Otis Elevator has found that bringing manufacturing jobs back to the U.S. can be a lot trickier than it sounds, writes The Wall Street Journal (May 3-4, 2014). The company’s 2012 move to relocate its plant from Mexico to South Carolina was hailed as a sign of a renaissance in American manufacturing. The relocation was supposed to save money and help fill orders faster by putting the people who make new elevators next to the engineers who design them, and their customers. But the reality hasn’t been so smooth. Production delays created a backlog of overdue elevators. Customers canceled their orders. The Nogales plant Otis was leaving behind had to stay open for half a year beyond its planned closing date to deal with the backlog.

The company’s experience shows that with supply chains and skilled labor following American factories overseas in recent decades, coming home can be more complex than just deciding where to site a plant. When the elevator maker opened its new 423,000-square-foot facility in a vacant Maytag factory in Florence, S.C., it was a notable participant in a trend of “reshoring,” where some companies reversed the movement of manufacturing work offshore to places like China.

For Otis, the return to the U.S. was supposed to herald a step up in efficiency. The relocation was to lower the company’s freight and logistics costs by 17%, and would cut costs a further 20% by having all of its white-collar elevator design and production workers on hand at the factory. The company now says it was trying to do too much at once. In addition to moving the plant, Otis also was replacing the computer system that manages supply, manufacturing, shipping and financial information. “The challenge, I think, was moving your supply chain, with your factory and your engineering center all at once,” says the CFO

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.

Inside a warehouse at the Brooklyn Navy Yard, steel beams and flat metal sheeting rest atop a workbench. A diagram–which looks an awful lot like furniture assembly instructions–spells out where each beam and metal screw belongs. On it someone has carefully checked off each component, one by one.

The metal may not look like much yet, but it’s on its way to becoming part of the world’s tallest modular residential high-rise. Workers will configure these beams into walls, which will become the scaffolding of rooms, which link together to form entire apartments. Then the “mods” are loaded onto a truck and driven 2.5 miles away, lifted by crane and snapped into position like Lincoln Logs. Time to load an apartment: 30 minutes. From the first cut of metal to placing a mod on its final site, the entire process takes about 20 days. “And we’ll get faster,” says the VP of Swedish construction giant, Skanska. “This is bringing the best of manufacturing and construction together.” The first 32-story tower is slated for completion in December.

Skanska is counting on the new factory approach to urban construction to save on costs and provide greater quality control, writes Forbes (May 5, 2014).  A 1,000-square-foot apartment in NY costs an estimated $330,000 to build; Skanska estimates it will knock 15% to 20% off that this go-round–and as much as 30% off with more experience.

“If they can show that here, I think it has potential to have a transformative effect,” says a Tulane architecture professor. “It’s of interest both to architecture and to developers who are interested in building affordably and fast.” The most important innovation is the construction method itself. The factory feels like the love child of Home Depot and a sterile surgical chamber. “We believe that in factory environments the productivity of the worker is greater,” says a project exec.

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.