Innovation and Manufacturing in the US - PowerPoint Presentation

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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!!