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OCR for page 49
Revitalizing the Manufacture and
Design of Mature Global Products
ALVIN P. LEHNERD
Manufacturing enterprises are evolutionary entities. Over time, their
product portfolios expand through evolutionary and chronological devel-
opments. Products are usually designed and developed one at a time. As
a result, it is the exception when the designs of a manufacturer's products
embrace much compatibility, standard~z~hon, or modulanzation. The norm
is Cat product portfolios are rarely designed simultaneously; designs take
place in a sequential manner. Additionally, many current products of U.S.
manufacturers were designed and tooled years ago, yet prevailing labor
rates, manufacturing processes, energy costs, availability of materials, and
interest rates are often significantly changed from the tune of the original
product design and tooling activities. It is rare that a U.S. manufacturer
invests the time and resources necessary to rationalize production of an
entire product line to fit the changing economic environment and to take
advantage of opportunities provided by technological advance.
Manufacturers usually design for function, then redesign for manufac-
tunug; thus, two design iterations usually take place. If an enterprise wishes
to maintain or gain market share in global markets, Me firms' managers
and technical personnel must learn to combine manufactunug win in-
novation in product design. Few enlightened companies take time for a
Bird design iteration to automate and mechanize production for global
leadership in cost and value.
In many, if not all, instances, design for manufacturing is also con-
strained by Me existing resources of plant and equipment. In over words,
manufacturing engineers guide Me design decisions to match He profiles
49
OCR for page 50
50
ALVIN P. L'HNERD
and capabilities of Weir existing factories and Heir respective in-house
capabilities. In-place facilities are frequently barriers to product ~nnova-
tions. Fixed capital investments in existing capabilities are also banners
to more advanced lower-cost processes. Organizations commonly ignore
what the production cost could be if their products were not shackled to
outdated manufacturing processes and could also use state-of-~e-art ma-
tenals requiring new processes and procedures.
An additional issue is that few U.S. domestic manufacturers look at
Heir product offerings as global opportunities. This domestic myopia-
~e belief Hat the marketplace ends at He U.S. borders is a problem
for U.S. industry, and He problem will only get worse as He wodd becomes
more economically integrated.
Finally, corporate planning horizons are too short, and manufacturers
seldom ask themselves what Hey are doing to ensure their longevity in
He business. Too many managements or boards of directors do not act
unto external influences cause significant disruptions and spur the orga
~zai~on into action.
This chapter presents a case history of a 1970s program at Black &
Decker Corporation to redesign a product line for production automation
and leadership in cost and value. The program was an effort to redesign
standard products to take advantage of opportunities for using new ma-
tenals and new manufacturing and design techniques.
BLACK & DECKER
When managers at Black & Decker Corporation observed growing global
competition in He 1960s and 1970s, they decided Hat a window of op-
portunity existed to improve Heir product lines and manufacturing ca-
pability. Moreover, they decided that if they did not take time to do it
right the first time, they would never have He rime or resources to do it
over. They recognized that if they were to be a domestic manufacturer
with aspirations to do business internationally 20 years hence, Hey would
have to change the business in a way that would ensure that long-range
performance. This involved making certain irrevocable decisions.
The impetus for change came from three sources. First, it was evident
that foreign competition would increase in Black & Decker's product
markets and that this would lead to foreign participation in new, related
product markets.
Second, in the 1970s, inflation in costs of labor, material, services, and
capital goods was a serious consideration. Table 1 shows the effect of
inflation in the labor component of product costs. It assumes an ~ percent
compounded inflation rate over five periods from year 1 to year 6. To
OCR for page 51
R~VITAL17lNG MANUFACTURE AND DESIGN
TABLE ~ Impact of Wage Inflation on Labor Costs (8 percent
compounded inflation)
51
Year Hourly Wage ($) Labor Minute Value of $3.00
-
lst 3.00 60.0
2nd 3.24 5S.5
3rd 3.50 51.5
4 ~3.78 47.6
5th 4.08 44. 1
6 ~4.41 40.8
maintain constant labor-cost content in the product, one-third of the labor
has to be removed from the product between period 1 and period 5. In
Black & Decker's assessment, offsethug inflation in labor costs depended
on making better use of labor In adding value through design standard-
ization, mechanization, automation, better use of material and floor space,
and intelligent capital planning.
