“Value Manufacturing” Vs. “Volume Manufacturing”.

Recently I came across an article https://www.nytimes.com/2019/01/28/technology/iphones-apple-china-made.html?action=click&module=Top Stories&pgtype=Homepage

Following are few extracts from this article and our views:

“To start building their damn computers and things in this country,” Apple is unlikely to bring its manufacturing closer to home. A tiny screw illustrates why?

When Apple began making the $3,000 computer in Austin, Tex., it struggled to find enough screws, according to three people who worked on the project and spoke on the condition of anonymity because of confidentiality agreements.

In China, Apple relied on factories that can produce vast quantities of custom screws on short notice. In Texas, where they say everything is bigger, it turned out the screw suppliers were not.

Tests of new versions of the computer were hamstrung because a 20-employee machine shop that Apple’s manufacturing contractor was relying on could produce at most 1,000 screws a day.

Chinese suppliers shipped their components to Texas. But in some cases, the Texas team needed new parts as designs changed, and engineers who were tasked with designing the computer found themselves calling machine shops in central Texas.

That is how they found Stephen Melo, the owner and president of Caldwell Manufacturing in Lockhart. Employees of Flextronics, the company hired by Apple to build the computers, in turn hired Caldwell to make 28,000 screws — though they would have liked more.

When Mr. Melo bought Caldwell in 2002, it was capable of the high-volume production Apple needed. But demand for that had dried up as manufacturing moved to China.He said he had replaced the old stamping presses that could mass-produce screws with machines designed for more precise, specialized jobs.

He made do with his new machines, although he could not make the exact screws Apple wanted. His company delivered 28,000 screws over 22 trips. Mr. Melo often made the one-hour drive himself in his Lexus sedan.

Let us look at the above story a bit closer. There is a real story behind this simple minded statement that Apple is unlikely to bring the manufacturing back to the U.S. shores because of a few small screws!

Manufacture of small lots of custom screws on demand is different from manufacture of large volume lots for mass manufacturing. 

Apple did enjoy and does enjoy the luxury of custom manufactured items at low cost and short lead times in China thanks to many factors listed in the article – low labor cost, massive investment by Chinese Government in the manufacturing sector, authoritarian rule that can flex its muscle at will to make things – even custom manufacturing – happen on demand and at will.

If U.S. manufacturing has to take hold again, U.S. Government and Apple as the end user must invest in such mass customization resources for manufacturing.  But this investment has to be well thought out – between “Value Manufacturing” and “Volume Manufacturing”.

As noted in the story above, Apple had a good source for quality screws in the USA in 2002. When they shifted their manufacturing to China, the local manufacturer had to shift their production capability. Now Apple cannot expect to rely on its old friends in US, without systematic rebuilding of the needed eco-system and capabilities. These are the shortages in the planning for manufacturing in the USA. PLEASE DON’T BLAME THE TINY SCREWS!

The screw shortage was one of several problems that postponed sales of the computer for months, the people who worked on the project said. By the time the computer was ready for mass production, Apple had ordered screws from China.

Read the above carefully and again! Apple did not strive to work on the manufacturing infra-structure. Instead they chose to ship their procurement to China! Detroit was not built as the automotive capital of the world by large manufacturers fleeing away from Detroit at the drop of a dime. This eco-system development has to be one of Transformational Skills for the return of US Manufacturing base.

The challenges in Texas illustrate problems that Apple would face if it tried to move a significant amount of manufacturing out of China. Apple has found that no country — and certainly not the United States — can match China’s combination of scale, skills, infrastructure and cost.

Above is an opinion stated as a fact. It is true that China has a unique combination of scale, skills, infrastructure and cost. But these advantages are not eternal or cast in stone. These are relative advantages gained through investments – both private and public – over a period of time. Since the late 70s US Govt. and the private sector as well as the educators have given lip service to these factors, the essentials for manufacturing competitive advantage. Now we are complaining that the barn is empty after having left the door wide open for decades. The answer is not to state that China has these advantages as a foregone event. Instead discussions and investments have to focus on how to corral more horses and fill the barn. It will require mfg. infra structure investments worthy of a leading global power. But we are far from any thought or discussions in this direction.

“In the U.S., you could have a meeting of tooling engineers and I’m not sure we could fill the room,” he said. “In China, you could fill multiple football fields.”

The above statement means nothing. Today there are conferences on Brain and Cognitive sciences or Computer forum in the USA that attract over 30,000 attendees. Engineers are also people who will converge where they see opportunities. Let us create the right climate and opportunities in order for people to be attracted to that field. For over four decades there has been a drum beat of news coverage to describe everything “manufacturing” as “brick and mortar”, “legacy technologies”, etc. With that kind of beating down it is no surprise there are few left in the US who are proud to stand up and proclaim themselves as “manufacturing professionals”.

