United States: Manufacturing And Distribution Group Newsletter – Summer 2014

Last Updated: September 17 2014
Article by Anna Coldwell and Tanya Gierut, CPA

REGIONAL MANUFACTURING HUBS: A MODERN INDUSTRIAL REVOLUTION

Anna Coldwell, CPA

President Obama is planning to launch a national network of up to 45 regional manufacturing innovation centers — or "hubs" — over the next ten years with the support of Congress. This blog takes a look at the first four regional pilot facilities and how the hubs are intended to work. It explains how, in addition to setting new production standards, each hub will serve as a "teaching factory."

Manufacturing is the heart of America. It accounts for about 12% of U.S. gross domestic product and one in six private-sector jobs, according to the National Network for Manufacturing Innovation (NNMI).

President Obama believes that investing in industrially-relevant, advanced manufacturing technologies is the key to U.S. economic recovery and ongoing prosperity. Therefore, he is planning to launch a national network of up to 45 regional manufacturing innovation centers — or "hubs" — over the next ten years with the support of Congress. Let us take a look at the first four regional pilot facilities and how the hubs are intended to work.

Coming to a Region Near You

The first four pilot facilities were selected from a competitive bidding process. Here is a brief overview of each, including long-term objectives:

  1. National Additive Manufacturing Institute (Youngstown, Ohio) Now known as "America Makes," the first hub was launched in August 2012 and focuses on waste reduction. Specifically, it aims to develop new techniques that minimize the use of expensive materials through automation and computer simulation.
  2. Next Generation Power Electronics National Manufacturing Innovation Institute (Raleigh, North Carolina) Launched in January, this hub specializes in developing wide bandgap semiconductor technologies that are smaller, faster and more energy-efficient than those based on silicon. It strives to revolutionize energy efficiency across a wide range of applications, including electronic devices, power grids and electric vehicles.
  3. Lightweight and Modern Metals Manufacturing Innovation Institute (Detroit, Michigan) The White House announced this hub in February 2014. Its overriding objective is to develop new processes and applications for lightweight alloys and metals, such as aluminum and titanium. The complex physical properties of these materials create large-scale fabrication challenges. If the hubs can overcome technological barriers, lightweight materials promise to improve performance, enhance safety and boost energy-efficiency of vehicles and machines.
  4. Digital Manufacturing and Design Innovation Institute (Chicago, Illinois) This hub was announced in February 2014 and is meant to address digital manufacturing and design technologies for new consumer and commercial goods. Its long-term goals include enabling supply chain interoperability, creating digital technology to design and test new products, and reducing production costs and lead times for all types of manufacturing processes.

Fostering Collaboration and Best Practices

Education and innovation are essential raw materials to boost America's competitive edge in advanced manufacturing. In addition to setting new production standards, each hub will serve as a "teaching factory" that provides opportunities, especially for small manufacturers, to:

  • Train workers at all levels and connect skilled workers with local employers;
  • Collaborate and share resources to design, test and pilot new technologies;
  • Share best practices in procurement, production, logistics, and financial strategy;
  • Tap into local supplier networks; and
  • Act as thought leaders that model effective coping strategies for daily manufacturing challenges.

Participants in these teaching factories include manufacturing companies, universities, community colleges, research institutions, and local and federal governments.

Legal and financial advisors who specialize in the manufacturing industry may also become involved in blogs, education sessions and roundtables organized through these regional hubs. They may lead candid discussions on such topics as lean manufacturing practices, supply chain data management, offshoring and reshoring, strategic acquisitions and divestitures, intellectual property security, and tax-saving opportunities.

Joining the Revolution

Government investment in private sector manufacturing initiatives is nothing new. The Internet, the microwave and the solar photovoltaic cell, for example, are the results of collaborative research efforts between the private sector and the U.S. Department of Defense.

Regional manufacturing hubs provide opportunities to leverage shared resources and knowledge. In turn, manufacturers may grow and innovate faster than they could on their own.

Where Will the Next Hubs be Located?

According to his State of the Union address, President Obama plans to launch four more manufacturing hubs in 2014, beyond the original four pilot facilities. As of this writing, the locations are yet to be announced and will be selected using a competitive bidding process.

The White House announced that it will provide $70 million over the next five years to fund the next hub, called the Advanced Composites Manufacturing Innovation Institute. It will focus on developing advanced fiber-reinforced polymer composites that are lighter and stronger than steel. These composites have widespread use in clean energy products, including fuel-efficient and electric vehicles, wind turbines, and hydrogen and natural gas storage tanks.