We thud factor in Black ~ Decker's decisions was an anticipated
continued public attention to consumer protection and environmental con-
cerns. In the power too] Industry, this attention took the form of require-
ments for double insulation of tools. The term "double insulation" refers
to He additional insulation bamer placed ~ an electncal device to protect
Me user from electrical shock if the main insulation system ever fails. In
Be late 1960s there was a strong possibility that double insulation of
domestic power tools would be legally required. Black & Decker decided
Cat the threat of required double Insulation provided an opportunity to
study the entire product line.
The program begun at Black & Decker in the early 1970s was called
Double Insulation. All consumer power tools were to be redesigned at Be
same time and would initially be manufactured in venous locations In
Norm America win standardized parts and components.
Double Insulation was Black ~ Decker's vehicle to redesign Be line
and develop a "family" look, simplify Be product offenng, reduce man-
ufacturing costs, automate manufacturing, standardize components, in-
co~porate new materials, improve product performance, incorporate new
product features, and provide for worldwide product specifications. The
program was designed to incorporate double insulation on 122 basic tools
win hundreds of variations. Of i8 tool groups manufactured by Black &
Decker, ~ contributed 73 percent of sales, 71 percent of earnings, and 91
percent of units sold. These groups were tools and drivers, jig saws, shrub
and hedge mmmers, hammers, circular saws, grinders and polishers,
finishing sanders, and edgers.
OCR for page 52
so
ALVIN P. ~ WE
Many of Black & Decker's U.S. competitors that had already Introduced
products win double Insulation had incurred a 15 to 20 percent premium
in material and labor costs in doing so. It was Black & Decker's goal to
add double insulation without increasing the cost of any new tool beyond
Hat of Be existing product. In addition, of course, Black & Decker aimed
to avoid dilution of assets or return on investment.
In this instance, Black & Decker's decision to introduce fundamental
redesign throughout its product line was motivated by the prospect of an
indushywide requirement to incorporate double insulation in power tools.
At other times, competitive product analysis plays an important role in
decisions to redesign (~e Appendix to this chapter describes a competitive
product analysis carried out by Be Sunbeam Appliance Company).
An important part of Be plan for Double Insulation was Be decision
Cat the resources of Be organization would be concentrated on this tran-
sit~on. Black & Decker would leave only a small portion of its management
and engineenug staff to carry out development efforts on new products.
The development of new products was put In abeyance, and the resources
usually devoted to development were focused on the manufacturing pro-
cesses essential to the program.
To accomplish Be engineering goals, a bridge was needed between
design engineering and manufac~g. That bridge was Be placement of
advanced manufacturing engineers in residence at headquarters to work
elbow to elbow win Be design Sneering groups. These manufacturing
+ 20 _
+ is
~ 10
-15
30 % ROI (DC~ PRE-T"
-
_~_!
__ Savings |
~ Capital 8 Revenue I
an: . :,: -.. ~
- 22.''-2'' ~
1 1 1 1
8reak~even
Cumulative
Net Cash Flow
I I ~I
1970 1971 1972 1973 1974 1975 1976 1977 1978 1979
YEAR
FIGUBE 1 Financial analysis of Double insulation program.
OCR for page 53
*~VITAnZING MANUFACTURE AND DESIGN
16
14
At
° 10
-
z
of
o
Q
8
6
41
2
r _
53
TOTAL Investment $17.t Million
_~.7
D.l. Tooling
6.0
O _
1970 1971 1972 1973 1974 1975
YEAR
FIGURE 2 Investment requirements for Double Insulation program.
engineers were involved with machine development, process development,
value and cost engineering, purchasing engineering, and packaging. In
addition to bringing manufacturing and design together at the engineering
level, the basic structure of the company was changed. Before these
changes were made, the program structure had consisted of a general
manager and two vice presidents one for manufacturing, and one for
engineenug and product development. That organization was changed,
and a new position- vice president of operations was developed to
combine manufacturing, product development, and advanced manufac-
tunng engineering under one manager.
