Author Archives: AccountMate

Harley-Davidson’s Manufacturing Strategy

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FEBRUARY 5, 2014

harley2“Before the great recession, Harley-Davidson didn’t have to worry about counting the seconds,” writes The New York Times (Feb. 2, 2014). There was little competition for their core customers — “fat white guys,” as one employee called them. Harley charged a huge premium for its bikes, and its customers waited as long as 18 months to receive them. The union rep at Harley’s York plant said workers could assemble motorcycles at their own pace, music blaring. “We had 30% absenteeism every Monday and Friday,” added the plant manager. This all worked fine until the recession, when the company was close to collapse.

Many firms respond to global competition by breaking their unions, by moving to a right-to-work state (or out of the country), and by employing robots on the assembly line. But Harley has an “American blue-collar, working man” brand, and to get rid of its union or to make its motorcycles in Mexico would have been catastrophic. The company could only compete by redesigning the production system so that each worker created more value than they cost. So Harley tore down the existing plant and built a new one. Unlike most factories, the new plant has people everywhere. There are no robots on the main assembly line; instead, hundreds of workers, operating in teams of 5 or 6, manually build each motorcycle. There are around 1,200 different Harley configurations, and a new bike starts its way through the production line every 80 seconds. Virtually each one is unique.

Human beings can also solve thorny problems that lead to major inefficiencies. At Harley, there are 150 “problem solvers” whose entire job is to continuously monitor their small sections of the production line and search for better ways to make motorcycles. The average tenure of a line worker at the York plant is 18 years, and these workers are extremely devoted to the company. (“How many factory workers have the company logo tattooed on their arm?” asks the plant manager.) Costs have fallen by $100 million at the plant and quality has improved even more significantly. Customer demand is extremely high, especially now that people can get a bike within a few weeks.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

America’s Second Railroad Revolution

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FEBRUARY 4, 2014

Union Pacific's Bailey Yard

Rail is on a roll in the U.S. As Forbes(Feb.10, 2014) writes, “The relic of the 19th century will become the most important logistics system of the 21st century.” Thanks to leaps in technology, more and more freight traffic has moved from roads to rails, where trains can move one ton of goods about 500 miles on a single gallon of fuel. The industry, so recently an aging also-ran in the age of superhighways, has seen revenues surge 19% to $80.6 billion since 2009, creating 10,000 new jobs at railroad companies. Less than a decade ago diesel prices were so low that manufacturers rarely considered rail for shipments of less than 1,000 miles. Now they’re ditching trucks in favor of trains for jobs as short as 500 miles.

All of which is driving a multibillion-dollar revival in rail R&D and infrastructure, investment unseen in America since the transcontinental railroad. Thousands of new state-of-the-art locomotives–far more fuel-efficient and less polluting than the ones they replace–are now operating on U.S. railroads. And the boom (with $20 billion in infrastructure spending annually) has been underwritten by industry, with no cost to taxpayers. Further, the Rail Safety Improvement Act of 2008 required railroads to fund, build and implement a new, safer “Positive Train Control” system by the end of 2015, refitting locomotives and tracks, and placing GPS devices on every locomotive.

This technology has been revolutionizing freight hauling, allowing the railroads to pinpoint a locomotive’s location within one yard. And instead of sending trains speeding across the country only to stop at each red signal, the new system means conductors will be able to know about planned stops well in advance, allowing them to simply reduce speed (and fuel consumption) to a level that won’t force them to stop altogether and burn major amounts of fuel when restarting from a standstill.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

U.S. Factory Jobs are Gone?

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JANUARY 30, 2014

bmwThe headline in the latest BusinessWeek article (Jan.27-Feb. 4, 2014) reads: Factory Jobs are Gone. Get Over It. The magazine writes: “Politicians think creating millions of high-tech manufacturing jobs is the answer. It isn’t.”  Over the past 60 years, U.S. GDP increased from $2.6 trillion to $15.5 trillion, which means that absolute manufacturing output more than tripled. Those goods were produced by fewer people. The number of employees in manufacturing was 16 million in 1953 (about a 1/3 of total nonfarm employment), 19 million in 1980 (about a 1/5), and 12 million in 2012 (about a 1/10). Service industries have taken up the slack. Even much of the value generated by U.S. manufacturing involves service work—about a 1/3 of the total. More than 1/2 of all people still employed in the U.S. manufacturing sector work in such services as management, technical support, and sales.

Over the past 30 years, manufacturers have spent more on labor-saving machinery and hired fewer (but more skilled) workers to run it. From 1980 to 2012 across the whole economy, output per hour worked increased 85%. In manufacturing output per hour climbed 189%. The proportion of manufacturing workers with some college education has increased from 1/5 to 1/2 since 1969.

Developing countries have taken over much of the low-skilled, low-capital production once done in the U.S. Consider the garment industry or tire manufacturing. Such low-tech work is even more mind-numbing and poorly paid than it was when the work was done in the U.S. through the 1970s. Many of the workers killed in the recent Rana Plaza garment factory collapse in Bangladesh earned just $3 a day. Some politicians have regretted the loss of similar jobs in the U.S. The question is: Do we want such jobs here now?

For every $1 spent by the federal government on retraining workers and helping them find jobs after they lost theirs to trade competition, the U.S. spends about $400 on Social Security and disability payments for those who exit the workforce rather than seek new work. So perhaps retraining programs are the solution.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.