Strengthening Global Manufacturing with Localized Operations
Recent global events, from Brexit and the expanded use of tariffs to the COVID-19 pandemic, have presented manufacturers who depend on global manufacturing operations and supply chains with unprecedented risks and challenges. While there have always been significant benefits and advantages to expanding production and factories to multiple parts of the globe, as well as working with suppliers of equipment, materials and components in one region and assembling final products in another, recent events have demonstrated there are risks as well as rewards.
There are strategies that original equipment manufacturers (OEMs) can pursue to strengthen their ability to mitigate these risks. The goal: implement a global manufacturing platform that can respond to changing situations without imperiling customer orders, lead times or product quality — no matter where the production is done.
Southco: Developing a Local-for-Local Approach
As a global leader in engineered access hardware solutions, Southco manufactures and supplies a wide range of latches, locks, fasteners, hinges, electronic access solutions and other accessories. We manufacture and supply over 100,000 standard products for applications in the automotive, truck, networking, telecommunications, data center, computer, aerospace, rail, bus, off-highway/construction, industrial machinery, marine and HVAC industries.
Our customers in these industries are in every part of the world. We supply components woven into so many final products — automobiles, aircraft seating, lighting fixtures, data center enclosures — the world uses every day. For us to succeed and be competitive, we have to be a global company that is local everywhere we operate, serving local customers with locally made products. This is how localized manufacturing can satisfy operational needs, business requirements and preferences of each market.
Beginning in the 1990s, when Southco built its first plant outside the United States, we realized that to be viewed and trusted as a local company, it was necessary to be local. There are clear differences from region to region and customer to customer about what is considered good design, what is the right level of customer service and what the local preferences are in terms of how we supply our products to their operations.
We committed to implementing a global presence that includes sales, customer service, “Centers of Excellence” for product design and engineering, regional management and manufacturing. We have manufacturing capabilities in North and South America, Europe, India and China, and multiple design and customer support centers locations in each of these regions as well.
To effectively implement a local-for-local manufacturing strategy, we have found that facilities need to be an ideal size. This means not attempting to fit every type of manufacturing under one very large roof. When a large number of capabilities are fit into one facility, material supply, quality control and manufacturing workflows become harder to manage, and staffing becomes significantly more complex.
To create Centers of Excellence, we focus on making each facility the best it can be in its chosen manufacturing function. For example, an injection molding plant will focus only on injection molding. Parts produced by metal forming processes are made by separate facilities, so the teams in each facility can maximize the quality and productivity of those unique production processes.
With this lesson learned, we’ve also made sure to invest in local design and engineering capabilities, so we are deeply connected with customers in each region, gaining insight into that region’s design and performance expectations. It also allows us to be more responsive to product changes and customization, which is critical to the development process of the types of products we supply.
Controlling Global Processes and Quality
In order to fully localize manufacturing in the way it has been described, it is crucial to establish and maintain highly uniform manufacturing and quality processes, no matter what region or facility is performing the work.
Essentially, each of our plants has the same equipment, the same tooling, the same plant layouts and production flows and the same procedures, whether they are in the U.S., Europe, India or China. Following this approach, someone who visits our plastic injection molding plant in Concordville, Pennsylvania could be taken blindfolded to our Shanghai, China plant and not see any difference (other than language and personnel). They would see the exact same setup, the same flow of goods and materials and the same quality checking and documentation processes.
It’s important to note that creating these kinds of uniform plants globally includes investing in the connectivity technology becoming so popular now — Internet of Things (IoT) communications and production data systems. We’ve been ahead of that curve: As an example, for more than a decade, our plastic molding production machines have been globally networked and generate real-time reports on the key metrics used to manage those machines and production lines.
If you are on the floor of our injection molding plant in the U.S., our digital Kanban screens show the status of all our molding machines in each of our plants worldwide, with easy access to details on each machine so that all lines are managed and supported in the same way. The production is local to satisfy local requirements, while simultaneously operating as a single global manufacturing unit.
Along with uniform and consistent procedures, we also insist on investing in the highest levels of training which is applied across regions. This contrasts with some other approaches to globalized manufacturing, which place production of some products and components in countries that are known for being low cost, and seek to economize by using different production processes and workers with lower skill levels.
The majority of the products we produce in each region — often more than 80% — are sold to and used by that region’s customers. We can only remain competitive if we ensure that the quality, performance and value of the products we deliver — and the people who produce them — match the quality in every region where we operate.
