“… Like Holding the Wolf by the Ears …” the Key to Regaining Electronic Production Market Share: Breaking Free of the Division of Labor Manufacturing Model in High Labor Cost Global Regions

ABSTRACT Thomas Jefferson foreshadowed the American Civil War by almost 80 years when, in 1782, he said, “I tremble for my country when I reflect that God is just (and) that his justice cannot sleep forever…” In 1820, Mr. Jefferson likened slavery to holding a “wolf by the ears” – having the fear of letting go, but knowing one cannot hold on forever. This paper uses the powerful wolf by the ears metaphor to address the dilemma faced by companies in high labor cost regions of the world – holding on for dear life to the notion that securing the lowest hourly labor rate for their production workforce is the necessary cornerstone to constructing a competitive electronic product assembly operation. Even though they may sense there is another way, the disciples of this model are obsessed with following low labor rates around the world, afraid to put it down, and fully embrace the other (albeit harder) ways to decrease labor cost – first, by reducing labor hour content through truly exploiting the available automation; and second, through a dramatic reduction in overhead cost. The paper maintains that there are only two reasons for manufacturing in low cost labor areas: selling your products into those markets (a good reason), and being unable to successfully exploit the available automation, coupled with having an excessive overhead structure that is bloated with non-value-added indirect costs (a bad reason). These added costs must be absorbed by the direct labor. However, absorbing them drives the fully burdened labor sell rate well above the level that can compete with manufacturers in low cost areas. The second reason is not easy to address. It is easier and safer to cling to our traditional production model and exert most of our energy in searching for and developing sources of cheap labor, often to compensate for inadequate automated processes that lack the proper proactive process controls to head off assembly defects before they occur. This paper offers an alternate electronic product assembly model for high cost labor regions, looking at assembly labor in a totally different way. It requires breaking with the traditional hierarchical organizational structure, a paradigm that is the legacy of the Henry Ford division of labor model. The new strategy has three basic elements: Transformation of the direct labor workforce. In this new model, the approach to direct assembly labor is turned upside down from the way we have traditionally looked at it. We currently staff with a large number of the lowest cost “unskilled” production line workers and equipment operators we can find, and then create tiers of support groups – material procurement, incoming inspection, kit/prep and equipment set-up personnel; equipment repair technicians; test, rework and final assembly operators; process, quality and test engineers, etc. These personnel are then organized into departments, each with supervisors and managers, and the departments are organized into groups, each with its own director. In this traditional corporate pyramid, only a portion of the cost of this massive workforce is direct labor. Yet, it is this direct labor that must absorb all the layers of indirect and overhead costs, resulting in labor sell rates of $50.00 per hour and higher. And, when business bookings go away because of poor planning by management and leadership – who are included in the overhead cost category – it is the direct labor that always seems to get cut first. Go figure! But, of course, the reason for the dilemma is never the overhead contributors' performance – “It's the $0.75 per hour labor we have to compete against. Let's find a source of cheaper direct labor!” This paper suggests a better way to compete with low labor rate regions: exploit the competitive potential of the available true (not faux) automation that is built on capable and controllable processes [1]. This requires products that are designed for automation. It also requires a more highly skilled, more expensive labor force to replace the labor-intensive workforce. While increasing the cost per labor hour, this model reduces the labor hour content. This results in a less expensive overall cost of labor. The paper encourages the emergence of the super engineer, a multi-skilled professional. Not a mechanical engineer or test engineer or process engineer; rather an engineer capable of handling all engineering aspects of high tech automated electronic assembly. But, alas, this is not enough, and leads to the next element in the new model. A corporate model that focuses on the assembly of the customers' products and not on technical disciplines or departments within the organization. A radical flattening and restructuring of the traditional manufacturing organization, a vestige of the Henry Ford division of labor and assembly line model, is implemented to significantly reduce the overhead that the direct labor has been called upon to absorb. The new model replaces all departments and their management by just two groups: small, cross-skilled product teams and a leadership group. The leadership group serves the product team as an enabling function, providing the team with the skill sets and tools they require for success. The paper concludes with the final element of new model. Creating an educational environment that serves the needs of the new model. With an operational organization consisting of a small number of almost all multi-disciplined engineers, a holistic and practical approach to engineering education is required to create a workforce that is intelligent, well-rounded and real-world based – one with exceptional critical thinking, problem solving and team oriented skills – one that is well versed in the physics, process, price and politics involved in successfully assembling high tech electronic products. The paper suggests that an educational framework built on the principles of Concurrent Education [2] would provide these skill set requirements.