James P Campbell, chief executive of General Electric’s (GE) appliances and lighting division, believes that his company is a model for American manufacturing. The reason: GE has relocated the production of some of its major product lines to the US.
For years, GE employed contract manufacturers in South Korea and China to make many of its appliances. But realising it was facing big disadvantages – currency exchange costs, narrower wage gaps, higher transportation costs, longer cycle times, quality issues and competition from suppliers – GE decided to bring the work back home.
“By manufacturing offshore, we cannot readily respond to customer needs,” says Mr Campbell. “We needed to inventory products eight weeks out compared to two weeks for products made here.”
Another issue was that contract manufacturers were gaining design, engineering and manufacturing expertise by handing these responsibilities. Meanwhile, to GE’s detriment, design and engineering skills declined in the US, compounded by the fact many engineers have retired.
“As we contracted out manufacturing, our suppliers developed those competencies by working on our designs,” says Mr Campbell. “These suppliers and contract manufacturers knock off your products and then become your competitors.”
Consequently, GE's appliances and lighting division has embraced new procedures that include greater labour-manufacturer collaboration, a new lean production approach, investment in technologies and greater collaboration with the government over regulations.
In turn, GE has brought much of its appliance production back to the US, including relocating its refrigerator operations to four sites in the country and commencing joint-venture relationships with suppliers in Mexico. “We are moving to become US-centric,” says Mr Campbell.
GE's appliances and lighting division has embraced new procedures that include greater labour-manufacturer collaboration, a new lean production approach, investment in technologies and greater collaboration with the government over regulations
The first product line to return to the US was GE’s GeoSpring Water Heater. GE used to manufacture its water heaters in China, but now it produces them in at the Appliance Park campus in Louisville, Kentucky. More than $69m was spent on building the facility to manufacture the energy-efficient hybrid water heaters at the park, a move that created approximately 400 new direct jobs and up to 1600 incremental 'green' jobs for suppliers and contract partners.
“We made the decision to build these products in Louisville because of the strong support from our state and local governments and the co-operative spirit of our union leadership and our employees at Appliance Park,” says Mr Campbell. GE's local IUE-CWA union agreed to a wage freeze through the end of the current contract in 2011 and new wage rates for new hires.
Last year, GE announced that it will also spend $194m and create 300 jobs by manufacturing bottom-freezer refrigerators, a new product line, at Appliance Park. The refrigerators are the third new GE product line to be manufactured in Louisville.
Other recent GE investments include the $93m investment for making side-by-side refrigerators in Bloomington, Indiana, at a plant once slated for closure, which will create an additional 200 jobs. The company is also investing $59m in a 'green' manufacturing plant in Decatur, Alabama, which will make top-freezer refrigerators.
Since 2009, GE has created more than $1bn company-wide in new investment and 1300 US appliance-related jobs. “This is a big commitment on the part of GE to transform the business and put us in a much different place,” Mr Campbell says.
By using metrics and lean processes, GE's appliances and lighting division has been able to reduce the number of work hours per unit. Metrics are in place for labour efficiency. “Today we are trying to become a lean and learning company,” says Mr Campbell. “Our assembly process is more modular, movable, and flexible. It is all about eliminating waste.”