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February 2017 • SMT Magazine 57 A NEW ORGANIZATIONAL MODEL USING LOGIC, PART 3 50% less in Orlando than in Sao Paulo. So there it is: If you buy the premise, then the way to win is to sell better products at lower prices—not whine about the protectionist poli- cies of the competition. What these Jumping Off the Bandwagon col- umns have attempted to do is provide a road- map toward that end. Assuming the company's controllable component of product cost is la- bor, the columns have analyzed the corridors of labor looking for advantages and edges to real- ize the cost reduction part of this goal. The other part of the product cost pie is ma- terial and shouldn't be ignored out of hand. However, at this point, it is beyond the scope of our discussion 2 . In summary, the following has been con- cluded: 1. Automation is the counterweight to low labor rates. High labor rate environments can compete by reducing labor content through au- tomation. 3 2. In this automated environment, the work- force needs to be transformed from many low paid direct personnel to a few high paid engi- neers with the ability to develop and maintain the automated processes. 4 3. This new workforce must be cross-disci- plined with each member having multiple skill sets and the versatility to multitask and wear whatever hat is necessary at a particular point in time. They will be focused on the products they are assembling, not the departments from whence they once resided. 4. What must accompany this workforce transformation is a transformation in the com- pany's organizational model. The reduction in labor content must be accompanied by a cor- responding reduction in indirect and overhead cost since there is less direct labor to absorb these costs 5 . 5. This new organizational model is a struc- tural disruption from the traditional hierarchi- cal form of power pyramid (Figures 1 and 2). 6. What is needed for the new workforce re- quirements and new organizational structure is a new approach to education 6 . Doing Things the Way We Always Have Done Them As discussed in last month's column, it seems we have hierarchical, pyramid shaped or- ganizational structures because they are rooted in the past, not because they are necessarily best (Figures 1 and 2). They certainly cost more than alternatives. 4 As mentioned last month, over the centu- ries academia has been able to adjust their ed- ucational offering to our changing understand- Figure 1: Direct and indirect labor cost contributors in a hierarchical pyramid organizational structure. Figure 2: The effect of loading indirect labor cost on the direct labor rate.

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