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11/2/2003

Lean&mean;

By Tony Kindelspire
The Daily Times-Call

LONGMONT — You’ve heard the numbers: Nearly 3 million manufacturing jobs lost in the past 21/2 years. But the trend started well before that.

Factory jobs in the United States hit a peak in 1998, coincidentally, the same year in which reported productivity growth numbers began to show dramatic improvement.

Blame technology and free trade. As long as it’s cheaper to either automate something or have someone overseas make it, manufacturing jobs in this country will continue to erode.

Are we seeing the beginning of the end of manufacturing in this country?

“Jobs, especially low-skilled and semi-skilled jobs, are being increasingly off-shored. And that means the strongest place to be if you’re a manufacturer is to be in very skilled manufacturing,” said John Challenger of the outplacement firm Challenger, Gray & Christmas. “The kind of skilled jobs that are going to set U.S. manufacturing apart.”

The biggest local job cut of the past few years occurred when Flextronics closed its operations east of town, putting 550 people out of work. But other local manufacturers have adapted to the changing environment, and are not only surviving but thriving.

Peak Industries, a contract manufacturer, started with 13 employees in 1996. Today, the company employs about 330 and has expanded four times, including building a completely new building for its medical device business.

“To be successful as a manufacturer in the U.S. today, you better find a niche,” said Mark Hopkins, Peak’s president. “The idea is that everybody specializes today. We’re trying to be the manufacturing arm for several companies.”

Hewlett-Packard and KLA-Tencor, a semiconductor company, are two of Peak’s clients on the high-tech side. Over in its medical devices building, the company is building things such as a home-based kidney dialysis machine.

Hopkins said he is acutely aware of the trend toward off-shoring, but Peak survives because of its philosophy of seeking out “high complexity, low-volume” jobs.

“High volume kind of means consumer, and consumer kind of means offshore,” said Hopkins.

The same philosophy has helped InstruTech Inc. thrive. Like Hopkins at Peak, Jerry Howard, InstruTech’s president and CEO, runs a “lean” manufacturing company.

Lean manufacturing is a philosophy that incorporates keeping inventories low, having a highly trained and flexible staff, and maintaining strict quality-control standards. The point is to let the process guide production.

“We stay very lean. We build to order, we are very quality conscious, we put that responsibility down to the people on the floor and we pay them for that responsibility,” Howard said. “We drive the waste out of the organization, which is really where your high cost is.”

A year ago, Howard was InstruTech’s only employee. Today, the company, which manufacturers flow products and measuring devices for Advanced Energy, employs nearly 30.

“Everybody moving offshore created some huge opportunities in manufacturing, so I broke off and started InstruTech 12, exactly 12, months ago,” Howard said as he showed a visitor around his factory floor. “Most of (Advanced Energy’s) manufacturing is going to China. This particular product was not a good fit. It’s high mix (of materials)/low-volume stuff that just doesn’t lend itself to offshore manufacturing.”

These companies offer us a glimpse of the future of manufacturing in the United States. Banging out 5 million key chains in a day will become the province of other countries. Jobs that once went to Mexico because labor was cheaper there have since shifted to China. Now, China is starting to lose those types of jobs to countries such as Romania.

In America, a manufacturing evolution is under way.

“We can all wish for the days of the $20 per hour semi-skilled jobs, but those days are gone,” said Challenger.

High mix/low volume is the new mantra. For Blackfox Training Institute, which works with manufacturers to get their employees trained, this has meant a shift in how they do business.

“Originally our focus was providing certification training, but with the job losses the companies’ needs have changed,” said Pramod Goel, Blackfox’s chief operating officer. “‘How can I change my cost of quality to become competitive in the marketplace?’”

New methods of manufacturing means “they need people with a wide variety of skill sets,” said Goel. “Training becomes a critical issue.

“What they’re saying is that the employee has to do five functions, rather than one specialized function.”

Goel told the story of an electronics manufacturing company that saw its business drying up. High-tech was in the toilet, inventory levels were high, and their business was in danger of failing.

What did they do? They hooked up with a jewelry designer, and began manufacturing jewelry.

“Soon they realized — what is their core competency?” said Goel. “Their core competency is manufacturing, not electronics manufacturing.”

Call it good old American ingenuity. Companies are needing highly skilled workers, and Blackfox is helping to train them. Turnaround time for certain highly complex products becomes critical, and companies such as Peak and InstruTech fill the void.

Peak’s next step will be to move its warehouse off-site, while InstruTech plans on building its own building in the near future. They’re both growing and proving that not all the manufacturing news is bad.

“The key to this is you can take a few good people, pay them a decent wage, and rotate them throughout the different processes depending on what’s selling,” Howard said. “You don’t dedicate people to one job, you use diversity across all lines of it.”

Howard, who plans to stay in Longmont, said that in some cases, he thinks off-shoring manufacturing jobs is a short-sighted approach.

“Times are good, you’ve got waste in your process, you spend money on things you probably shouldn’t be, and it’s easier to shove things offshore when you should really be looking at yourself and how you can better manage your processes,” said Howard. “Which costs are necessary and which ones aren’t?”

Or as Blackfox’s Goel puts it: “A lot of times you really have to adjust your thinking — you have to adjust to what the market is telling you.”

Tony Kindelspire can be reached at 303-776-2244, Ext. 291, or by e-mail at tkindelspire@times-call.com.