Ugh... October was BAD

I think we all knew this.

NEW YORK (Reuters) – U.S. factory activity contracted sharply in October, falling to its lowest in 26 years as the financial crisis ravaged the world's largest economy and its trading partners around the globe.

From the Institute of Supply Management:

(Tempe, Arizona) — Economic activity in the manufacturing sector failed to grow in October for the third consecutive month, and the overall economy concluded 83 consecutive months of growth, say the nation's supply executives in the latest Manufacturing ISM Report On Business®.

Amazing that we had 83 consecutive months of economic growth. It makes the 84th the more striking.

Plant Closing #5

The housing downturn claims another factory:

It's not merely that Shaw Industries Group Inc.'s Plant 76 is the economic lifeblood of Trenton and Dade County, its 440 good-paying jobs make it the county's largest private employer. The factory has been a constant here for some 40 years, changing hands from time to time but always providing economic certainty: It was where people went to work after high school, and the only place many ever worked.

In towns like Trenton there are often only one main plant. Sometimes they have survived through the years by leaning the operations enough to remain competitive. The recession was too much to withstand.

Demographer Johnson says small towns that lose their main employer often fade
into obscurity, but he believes Trenton will endure: "Their saving grace is
their proximity to the Chattanooga metro area. A lot of these people are
certainly going to find jobs there."

Hope.

Melamine - Tainted Food. How Could it be so Pervasive?

Have you followed the current melamine scandal from China? The first scandal involved pet food.

Melamine was first discovered in food during the pet food scandal in 2004 (and again in 2007), which caused the death of many animals in the United States.

The new scandal started with baby milk contamination that hospitalized a bunch of kids.

The scandal broke on 16 July, after sixteen infants in Gansu Province who had been fed on milk powder produced by Shijiazhuang-based Sanlu Group were diagnosed with kidney stones.

The milk was contaminated with melamine. What is melamine?

Melamine is sometimes illegally added to food products in order to increase the apparent protein content. Standard tests such as the Kjeldahl and Dumas tests estimate protein levels by measuring the nitrogen content, so they can be misled by adding nitrogen-rich compounds such as melamine.

In other words, melamine is sometimes added to milk to make the milk appear to be a higher grade or to allow diluting to stretch the milk and earn more profit. (Same reason it was added to pet food)

Over the course of a few weeks melamine was found throughout the Chinese milk supply. Then it was found is many products that contain milk in China. Then it was found on products outside of China that contained Chinese milk products.

Now.... it seems meat may be contaminated.

In an AFP news report, Zhang Zhongjun, programme officer with the Food and Agricultural Organisation, said China’s agriculture ministry was investigating the possibility that melamine had been added to animal feed.
“If the feed is found to be contaminated, then there is the possibility (that pork, chicken, fish and beef could also be contaminated),” he said.
Zhang believed that feed producers could have laced their products with melamine to falsely boost protein content, similar to the methods of milk producers.

The question that I have is, how can melamine be so pervasively used, by so many companies, and so many employees, and there is no whistle blown? How likely do you think it would be for some illegal or immoral practice to be conducted in your plant without someone alerting authorities?

At the Mercy of Design

How often do yo think about how linked your factory is to the products that you sell? Sometimes sales are simply due to the overall economy, as they are right now. However, your company is always fighting for market share from your competitors. the design of your product matters. Brandweek.com has an in-depth article about something called Design Thinking.

When Whirlpool launched its KitchenAid Series II line of appliances in 2007, the company was taking a bigger-than-usual gamble. Whirlpool's designers didn't just imbue the Series II—a refrigerator, microwave, range, oven and dishwasher—with the kind of sleek, industrial look popularized by TV foodie shows; the appliances shared distinctive design touches like responsive black touch display panels and bow-shaped chrome handles—clear indications that each appliance was meant to be part of a set.That may sound simple, but in fact it broke with industry orthodoxy. Conventional wisdom holds that consumers buy stuff like this piecemeal, most often as a "distress purchase" when the old one breaks down. So why did Whirlpool spend a lot of its own money to create a uniform look when most consumers wouldn't care?

The company's approach to advertising was similarly counter-intuitive: The brand advertised the whole line at once. Usually, ads for refrigerators come in March and campaigns for ovens hit in late summer.

Because the design is closely linked to life on the shop floor it is good to know some of the current thinking about best practices. Hopefully, the design activity has some linkage to the manufacturing environment.

What Operation Do You Work In?

This is a dairy plant.

Let me know what part of the plant operation you work in.

I am currently working in a mix of several areas, mostly focused on assembly.

How about you?

Manufacturing Operations

• Processing

• Assembly

• Material Handling & Storage

• Inspection & Testing

• Coordination & Control

Textile Labor Costs

Here is some interesting data about the costs to produce textile goods in various countries. The data is a little dated. From EmergingTextiles.com:

...lowest labor costs are still in Bangladesh, at 22 US cents per hour or five times lower than in China's richest coastal areas.
Labor costs include wages, social charges, and a series of bonuses.

$0.22 per hour?

In addition to Bangladesh, Cambodia, Pakistan and Vietnam are other apparel exporters taking advantage of extremely low labor costs at 33 cents, 37 cents and 38 cents per hour, respectively.

What about China?

China's lowest labor costs are at 55 cents in the country's inland and remote areas while labor costs may now reach US$1.08 in certain areas of coastal provinces.

Recent strengthening of the dollar will help US relative costs, but..... wow.

Legacy Automotive Shrinks

The current economic crisis is another blow to the US automakers. The high price of gasoline hurt large size vehicle sales. Then the lack of demand for both new and used large sized vehicles hurt the resale value of all of those vehicles currently being leased. their value plummeted. The big three had to write of billions of losses. Then the credit crisis and drop in consumer confidence hurt ALL vehicles sales.

Somehow GM and Chrysler started to discuss merging. I don't know how these things start. I suppose the big dogs sit around in the board room and toss this stuff around. Maybe Cerberus first broached the subject. There has been news leaking about discussions for weeks. Forbes writer Joann Muller wrote an article, Picking Over Chrysler's Bones, with some further details.

Only seven of the 26 models in Chrysler's lineup are likely to be retained if General Motors merges with Chrysler.... They are the Chrysler Town & Country and Dodge Caravan minivans; Jeep Grand Cherokee and Wrangler SUVs; Chrysler 300 and Dodge Charger sedans; and the Dodge Ram pickup. Together, those core models account for 56% of Chrysler's sales.

The alternative to a merger is apparently bankruptcy. Even with the better option of a merger, Muller's article details some of the expected fallout:

....up to half of Chrysler's 14 assembly plants would close, resulting in 24,000 hourly and administrative job cuts, Grant Thornton says. (About 5,000 cuts have already been announced.) In all, the company says 30,000 to 40,000 of Chrysler's 67,000 existing jobs would be eliminated.

That is darn close to 60% staff reduction.

Cartoon about the topic here.
Intersting discussion about it here: new big three; Toyota, Ford/Mazda, Honda?