Importance of the connection to innovation and how you can afford to produce in the US Hans Peter Schaefer Retired VP of Product Supply PampGGillette Introduction German Married 2 Teenage Kids ID: 619638
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Slide1
Innovation and Manufacturing in the US
(Importance of the connection to innovation and how you can ‘afford’ to produce in the US)
Hans Peter SchaeferRetired VP of Product Supply P&G/GilletteSlide2
IntroductionGerman, Married, 2 Teenage Kids Hobbies: driving fast cars fast (on the track!), family travel, ski and dinners
31 years with Gillette/P&G in Germany, UK and US, mainly Supply Chain, Global OperationsDesign and implementation of 3 tier manufacturing conceptDesign, implementation and operation of single supply chain across 200 countries and 5 BU’s
Integration of the the Gillette Company’s Technical Organizations into the P&G structureSlide3
Key MessageManufacturing is a key factor in every economyThere are ways to produce successfully in the US
Connection between manufacturing & innovation Pack center concept Lead factory concept
Reputation of manufacturing and education are as much a key ingredient as is costSlide4
Importance of Manufacturing in the US Every economy needs manufacturing since I believe that one has to either grow, mine or produce products to create a profit – redistributing the profits (money) alone is not sufficient.
Manufacturing jobs support a solid middle class in the US Manufacturing jobs provide higher skilled service jobs like design, process engineering, accountants, lawyers, etc.
Each direct job in the car manufacturing industry provides 8.6 indirect jobs!!!!The danger is that in order to keep the close link between manufacturing and higher level service jobs, these higher level jobs might eventually “follow” manufacturing to ??Slide5
Importance of Manufacturing in the US Every economy needs manufacturing since I believe that one has to either grow, mine or produce products to create a profit – redistributing the profits (money) alone is not sufficient.
Manufacturing jobs support a solid middle class in the US Manufacturing jobs provide higher skilled service jobs like design, process engineering, accountants, lawyers, etc.
Each direct job in the car manufacturing industry provides 8.6 indirect jobs!!!!The danger is that in order to keep the close link between manufacturing and higher level service jobs, these higher level jobs might eventually “follow” manufacturing to ??
ConcernSlide6
Gillette ExamplesConnection between Innovation & Manufacturing
Connection of Manufacturing and Innovation Slide7
Importance of Connection between Innovation and Manufacturing at GilletteThe high tech products (e.g. Sensor, Mach3, Fusion
and Fusion Pro Glide) could only be cost effectively produced (or produced at all) by designing our own manufacturing process and equipmentTo support this, we had a single technical organization which included R&D, Procurement, Engineering, Manufacturing and Supply ChainThis was enabled by a Program Management O
rganization to “manage” the process across the functionsSlide8
Example OnePack Center Concept (or Basic Operation Concept)
Pack Center ConceptBasic Operation ConceptSlide9
Example One - BackgroundIn the mid 90’s a n
ew product was coming - (Mach3)Due to the technical requirement, and the need to be close to the R&D and Engineering teams, the ideal startup location was Boston,…… howeverProducing in Boston required the addition of space to the factory (more capital into an already high cost factory)
Salaries in Boston even for lower level tasks were highBesides Cost and Capital, Flexibility was a concern – number of people fluctuating (some issue not different today, but will get to this with the second example)Slide10
Example One - FactsProprietary Technology and Innovation is in the productCapital requirements for a new product were 95% product related
Product is identical around the worldGlobal product level forecast error was +/- 5% on an annual basisCapital is only 5 % packaging related
Packaging is different in almost every Geography SKU forecast error regionally, weekly +/- 50%Slide11
FWIP
Inventory
Basic Operation Concept
MANUFACTURING
(unpacked product)
PACKAGING
UT
Avg
60 - 70%
UT
95
- 100%
Done in house (Boston)
w
ith highly skilled and
(paid) labor
Outsourced (
Devens
) to
Packaging Company
w
ith lower skilled temp
(low cost) laborSlide12
Basic Operation Concept
Major
B
enefits
of B/O
Concept
:
Lower Cost
and Capital
- High asset UT in B/O,
Lower
Cost
in packaging
- outsourced
Better Customer Service
- Built-in flexibility
in Packaging/Buffer
Focus
- different tasks on both
sides
Better Innovation
connection Gillette R&D connected to product (manufacturing)Packaging knowledge and innovation connected to packing operation
UT
95
- 100%
MANUFACTURING
(unpacked product)
PACKAGINGUT Avg 60 - 70%
FWIP
InventorySlide13
GLOBAL
REGION
LOCAL MARKET
Raw
Mat
’
l
Inv
Produce
to Global Demand
Pack to
Replenishment
Configure to
Order and Ship
WIP
Inv
WIP
Inv
FG
Inv
AS
FG
Inv
BO MANUFACTURING
PACKAGING
ORDER FULFILLMENT
Very High Volume
Very Few SKUs
Few Locations
Highly Automated
High Volume
Medium No. of SKUs
Several Locations
Partially Automated
Low Volume
High No. of SKUs
Many Locations
Manual
3
Tier Production Concept
Global Factory
Regional Pack Center
In Market DCSlide14
Example Two
Lead (Startup) FactorySlide15
Example Two – BackgroundAs mentioned before, our Factory is located in South BostonHigh Labor Cost (compared to other locations/countries)
Land worth a LOT of money (bean counter interest high)Slide16
Example Two – BackgroundAs mentioned before, our Factory is located in South BostonHigh Labor Cost (compared to other locations/countries)Land worth a LOT of money (bean counter interest high)
However All R&D and Engineering staff, plus trained workers are in South Boston!! Slide17
Example Two – SolutionCreating a High Tech “LEAD” FactoryAssessed the size (output, number of employees) of the “smallest” viable factory
Designed the factory as a high tech lead factory
Lead means they start up the production of the latest technology products (currently Fusion Pro Glide, Fusion, some Mach 3) (Packaging of these products still in outsourced Pack Centers)When the next generation of technology is ready for deployment Boston will again start up the new product, BUT as they ramp up, they also ramp down the older product, which includes training the receiving factory of the older version and supports the transfer of the older version to the receiving factor.Slide18
Example Two – ResultCost overall are down R&D, Engineering and Manufacturing are integrated under one roof
Very interesting jobs even in the factory – new technology, training others, etc. Huge portion of the land not needed anymore and can be sold Slide19
Reputation and EducationEducation:There is a lag of Engineers, quality and quantityTo offset the quality aspect, we created what we called the “Tech Op Program”. Three year formal and on the job
training in technology, leadership and operations!Very successful in terms of capability building, but also in terms retention.Slide20
Reputation and EducationReputation:We (Gillette) treated (level, pay, etc.) the MFG leaders like the engineering, supply chain and R&D leaders.
Result was that every young engineer’s dream was to run his/her factory some day - highly qualified plant managers.P&G plant managers were mostly a level below a supply chain, engineering and R&D leader.Result, it was tough to find a plant manager, let alone a top notch person, or one in ‘less desired’ locations.Slide21
Key MessageManufacturing is a key factor in every economyThere are ways to produce in the US
Connection between manufacturing & innovation Pack center conceptLead factory concept Reputation of manufacturing and education are as much a key ingredient as is cost
Different view of things deliver different solutions!!