Kristin Huguet, an Apple spokeswoman, said the company was “an engine of economic growth in the United States” that spent $60 billion last year with 9,000 American suppliers, helping to support 450,000 jobs. Apple’s Texas manufacturer, Flextronics, did not respond to requests for comment.

If Apple invested so much in the manufacturing infrastructure in US and they could not get the screw they needed at the right time, place and quantity, does it reflect on Apple’s effectiveness in their supply chain management as much as it reflects on the Supplier base?

Mr. Cook often bristles at the notion that iPhones are Chinese-made. Apple points out that Corning, at a factory in Kentucky, makes many iPhone screens and that a company in Allen, Tex., makes laser technology for the iPhones’ facial-recognition system.

The above is the most interesting and valid point pertaining to “manufacturing” in the USA. The Gorilla Glass from Corning is a great example of the kind of success one can envision in US Manufacturing – high value added products, design, services, capabilities, manufacturing resources. Instead of treating all manufacturing in one bucket, it may be necessary to discriminate between “Value addition” Vs. “High Volume low value added manufacturing”. As an example in the disk drive industry, the hardware for thin film heads are manufactured in the USA as hundreds of heads nestled in a single substrate. After this high value added manufacturing, a large amount of large volume fabrication and assembly are carried out off shore using low cost labor.

Mr. Cook has also disputed that cheap labor is the reason Apple is still in China. But it doesn’t hurt.

There is nothing to be ashamed of in using low cost labor where it counts. Low cost labor is a reflection of the prevailing standard of living in the given country or region. As long as there are lower cost resources – products, suppliers, labor, etc. it is imperative for any manufacturer to take advantage of that. But, what do you do and how do you take care of the people on whose back you built your company and products is a moral question that must be addressed by the manufacturer (seeking off shore resources) as well as the Government. The profit made on low cost manufacturing comes from the earlier work of people in home countries who invested their skills and toil leading up to the high volume manufacturing stage. Today the manufacturers (Capitalists) and the Government (ruled for and by special interests and lobbyists) are morally deficient. That is the reality, which this article, the author of the referenced article and the media at large miss when they discuss manufacturing.  I have witnessed highly skilled workers travel to China to set up plants and train the workers there only to find their pink slips on their return. This lack of empathy, moral commitment and emotional intelligence on the part of the Capitalists and the Government has to be the critical issue to be addressed ASAP.

A former Apple manager who spoke on the condition of anonymity said the Flextronics team had also been far smaller than what he typically found on similar Apple projects in China. It was unclear exactly why the project was understaffed, the manager said, speculating that it was because American workers were more expensive.

Insufficient resources in a supplier are a reflection of poor Project Management. Speculating on higher wages of the US workers (which is an obvious constraint) as the reason suggests a total lack of understanding of the basic principles of Supply Chain Management! SAD!!

Another frustration with manufacturing in Texas: American workers won’t work around the clock. Chinese factories have shifts working at all hours, if necessary, and workers are sometimes even roused from their sleep to meet production goals. That was not an option in Texas.

How could one write such hypocritical views and then print that as well?

American workers won’t work around the clock” is a self-full filling prophecy? Has anyone seen the millennials who work in the Bay Area or in the startup companies across the globe? Aren’t those hundreds of workers who travel across the globe to get their job done evidences of US workers who are ready to lose their sleep to meet their goals? Aren’t those employed today in manufacturing sector in the USA working days and sleepless nights just to keep their jobs, pay checks and hence put food on the table?

Ms. Helper said Apple could make more products in the United States if it invested significant time and money and relied more on robotics and specialized engineers instead of large numbers of low-wage line workers.

Ms. Helper and Apple may need to look at their “manufacturing” in a holistic manner and segregate the ”Value intensive” aspects of their manufacturing Vs. “Volume intensive” aspects of manufacturing and then foster infra-structure and invest plans in alignment with these two needs. This may not automatically imply robotics vs. low wage workers. This will certainly require high skilled engineers who are System Thinkers with Transformational Skills.

She said government and industry would also need to improve job training and promote the development of a supply-chain infrastructure.

Everyone can agree on these needs. Let us hope that Apple (and other manufacturers) and the US Govt. can work collaboratively on these needs.

But, she added, there is a low chance of all that happening.

Sadly this is also the fact and reality. But, to articulate the above needs is also the role of the Media. Let us hope we can read more of articles reasoned on real needs as opposed to glib statements, full of opinions and pre-conceived notions as noted in this article.