There is a great article on CNBC about a guy named Doug Clark who runs a company called New England Footwear who is working on bringing shoe manufacturing back to the United States. Beyond the usual Made in the USA cheerleading, Clark makes a very, very good point. “Wow. We designed a lot of labor out there. And if you don’t need labor you don’t need China.”
He is dead on. The focus on cheap labor has made too many companies lazy when it comes to Design For Manufacturing and Assembly (DFMA). Who cares how convoluted the manufacturing process is when the people going through the convolutions make pennies per hour? Put another way, the perceived benefit from cheap labor is directly proportionate to the labor content designed into products.
The greater the attention to DFMA, the less reason there is to make things in far off third world countries, and the less concerned a company is with DFMA, the more management and accounting think China is a good place to manufacture. The lack of DFMA is, by default DFCL – Design For Cheap Labor – and examples of it abound.
Of course poor design for manufacturability– putting too much labor and too many steps in the production process – is not really a labor cost problem. Its biggest drawback is the creation of too many defect opportunities in the production process. Overly complicated production inevitably leads to poor quality – a hallmark of production in low labor cost countries where they work on things created in the DFCL mode; but management that doesn’t understand DFMA certainly isn’t capable of understanding concepts like “defect opportunities”. It isn’t covered in the accounting text books and, therefore, is not important.
DFCL isn’t just a problem for third world manufacturers – you see it in American manufacturers assembling stuff made of cheap labor components. It shows up in the form of too many fasteners, too many electrical connectors, too many of a lot of things – products made of far too many components and too many variations of similar components … all built into the product because they are cheap. And because accounting doesn’t understand the cause and effect relationship between design and supply chain cost.
On an intellectual level, most senior managers and accounting folks will nod their heads knowingly when it is pointed out that a products cost is at least 80% determined before it leaves design, and there is little production or purchasing can do to change that. But their thinking does not often go beyond the obvious costs of direct labor and material, so they think they can cheat the system by sending shoddily engineered products to far off places for production. The devil will have is due, however, and whether it is in the form lousy quality or bloated supply chains DFCL can never compete with DFMA.