Achieving this kind of localized manufacturing requires significant investments in equipment, planning and management practices. At Southco, we have regional Executive Leadership teams who are responsible for the overall financial performance of their region’s operations. However, the responsibility for structure and policy for any functions is managed globally, with major decisions governing manufacturing, engineering and design, human resources, sales and business development centralized at the top level.
If a regional leader wants to change a production or engineering process, possibly because it could reduce costs in their region, we assess the approach and decide whether the change can be made globally without risking quality, productivity or customer satisfaction at all of our facilities.
To facilitate this, we have Operational Excellence personnel at the regional level and within our global headquarters. They work to audit process policy and discipline, and then propose and help guide the implementation of productivity improvements. These improvements aren’t driven by what’s best for the factory, but by what our customers in the region need us to do. At the same time, these improvements need to align with our global approach to excellence. If an improvement is successful in one location, we investigate how it can be implemented globally.
Responding to Disruptive Events
Our localized manufacturing strategy has enabled us to be much more responsive to several recent macroeconomic events that could have made it difficult to keep our commitments to customers.
For example, the exit of the United Kingdom from the European Union has continued for more than two years, creating unknown risks. There were concerns associated with our ability to serve our European customers from our U.K. plant. However, we had already invested in a new production facility in Poland — not due to Brexit, but because it was clear that we could reduce lead times and shorten delivery costs for customers in the region by locating production to that part of Europe.
Our localized manufacturing then operated almost like an insurance policy: Customers who were interested in using the parts we produced, such as hinges for an automobile armrest, expressed concern that the parts wouldn’t be available if Brexit turned out poorly or increased costs.
We were able to assure the customers that we would use the same machines, processes, engineering and customer service support in whatever region the part needed to be produced. If we needed to move tools from our U.K. plant to other plants, there would be no disruption.
With the COVID-19 pandemic, our local/global foundation has helped us respond in a coordinated and caring fashion. This event is tragic in so many ways, with families and friends losing loved ones and the economic disruption shutting down economies across the globe, the human cost has been devastating.
We feel fortunate in having financial plans in place for more than a decade to enable our company to weather major business crises. Equally important, the global, collaborative culture and business processes we’ve established enabled us to learn ahead of time from the events in Wuhan and across China, helping us prepare the rest of our plants across the globe.
We have facilities in Shanghai and Shenzhen where we needed to implement a wide range of practices: quarantining any staff that tested positive for two weeks, erecting shields and other physical materials to help prevent the spread, establishing effective social distancing practices, implementing cleaning/sterilizing practices and obtaining protective clothing for personnel.
These efforts were successful: We did not have one case where the virus was spread within our China facilities. And since we knew that these methods worked, we were fortunate and prepared to duplicate these procedures in our other operations in Europe, India and the Americas. We put technology in place to support working from home and adjusted shifts and social distancing practices in our facilities, implementing these changes ahead of government directives in most locations.
Lessons Learned and Moving Forward
Due to the evolving nature of COVID-19, it’s difficult to fully assess what long-lasting changes we will make in response to the pandemic. We know that our planning and investment in localized manufacturing equipped us with both the resources and the processes to quickly identify what we needed to do to adjust our operations without significantly impacting our ability to meet customer requirements.
One definite lesson we’ve learned is viruses don’t respect borders. So, as a global manufacturer, our manufacturing strategy must strengthen our ability to serve customers — whether global or more regional in nature — as best as we possibly can, regardless of the disruptions that arise.
Our processes and investments in localized manufacturing help make that possible. However, one final element is crucial: a culture of honesty and collaboration that makes it possible for everyone who works in an organization to trust, respect and freely communicate about what is needed for a company, whatever its size, to succeed.
Our core values have never been more important: integrity and professionalism, passion for creating customer value, diversity for our global community, inspired commitment, openness and candor, growth and results orientation. In this current situation, these values have been integral to the actions we’ve taken and are still taking.
They are also vital to the localized manufacturing strategy we pursue and continue to refine — especially integrity and professionalism. Companies that want to undertake the strategy we follow need to recognize that this approach is not the low-cost path for globalized manufacturing. It requires commitment and long-term investment.
It also requires people who embrace and support a global company culture, irrespective of their region or country. The qualities of our people and the values they share make it possible that, no matter where manufacturing, engineering, sales and customer service operations are located, we operate as one.
