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Global Sourcing Spotlight: Don’t Be Afraid of Global SourcingThe Henry Ford Division of Labor Production Model
May 31, 2016 | Tom Borkes, The Jefferson ProjectEstimated reading time: 2 minutes
Last month, in my inaugural column entitled, "The Importance of Being Ernest (Educated)", I identified U.S. academia as “the emperor with no clothes” because of their self-congratulatory nature—reveling in buzz acronyms like STEM, and suggesting that decades of a continually widening gap between academic preparation and industry needs in high-tech electronic product assembly has been magically closed just by talking about the “new religion,” when, in actuality, little has changed.
I went on to talk about the need to complement an undergraduate engineering curriculum of primarily "learning for learning" with a commensurate dose of “learning for earning.” Our industry has failed to challenge the “emperor” since our industry's domestic competition has been faced with the same education level of employees that they hire out of school.
However, I indicated that the competitive landscape over the decades has changed in several important ways, as we have continued to tolerate the ill-prepared entry-level employee:
1. Low labor-rate global competition
2. The need for high engineering skill level employees to develop and maintain the leading-edge automation needed to reduce labor content as a way to compete with low labor-rate dollars. In other words, everything else being equal, if your direct labor rate is 10x more than your competition, but you find a way to reduce the labor content (labor hours) of a particular product by a factor of 10, you have removed the low labor rate competitive advantage—assuming that the low labor rate competition isn’t able to automate as well. This rarely happens with minimum wage operators and support technicians (process “engineers”).
Since, everything else being equal, one’s labor cost is simply the number of labor hours needed to build a product multiplied by one’s labor rate (or, more accurately, one’s labor sell rate).
Of course, “everything else” isn’t equal, and "el diablo esta en los detalles!"
I concluded the column by listing a number of "core issues" that, if not addressed, will continue to have us wallow in good intentions without ever seeing a tangible improvement.
For this month, the topic is The Henry Ford division of labor production concept.
We are all aware of what the price of assembling a product is based upon:
• Material cost (assuming the assembler purchases the material);
• Number of labor hours needed for the product assembly and test; and,
• Labor sell rate in dollars per hour.
The material cost, although seemingly uncontrollable, is crucially important and will be the subject of an upcoming column in this space. However, at this time we want to drill down into the labor sell rate to see what pops up out of the ground.
Editor's Note: This article originally appeared in the May 2016 issue of SMT Magazine.
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