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Reshoring Or Not, What is Manufacturing? 4 Questions to Ponder with Real American Manufacturers

Editor's Note: This is a two part series featuring Chuck Intrieri, who along with providing excellent insights over at his industry leading The Lean Supply Chain blog, is also a consultant who works with companies for Cost Reduction, Supply Chain Optimization, Logistics, Manufacturing, and 3PL Selection. We recommend you get in touch with him if you'd like an expert to guide you to the next level in your manufacturing business.  You can call Mr. Intrieri at 714-788-0744 or email him here.

Reshoring Or Not, Let's Get Back to the Basics of What is Manufacturing

Over the last few years there has been a lot of talk about reshoring and bringing manufacturing back to the USA. We should take a look at what manufacturing really is, if and when it is coming back to the USA.

Recently even, the A.T. Kearney Reshoring Manufacturing Index has shown that although there is reshoring optimism and we all have hopes of bringing more manufacturing back home versus offshoring manufacturing to other countries, that reshoring is still not outpacing offshoring. 

what is manufacturing reshoring index

But regardless of whether reshoring is increasing or not, we are still seeing world class manufacturing companies reshore their operations back to the United States. You can always view the most up to date list of at The Reshoring Institute's website here. And further, what we must continue to focus on are the fundamentals and the basic understandings of what is manufacturing and how we can create excellence in operations in order to create a prosperous economy here in America.

I’m fortunate to have been employed at some “World Class” manufacturing and assembly companies:

Schwinn Bicycle Company: Chicago, IL: Schwinn manufactured their frames, forks, and small parts for their bicycles, but was mainly an assembly operation. The majority of parts were purchased domestically, and internationally (many parts purchased internationally were not made in the USA at that time.)
General Binding Corporation (GBC), Northbrook, IL: Manufactured “Cerlox” plastic bindings for the end of note books. Plastics were purchased and stored in huge silos. GBC manufactured and assembled shredders, and equipment to encapsulate paper documents in plastic.
Troy-Bilt: Troy, New York: Manufactured and assembled various sizes of roto-tillers called: “Horse”, “Pony”, etc. They supplied tractors and trailers to the farm industry.
Jovan Cosmetics: Bensenville, IL: “Musk” Cologne, Ladies Cologne, Beecham Cosmetics, Underarm Deodorant, and Cassini Products along with other special cosmetics.

What is Manufacturing? 4 Simple Questions to Ponder

A manufacturing business is any business that uses components, parts or raw materials to make a finished good. These finished goods can be sold directly to consumers or to other manufacturing businesses that use them for making a different product. These manufacturers are called Subcontractors. Manufacturing businesses in today's world are normally comprised of machines, robots, computers and humans that all work in a specific manner to create an end product.

Manufacturing plants often use an assembly line, which is a process where a product is put together in sequence from one work station, work center or cellular manufacturing center to the next. By moving the product down an assembly line, the finished good can be put together quicker with less manual labor. It's important to note that some industries refer to the manufacturing process as fabrication.

Manufacturing businesses can be very simple, with only a few parts required for assembly, or they can be very complicated, with hundreds of parts needed to create a finished product. A Bill of Material lists all these various parts in levels, as they should be assembled or manufactured. Compared to other businesses, manufacturing businesses usually have more legal regulations and environmental laws to deal with, if they don’t they can be fined. These things can range from scrutinized labor laws to safety (OSHA) for employees, to environmental and pollution issues. Although labor unions are not as common as they were 50 years ago, they still heavily exist in the manufacturing industry, where wages, benefits and other rights are negotiated.

Four simple questions help to define manufacturing, as Ollie Wight said many years ago, they are:

  • What do you want to make?
  • What does it take to make it?
  • What do you have?
  • What do you have to get?

Simply we can offer the following answers:

  • Question number one: The Production Plan, Production Forecast, or Master Production Schedule (MPS)
  • Question number two: The Bill of Material (BOM); what parts go into the end product or finished goods.
  • Question number three: Inventory on hand, both finished goods and individual parts, and Inventory Records Accuracy.
  • Question number four: Manufactured or Purchased components or parts to complete the finished goods

Envisioning What is Manufacturing as a Triangle...And Match them Up To Real American Manufacturer Examples

The MPS is exploded and reads the BOM and Inventory on hand to create make (manufactured) and buy (purchased) components needed to fulfill the MPS. Obviously accuracy of the BOM and Inventory are critical, and the goal should be 100% daily. Since there is no perfection, 98-99% accuracy is considered close enough to the goal of 100% accuracy.  The ‘ole “garbage in; garbage out” (GIGO) adage definitely applies here.

