In the past, Chicago, Illinois was number one in the manufacturing of radios, telephones, household appliances, industrial machinery, musical instruments, steel, and tool/die and mold making. What happened to those once-thriving, robust industries is a study in gross mismanagement at the corporate, state, and federal level.

The television industry is a classic example of what went wrong then and what is still going wrong today. In 1970 all of the TVs sold in the U.S. were manufactured within 200 miles of Chicago. None are produced there today.

Giving the electronics market to Japan

In the 1950s Japan was a leading source for low-cost manual labor. American companies began producing simple assemblies in Japan. The Japanese progressed to locally producing the components for these assemblies. It was a small step from there to producing a whole TV in Japan. Shortly thereafter American companies moved their R&D operations to Japan to be near the manufacturing and to further reduce cost. While this was happening, the U.S. manufacturers were teaching the Japanese manufacturers how to produce and market their own TV sets.

By 1976 only 6 of the original 34 U.S.-based TV manufacturers were still in business. These survivors petitioned the U.S. Treasury Department to investigate charges of Japanese companies "dumping" (selling at less than manufacturing cost) TVs in the U.S. market. Nothing came of this petition.

In retrospect corporations failed to exercise good judgment in managing their businesses and their markets. They literally gave the TV and much of the rest of the consumer electronic market to the Japanese. The Federal Government was also negligent in failing to protect important markets in which America was a world leader. Another generation of corporate managers and government leaders are now repeating the same shortsighted mistakes in other Asian nations.

As Japan transformed itself into a manufacturing and exporting powerhouse, Americans began to wonder how they had done it. Fortunately, there was someone who could explain the Japanese method. In 1947 the U.S. government sent Dr. W. Edwards Deming to Japan to help in that country's recovery from WWII.

By 1950 Deming had finalized his 14-point theory of good management. The Japanese eagerly adopted the Deming theory, but American corporate managers were not interested. In 1980 Deming appeared on national television presenting a comparison of American and Japanese management styles. From then until his death in 1993, he was in constant demand as a consultant and seminar teacher. These well attended dynamic, no nonsense seminars concentrated on his 14-point theory for corporate management, with a good dose of the importance of quality and common sense personal training and management.

This was the beginning of much needed improvements in the quality of American products. Deming's message was powerful. These seminars and the publicity surrounding them caught the attention of much of corporate America. Many improvements resulted from Deming's teachings.

Unfortunately, not everyone saw a need for change. After all, America was a world leader with the largest economy. Many saw no need for an 80-year-old man's opinions on how to manage their companies. Others adopted only those parts of Deming's 14 points (link to Deming's 14 points) that suited them. They rejected those programs that were difficult to implement or that did not promise a quick return on investment.

The failure to adopt all 14 interrelated points did not produce the results achieved in Japan. It did, however, create a costly self-serving quality assurance bureaucracy that once in place was difficult to manage or eliminate.

OEMs love JIT

One of Deming's concepts that was widely accepted by Original Equipment Manufacturers was the idea that costs could be reduced and profits increased by keeping inventory to an absolute minimum. This realization led to what became known as just-in-time delivery or JIT. This new procedure, in effect, transferred the cost of maintaining an adequate inventory from the OEM to their suppliers.

This also dictated the molding of smaller quantities while ignoring the fact that injection molding is more efficient with long production runs. The need for short runs led to the development of quick mold-changing equipment. Injection molders were expected to also deliver those smaller quantities as needed. In many instances this was more than once a day. The added cost of these changes was, of course, born by the suppliers.

Original Equipment Manufacturers fell in love with JIT. It eliminated the difficult and mistake-prone task of estimating production requirements two or three months in advance. They could now place orders when the parts were needed without making any long-range projections. The JIT procedure worked better in Japan, where OEMs established mutually beneficial partnerships with their suppliers. In the U.S. there is a more adversarial OEM-supplier relationship. This led to wide abuse of what could have been a good procedure.

Another example of this mismanagement and corporate bullying is the case of a Cleveland-based OEM that moved its manufacturing operation to Mississippi in order to escape the high cost of doing business in Ohio. One of that company's injection molding suppliers was located 74 miles away in Youngstown, Ohio. That molder was told that in order to continue as a supplier it would need to establish a molding operation near Meridian, Mississippi. This was justified as necessary for good face-to-face communications and JIT delivery.

At about the same time that OEM started purchasing molds in China. A couple of years later it was molding its parts in China while continuing to assemble its products in Meridian. There is a high probability that it will eventually have complete products manufactured in China.

The OEM that couldn't cope with a supplier being 890 miles away in Youngstown wound up doing business with a Chinese molder 7630 miles from Meridian. It is unlikely that the managers who made these decisions ever gave any thought to how unnecessary it was to coerce their Youngstown injection molder to set up production in Mississippi.

Fortunately, the people that set up the molder's new plant near Meridian liked living in a rural community. They also found the winters in Mississippi to be more people-friendly than the cold ones in Ohio. As the volume of work from their original customer declined, they scurried around and found other customers. Ironically one of those new customers was a transplanted Japanese car company. At this point the Mississippi molder is growing faster than its parent back in Youngstown, Ohio.

About the author: In his regular column, Glenn Beall of Glenn Beall Plastics Ltd. (Libertyville, IL) shares his special perspective on issues important to design engineers and the molding industry. You can reach him at [email protected].