National surveys reveal a trend toward manufacturing jobs returning to U.S. soil, and Kennedy Valve in Elmira, New York provided a local example when they recently began to manufacture a product line that had previously been outsourced to Thailand.
A look back over the last couple of decades will help explain both this national trend and the decision at Kennedy Valve. A large differential in labor cost originally compelled American companies to move work offshore, and while that strategy may once have been competitively necessary, times have changed. Manufacturing executives are realizing that not only are offshore labor and shipping costs going up, but there are other risks.
For example, suppliers tend to become competitors. A company in China that receives larger volume contracts can build capacity that is an enormous help when turning on production for their own versions of the product.
These factors, plus concerns over government-sponsored I.P. theft and production time lags are causing companies such as GE, Ford, Dow Chemicals, Caterpillar, Google, and Apple to start moving some manufacturing back to the U.S. In doing so, companies are discovering that these changes can also enable them to:
- Improve quality control
- Utilize excess capacity
- Reduce lead times
- Reduce shipment costs
- Improve on-time delivery
- Shorten innovation and R&D cycles
Most companies would pounce on the opportunity to make just one of these improvements. Kennedy Valve has realized multiple benefits from their re-shoring move.
The products re-shored by Kennedy Valve are Rotating Disc Gate Valves that range in size from 3” to 72”, and were originally designed and produced in this region in the early 1900’s. The ownership of these valves moved through several companies and the manufacturing was eventually moved to Thailand. In 2007, ownership of this design was acquired by American R/D, another division of Kennedy Valve’s parent company, McWane, Inc.
According to Lisa Rawcliffe, Kennedy Valve’s Lean Manager, longer lead times and transportation delays were getting to the point that it was impeding the company’s business growth. Especially since the valves are sold in significant quantities in the U.S., bringing them back meant that Kennedy could improve the logistics and service levels to its customers.
“Our Lean Manufacturing accomplishments here have enabled us to free up capacity so that we can take on that business without having to purchase new equipment and build new space,” said Rawcliffe. “We reorganized production areas so that we have a better flow of materials and less work-in-process inventory. We minimized inventory levels to the point where we have available space in our warehouse and production line that can accommodate these valves that are sometimes very large.”
She explained that it was the broader economic and marketing considerations combined with their internal Lean efforts that enabled McWane to make the strategic decision to re-shore this production without a lot of expense and disruption. Thus Kennedy Valve is using existing resources to produce all components of the valve, from molding through machining, coating, and assembly.
This re-shoring event marks the return home for a valve that has been in use in America’s waterworks infrastructure since 1908. And it’s now being manufactured by Americans – the 400 employees who each earn their portion of Kennedy Valve’s annual payroll of $24.5 million. And those employees apparently have reason to be optimistic about their company: since 1997, McWane has invested over $32 million in capital improvement projects at the plant, with $4.5 million of that amount going toward environmental control and pollution prevention.
McWane and Kennedy Valve appear to be preparing for the kind of changes anticipated in a recent report from the Boston Consulting Group that said, “While China will remain an important manufacturing platform for Asia and Europe, the U.S. will become increasingly attractive for the production of many goods sold to consumers in North America.”
See this and other newsletter articles at http://amt-mep.org/files/3413/6250/0279/2013-03.pdf
Visit our website at http://www.amt-mep.org
No comments:
Post a Comment