The U.S. Department of Energy has been accepting bids from regions interested in hosting the next innovation hub. Stay tuned for more information on additional hubs; more details are expected to be announced later this year.

For more information on regional manufacturing hubs, visit http://www.manufacturing.gov/nnmi.html.

FOUR LEAN MANUFACTURING FUNDAMENTALS YOU CAN RELY ON

Tanya Gierut, CPA

Lean companies make their products as efficiently as possible, using the least possible staff time, equipment and working capital. Originally imported from Japan in the 1980s, lean manufacturing continues to play a key role in every successful U.S. manufacturer. Increased global competition and declining operating margins make four particular lean manufacturing fundamentals especially important in today's marketplace. This article describes how each one contributes.

Originally imported from Japan in the 1980s, lean manufacturing continues to play a key role in every successful U.S. manufacturer. Lean companies make their products efficiently, using the least possible staff time, equipment, working capital and storage space.

Take just-in-time (JIT) inventory management. This efficient supply chain strategy reduces inventory costs, such as storage, insurance, pilferage and obsolescence, through inexpensive, reliable overnight shipping and online order fulfillment. When implementing JIT, however, plant managers need to understand the trade-off between reducing inventory carrying costs and meeting customers' immediate needs. This system takes patience and careful planning to implement, but when done and managed correctly, can transform a business.

There are four lean manufacturing fundamentals that are important in today's business world:

1. Waste Not, Want Not— Lean manufacturing limits the amount of time, materials and other resources that are required to produce a finished product. Oftentimes, production creates a great deal of waste and scrap. Implementing a lean manufacturing production line will help alleviate some of the excessive waste. Waste also involves underutilized labor and inventory, defective products and inefficient, disorganized assembly line layout.

Lean manufacturers organize work spaces to expedite workflow, which limits unnecessary movements or steps employees must make to complete repetitive tasks. Instead of having parts for each production unit located throughout the plant, all parts required for assembly are placed close together to eliminate to the time to run throughout the plan to gather parts. This unnecessary transport time results in a reduction of productivity.

Lean manufacturers also utilize the kanban system, which signals to management when parts need to be reordered. This is a key area of lean manufacturing, since production stops when parts are not on hand to finish product. Having a proper system in place will prevent stoppage time and wasted employee time.

2. Commit to Quality— Poor or inconsistent quality can ruin your business' reputation. Yet ensuring the best quality for every product shipped out the door is easier said than done, especially if your operations are streamlined.

Quality is everyone's job, but it starts with your top executives. Management must share customer feedback with their employees and provide frontline workers with effective quality control (QC) tools. Effective QC procedures are necessary to ensure product defects are caught and corrected before products ship to customers. Proper training will help employees utilize equipment properly which, in turn, will eliminate defects and errors. In addition, proper training will help employees spot issues in advance and correct them for future production.

Although technology has become a useful tool in the manufacturing process, businesses cannot simply rely on computerized systems to spot defects. They must continually train and educate their employees utilize various technological tools to help evaluate and control the manufacturing process. This will also allow the employees to continue to evaluate the assembly line and come up with new ideas to help streamline processes.

3. Create a Consistent Workflow— Lean manufacturing principles discourage dramatic production fluctuations, because such fluctuations can lead to overtime pay, poor workmanship and overworked employees. Instead, management should forecast demand and produce consistent output each period. Ideally, inventory on hand, not additional output, should be used to shore up gaps when large customer orders arrive. In addition, reviewing sales orders from prior years can also help determine order patterns.

Accurate forecasts require close contact with your customers. Some customers grant suppliers access to their enterprise resource systems to monitor inventory levels and anticipate demand. Salespeople can also forewarn plant managers of large orders ahead of time, so the factory can gradually ramp up production, as well as the loss of a major customer that will significantly lower demand.

4. Focus on Employees— Successful lean endeavors encourage happier workforces. A happy employee is typically a productive worker who is likely to show up on time, focus on good production quality and take pride in his or her work. Happy employees are also less likely to steal or encourage poor behavior at the workplace. A good business is made up of not only good quality products, but also good people who stand behind their company and product.

Lean manufacturing is a continuous improvement process that relies on everyone in the business to identify opportunities to enhance efficiency. Successful lean initiatives hinge on people who are armed with common sense and accountability.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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