to its management tools that not only address performance efficiency but also public safety and sustainability. As a recent example, advanced PAS 55 planning helped New York City Transit respond more quickly to infrastructure damage caused by Hurricane Sandy in 2012.

 

Will the PAS 55 Approach See Widespread Adoption in North America?

It’s possible North American business planning executives will soon become familiar with PAS 55 concepts, but probably not the PAS 55 name. First a little background history. As we mentioned earlier, the PAS 55 standard was first published by the British Standards Institute in 2004. Five years later, in 2009, BSI proposed PAS 55 become a new world-wide asset management standard issue by the International Organization for Standardization (ISO). The American National Standards Institute (ANSI) agreed to pursue this idea by designating an official technical advisory group (TAG) to represent the US during the development of the proposed new international standard, to be called ISO 55000.

Since the initial meetings, there have been several draft versions of the standard. The final set of proposals were hashed out at the fifth official world-wide ISO 55000 planning meeting held this past April in Calgary, Canada. The resulting proposed ISO 55000 standard has now reached what is called “Final Draft International Standard” (DIS) status. Once balloting by all the intentional country representatives is complete, it’s anticipated that ISO 55000 will be officially sanctioned and released in early 2014.

 

What? Another International Standard?

If the proposed introduction of ISO 55000 is news to you, your reaction may be “Oh no! Why do we need another international standard! Don’t we have enough of them already?” Indeed there may be some ‘standards’ fatigue within enterprises that have implemented multiple standards in quick succession in recent years. Rest assured however, the proposed ISO 55000 does not supersede or replace other existing ISO standards. Rather it references the relevant existing ISO standards for established topics (such as ‘Quality’, which is covered by ISO 9000).

 

Will the Proposed ISO 55000 Standard Become as Important as ISO 9000?

The proposed ISO 55000 standard has a lot of benefits for operations and planning teams. Of course, we’ve identified the usefulness of this proposed standard for calculating the benefits of investing in workplace safety and sustainable business practices. If it turns out to be widely adopted, it could help standardize logistical and financial terminology and concepts– not only within individual industries but across different industry sectors. This might have the side effect of allowing career professionals to transition between different industry sectors, bringing a broader management perspective to different employers.

But whether the standard becomes widely adopted by “Made in America” manufacturers could depend upon other unexpected factors. For example, there are already signs that PAS 55-certified companies in Europe have been able to negotiate lower insurance rates. If that trend takes off in the U.S. and insurance companies began to clamor for ISO 55000 certification in exchange for offering their best insurance rates, this alone could fuel rapid adoption of ISO 55000 across many different industries here in America.

 

 

Formaspace is Here to Help

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Want to know more? Get in touch with your Formaspace Design Consultant. Just fill out the short form below to get started.

 

As a furniture supplier to Fortune 100 and 500 companies, we have the experience to help you make your factory more efficient. We can help across the board — from creating elegant, industrial-look desks and conference tables for your public spaces and private offices, to building strong, durable, efficient industrial-grade workstations built to withstand heavy use on the factory floor or in laboratory settings, to custom-designed packing stations to make your shipping and warehousing departments more efficient than ever.

 

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