Schwinn: All of this was done manually, by hand, responsibility: the Inventory Manager. It was called, “The Short List”. Why? This showed Purchasing what was “short” and needed for production (MPS) in what month. Purchasing would review this list, in their particular area of parts responsibility (by commodity) and Purchasing would send hand-written notes to the Inventory Manager on the status of the “short” parts. For any new purchases a red Traveling Requisition (TR) was used.

GBC: Initially, Production Planning would issue Traveling Requisitions (TRs) to Purchasing with offsetting lead times and a “Due Date” to meet the MPS. An ERP system was eventually put in, and did all of these calculations automatically. But, the accuracies of near 100% daily were absolutely needed to meet the MPS.

Troy-Bilt: TRs were used. But, Production Control used Vendor Scheduling to meet production plans and to manage inventory. Purchasing was tasked with Cost Reduction, Sourcing and Purchase Orders.

Jovan Cosmetics: Basic MRP as shown above. All MRP sheets were given to Purchasing to manage. These were Purchasing’s “Requisitions.” Inventory was not accurate and either were the BOMs, so GIGO. Purchasing was always in trouble and “behind the eight ball.”

What were your experiences in the past, “good ‘ole days of manufacturing that you would share? What is manufacturing in your opinion and how would you expand upon the questions posted above? Let me know in the comments section and stay with me tomorrow for what I explain is the most important part of what is manufacturing and how excellence in manufacturing operations is achieved.

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Chuck Intrieri
Mr. Chuck Intrieri is a highly experienced and credentialed Supply Chain Management professional and is a recognized thought leader and innovator, primarily in the areas of Supply Chain Optimization, LEAN initiatives, Operations, Manufacturing, Third Party Logistics (3PL) International Purchasing/Importing, Inventory Management and Logistics, Strategic Sourcing, and Procurement Operations.
Chuck Intrieri
Chuck Intrieri
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  • Sandy Montalbano

    According to Harry Moser, founder/president of the Reshoring Initiative, “Essentially, reshoring should be seen as not a measure of the renaissance but the most efficient tool to start achieving it.”

    Mr. Moser also commented that, “Some A.T. Kearney statements were completely misleading, chosen to get attention. They succeeded to the disadvantage of U.S. manufacturing. Recognition of the strength of the reshoring trend is a major factor driving companies to reevaluate offshoring and many individuals to choose manufacturing technology training, helping to fill the skilled workforce gap.”

    Getting companies to understand all of the benefits of local production and adopt a more comprehensive total cost analysis could cut the trade deficit by 25% and bring back 1 million manufacturing jobs. Mainly this requires education of companies and is entirely under the control of our society. Detailed, objective reporting is necessary to motivate companies to reevaluate offshoring.

    A.T. Kearney’s Reshoring Index does not actually measure reshoring. It essentially uses the trend in imports to imply a trend in reshoring. The Reshoring Initiative measures reshoring directly. Since the U.S. has one of the world’s fastest growing economies now, it tends to import more.

    Numerous surveys consistently show that the trend is increasing. According to the Boston Consulting Group (BCG) Annual Survey released in December 2015, “the percentage of companies actively moving operations back to the U.S. continues to increase.” Of particular interest is the number of 2015 studies documenting the strength of the trend:

    • BCG: Multinational industries actively reshoring increased 140% from 7% in 2012 to 17% in 2015

    • Medical Design Technology: Of the 49% that outsourced offshore, 45% are returning

    • Plastics News: 70% of plastics industry manufacturers have or will soon reshore

    • Alix Partners: U.S. is favored over Mexico: 55% / 31%

    • Walmart continues to make good progress towards its $250 billion 10 year goal

    • Reshoring Initiative’s preliminary statistics for 2015 show the total of reshoring and FDI around 66,000 manufacturing jobs. Final results due out in early 2016.

    • Was hoping you would leave a comment like this, Sandy! Thanks!

      • Sandy Montalbano

        My pleasure, thank you for the opportunity.

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