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Is It Realistic for an American Manufacturer to Raise Performance by Increasing U.S.-Based Jobs?

This article was originally posted on the Baldrige Blog. Guest blog post by Christine Schaefer

The 2013 Baldrige case study features a fictitious, small, manufacturing business, Collin Technologies. The sample Baldrige Award application of Collin Technologies is being used in training for the 2013 Board of Examiners, for example, to learn about the 2013–2014 Criteria for Performance Excellence. Beyond Baldrige training objectives, however, the new case study may provide food for thought and an example for manufacturers considering potential benefits of growing in ways that add U.S. jobs. The shifting business model of this make-believe organization might be seen as reflecting developments in U.S. manufacturing today that could eventually benefit American workers and the economy at large.

Collin Technologies depicts a Nashville, Tennessee-based manufacturer in the interconnect industry. Printed circuit boards and rigid-flex circuits constitute 35 percent and 40 percent, respectively, of its current product mix, which is necessarily changing as the company’s vision is to “lead circuitry innovation for the future.” As the application states, “Multilayer printed circuit boards represented the major share of products until 2008, when the need for smaller, lighter solutions increased.” Collin is also a growing provider of contract research and development services—now 25 percent of its business. Those new jobs are based in Nashville laboratories that expanded in 2006.

Collin Technologies is considered a small business under Baldrige Award eligibility requirements because it has a workforce fewer than 500 strong. Like many real-life U.S. manufacturers, Collin decided to outsource some fabrication work to overseas plants years ago, evidently based on cost considerations. As the application states under strategy development, “the original business model was one focused on fabrication of circuitry, including assembly. The business model and work system were modified when it was no longer economically feasible to retain in-house assembly and it needed to be outsourced. That change led to the qualification of the two [overseas manufacturing] partners.”

However, in recent years, the organization—which has a mission component to “sustain society and the environment”—saw that it could benefit by shifting its strategy and innovating its business model. As stated in the case study, “As Collin grew in its understanding of environmental sustainability, it recognized an opportunity to change the business model to be more R&D-intensive and also to develop fabrication processes for sustainable manufacturing.” And it states, “This long-term shift will reduce the potential unfavorable impact of manufacturing operations.”

Two Atlantic cover stories last year spotlighted reasons some U.S. manufacturers have decided to bring back or keep jobs in the United States. These included rising labor costs in some developing countries. In addition, as this December 2012 article illustrates, in-sourcing can reduce the difficulties and costs of communication among supervisors and engineers with plant workers, so that they can continually improve the design of high-tech manufacturing processes in order to enhance product quality or reduce costs. U.S. companies also need to protect valuable intellectual property in a competitive and sometimes hostile environment. And those whose products require advanced engineering, such as nanotechnology, may find it beneficial to locate manufacturing jobs in the United States in order to leverage highly skilled workers, as described in this January/February 2012 article.

In light of some of these factors, it’s easy to see the potential benefits to Collin of its long-term shift to both expand R&D services and develop manufacturing processes that minimize environmental impacts. Perhaps such a company would find it in its best interests not only to continue growing its U.S. workforce in R&D laboratories but also to retain or expand its proportion of U.S-based factory jobs for producing increasingly sophisticated technologies. Collin may find it easier to ensure that high environmental standards are met and to manage complexities in “sustainable manufacturing” processes when those are not conducted abroad.

So how has Collin Technologies been performing as it has added U.S. jobs? The company’s results data on product quality (its “primary indicator of process effectiveness”) show current performance matching or surpassing that of its best competitor. Its customer survey results “indicate levels matching or exceeding benchmarks for overall and the Aerospace and Contract R&D business segments in recent years.” Collin also shows sustained improvements in recent years on a key measure of earnings before interest, taxes, depreciation, and amortization. And it reports beneficial trends in financial results for gross margin and return on net assets, described in the application as indicators of profitability and shareholder value, respectively.

Is Collin Technologies realistic? Much of what I’ve read lately inclines me to believe it is—and frankly, as an American, I want to believe it is. What do you think?

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