SMT007 Magazine

SMT-May2016

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56 SMT Magazine • May 2016 Since, everything else being equal, one's la- bor cost is simply the number of labor hours needed to build a product multiplied by one's labor rate (or, more accurately, one's labor sell rate). Of course, "everything else" isn't equal, and "el diablo esta en los detalles!" I concluded the column by listing a num- ber of "core issues" that, if not addressed, will continue to have us wallow in good intentions without ever seeing a tangible improvement: 1. Using excuses for the exodus of manufac- turing jobs in the U.S.—about 6 million from early 2001 to late 2009, alone [1] . The excuses, of course, range from cheap labor global com- petition, to an uneven playing field, unfair monetary policy, a strangling regulatory envi- ronment, and corporate tax rates. Enough al- ready! Finding shelter in this jungle of excuses will never permit us to gain the clarity needed to identify what high labor-rate regions of the world CAN do to successfully compete. For ex- ample, the great free market economist, Milton Friedman, once said that to impose retaliatory tariffs on countries that impose tariffs on you is like having two people in a lifeboat. When the person sitting in the other end fires a bullet through the bottom of the boat, out of spite, you do the same. In my mind, there are only two reasons to build electronic products remotely: (1) you want to sell your products into those markets (a good reason); (2) you can't successfully com- pete with low labor-rate markets (a poor rea- son). It's usually because of the second that U.S. manufacturers and assemblers off-shore their products. And, of course, they are quick to pull out the excuse list. I'm waiting for, "the dog ate my operations sheet!" Actually, the root cause of the second is rarely raw high labor rates. It's usually: a. High yield loss during the assembly process b. The inability to exploit the automation to offset the labor rate disparityIndirect, overhead, G&A and non-value-added costs that have to be loaded on the raw labor rate Both "a" and "b" cause expending high labor rate dollars unnecessarily, both for the rework of assembly defects and for more manual labor for processes that could have been automated. Choice "c" is largely a function of a traditional organizational structure and is discussed below. 2. Looking upon product production (in- dustrial engineering) as subservient to product design (mechanical and electrical engineering). "It's really not engineering, you know. People who are industrial engineers are engineers who couldn't do the math." If that's so, the cost-con- scious operations manager thinks, "Why pay for engineers to do the relatively easy task of methodizing a product design for assembly? An 'engineer' with a technology degree should be fine. Or, why a degree at all—shouldn't some- one with a mechanical aptitude work?" (e.g., someone able to rebuild the heads on his car). 3. A world-class workforce. 4. The segmentation of engineering into specialized areas. In fact, the grouping of all em- ployees with similar skills into departments (si- los). Your customers don't pay you for electrical engineering, process engineering, accounting, tHE HEnRY FoRd diviSion oF laboR PRoduction ModEl Figure 1: Your customers don't pay you for electrical engineering, process engineering, accounting, procurement, etc. They pay you for products.

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