Factory Simulation

We’ve just started to have training exercises with members of our different departments to simulate a lean facility versus a traditional manufacturing facility.  The results have not only been eye-opening, but have really helped people understand the benefit of moving to lean.

Essentially, we have pulled people together in a mini simulation where they have to build towers out of plastic blocks.  The first mode they go through is to set up a receiving line where they follow the current batch build process.  They are given “builds”, kits of material to build sub-assemblies similar to traditional manufacturers and then, when the “subs” are completed, they can build them into the towers.  All this is given through the standard manufacturing process of gathering parts from a stockroom and bringing them to a mock production area.  At the end of 30 minutes we identify how much money they have made by looking at the amount of towers built and “shipped” vs. the remaining in process material, vs. the amount of “labor” that they put into it, and finally the cost of bad quality.  The results are always discouraging.

We then allow them to make whatever changes they want.  This usually leads to the traditional manufacturing approach of throwing more people at whatever operation(s) seemed to be lacking.  This usually results in hilarious consequences because rather than quieting, the chaos continues to rise.

Finally we re-set up their line in a lean, one piece flow operation, and allow them to work off material stores.  I don’t want to spoil it, but there are noticeable differences in this method that extend beyond the money.  You don’t realize how draining it is on people when they can’t work because they are waiting and how this waiting leads to other problems, including human interaction issues.

David Seifrid is currently the Manager of Planning and Customer Support at The Morey Corporation.

Inventory Risk in 2010: One of Many Reasons to Rethink Your Global Supply Chain Strategy

IDC Manufacturing Insights recently released their white paper and webinar entitled “IDC Insights Predictions 2010: Manufacturing Supply Chain.” IDC is a very insightful group with timely research.

One of IDC’s predictions for 2010– “Balancing Supply and Demand across the Value Chain Will Prompt a Strategic Redesign of the Supply Network” – ought to grab the attention of US brands and manufacturers.

IDC explains that three emerging global factors are causing US- based manufacturers and brand owners to rethink the collective instinct to off-shore manufacturing and assembly.

The three factors noted:

1.)    Profitable proximity sourcing – an emerging trend whereby US-based manufacturers and brand owners are realizing a multitude of benefits in sourcing manufacturing/material vendors within the region of headquarters and/or where the majority of their customers are located.

2.)    Emergence of the “globally fair wage” – the reality that Asia, India and others are waking up to the fact that a “fair wage” is worth fighting for.

3.) Logistics vs. Labor – the reality that, even with relatively low oil prices, global logistics costs are eating into or exceeding any margins gained in sourcing to low-wage regions.

We at MOREY agree that these three trends will continue to affect the global supply chain decisions of our customers. But perhaps the biggest trend that will affect supply chain decisions in 2010 is inventory risk.

Inventory Risk…

Our industry (Electronic Manufacturing) is like all manufacturing industries. When we negotiate a contract with an OEM, the biggest sticking point is volume commitment. We want to give customers a tight tolerance on commitment. Our customer wants as wide a gap as possible. This is a common scenario. But if 2009 taught us anything, it’s that this unruly economy has made volume commitments almost irrelevant. It turns out that our customers don’t have any better of a read on how much and when anymore than the housing, retail or banking industries do. Go figure. We don’t blame our customers for this. The old adage “It is what it is” rings true in this economy now more than ever.

The net result in this scenario is increased inventory risk. And this factor alone is enough for US brands to reconsider where their materials are coming from and where their manufacturing partners are located.

2010 holds a lot of promise, but we are seeing a carry-over in volatility in the supply chain from 2009. It’s going to take some time for the laws of supply-and-demand to reach equilibrium. Why make it any more volatile than it is by putting an ocean between your product and your customers?

Beyond Inventory Risk…

But inventory risk is just one of the many disadvantages of having oceans between sources and markets. Most customers don’t like to think about quality failures, but they do happen and when they do, the recovery time is multiplied because of time and language differences. The product travel time also adds to recovery time and could potentially cost millions in customer line shutdowns. Fast and effective response to quality problems becomes increasingly difficult to manage when working with partners in far-flung geographies.

Other risks include quarterly currency fluctuations which directly affect customer profits. With the decline of the dollar, the benefit of offshore manufacturing is diminishing further. The biggest benefits companies seek from low cost countries are labor costs. In typical electronics manufacturing the total labor cost put into a component range between 7-12%.  Even cutting those costs in half would not yield savings that compensate for quality recovery and inventory risk. In addition, most suppliers also have to replicate overhead on both ends of the ocean. This overhead generally ends up eating into customer profits, as it must be built into the price or transaction costs.

I could go on…

We agree with IDC Manufacturing Insights that global supply chain trends are causing brand owners and OEMs to reevaluate their decisions or intentions to source globally. We confirm the underlying causes that IDC indicates in their research and add that inventory risk in 2010 is perhaps an even greater underlying factor. We also note that beyond inventory risk, myriad other factors add to the risk of global sourcing.

- Taymur Ahmad

Taymur Ahmad is Vice President of Operations for MOREY. He is author of “Continuous Improvement Culture,” a blog dedicated to the best practices in continuous improvement and how those practices are delivering more value, cost reductions and increased quality for the customer

Dave Piet to Join Morey Corporation as New Business Development Manager

Woodridge, Ill., January 25, 2010 – Morey Corporation, a leading provider of comprehensive electronics manufacturing services, today announced the appointment of Dave Piet to the position of Business Development Manager. Reporting to MOREY’s Executive Vice President Dana Morey, Piet will be responsible for spearheading the company’s new customer diversification initiatives.

Most recently, Piet was responsible for the development of Arrow Industrial Automation, a strategic initiative within Arrow Electronics focused on the North American industrial automation market. He brings over 17 years experience in sales and business development. Piet has had proven success in strategy development and execution that delivers profitable revenue, improved process performance, cost reduction, and increased customer service. Prior to joining Arrow in 2006, Piet spent several years at The Home Depot as a national account manager as well as several years with Emerson Electric as a regional account manager responsible for sales growth with Original Equipment Manufacturer accounts.

“Dave’s track record will help him succeed in the crucial function of diversifying Morey’s customer base into the Industrial market.” said Dana Morey, Executive Vice President of MOREY. “His industry prowess, skill as a strategist and long history of increasing sales and profitability will make him an invaluable addition to our team.”

About MOREY

MOREY is an award winning, 75-year-old Electronics Manufacturing Services (EMS) company providing comprehensive design, engineering, manufacturing, and testing services for Original Equipment Manufacturers, Applications Service Providers, Suppliers and other enterprises relevant to the aerospace & defense, industrial, utility, communications, heavy off-road/on-road and agricultural vehicles markets. MOREY-manufactured electronics can be found in every region of the world powering mission-critical applications in the most demanding environments on the planet. MOREY leverages deep expertise in telematics, power electronics, controls, sensors, displays, cord reels and handsets for its customers and complements its EMS offerings with value-added expertise in program management, ruggedization, legacy support and global supply chain management.

MOREY is based in Woodridge, IL, and operates a 200,000 square foot, state-of-the-art manufacturing facility and design center.

Press Contact: Tony Woodall | 630.754.2196 | twoodall@moreycorp.com