A final general point about the Double Insulation program was the large
investment required and the long time horizon needed to reap a return on
that investment. As Figure 1 shows, the break-even point in the program
came nearly 7 years after the program began, and total cost was $17
million. Figure 2 shows the cumulative cost of the program from 1971
through 1975. Capital expenditures were $6 million. Tooling was $6.5
million, and development engineering and manufacturing technology were
$1.7 million each. It is important to note that this program is rare from
the standpoint that as much money was spent on manufacturing technology
as on development engineenug.
OCR for page 54
54
ALVIN P. ~H~VE~
Designing for Manufacture
The transition to Black & Decker's leadership in cost and value was
the result of collaborative effort among design, manufactunng, and man-
ufac~ng engineering functions. The changes in design and production
of motors are one example of this collaborative effort.
The most common component in ail power tools is the universal motor.
Figure 3 shows all Me components of such motors before redesign. Figure
4 shows the motor configuration both before and after redesign. Motors
are now manufactured automatically, untouched by human hands. The
laminations, placed at the head of the mechanized line, are stacked, welded,
insulated, wound, varnished, terminated, and tested automatically. Table
2 shows, at 1974 volumes of 2,400 pieces per hour, that the new Double
Insulation manufacturing system required 16 operators and that the old
design would have required 108 operators. Material, labor, and overhead
cost $0.51 in the old system and $0.31 in the new. The labor content cost
$0.02 in the new system, down from $0.14 in the old.
Through attention to standardization, the entire range of Black & Decker
power tools could be produced using a line of motors that vain only in
stack length Mat is, standardization froze the dimensional geometry of
... A ...... ...
..................
.~.
-. - - - ~ - ,~.-
~:~.~.~-~-~::-~.~:.:~--:~
~-
FIGURE 3 Elecmc motor field components.
:: ~ .~
. - :.:. ~ .
- ~.~ ;
.::::. : ~ .
I: at: I: ~ :: .~ i
OCR for page 55
REVITALIZING MANUFACTURE; AND DESIGN
55
FIGS 4 Motor configuration before and after redesign.
He motors in the axial profile. All motors can now be produced on the
same machines, and the only difference is stack length and the amount
of copper and steel used. As Figure S shows, designs ranged from 60
watts to 650 watts, and He only dimension that changed was in the axial
profile. The only difference in cost from He low-wattage to He high-
wattage motors was the cost of materials and machine time; labor cost
remained the same through He entire wattage range.
TABLE 2 Motor Field ~oducuon, Aerator Requirements, "d Costs
at 2,400 Units per Hour, Old and New Design and Manufacumng
Process
Old Design and
Manufacturing Process
108
New Design and
Manufacturing Process
16
Operators to produce
Cost to insulate
(materials, labor, overhead) SO.S1
Labor cost $0.14
Capital to produce $400,000
Annual savings (labor and materials only): $1,280,000
$0.31
$0.02
$1,222,000
OCR for page 56
56
.. ,.~:
,..,.,..,.-.-,..,-,..-...,.,- ~,.,~-~...:.-~.~..
Ha.
.-<,::..
I.'....
ALVIN P. LEHlIERD
,................
.~..,., _.............
,., alW: .....~.
~ . ~- _
. .....
~ ~.~
~ aft-.- --.: -- .
if. .- .-- ~ ~-~ .. . ~ .~ . ~
~-:.-..~.---.~..~ -.,..--. ~..
60
.................
_ ...............
.... .. ................. ..
................ . .. ~ ~ ~ . ~ ~ -. ~
. ~- ~- ..... -.
..:.~:-~.:.Y-.~-~.-.~..-.:...~-'-~...~::... ':....:: :..~
.--1'~.~..-.~-.-.,.
--=A.:CK- I-- -a
FIGUBE 5 Motor staclc length, 60 to 650 watts.
. . .
Another effect of design for manufacture can be seen in the production
costs for the armature of the motors. As Table 3 shows, four times as
many operators would have been needed to produce armatures under He
old system as under the new system at a constant production volume. The
effect on labor costs was dramatic. The labor cost of the manufacture
using He new design was only $0.025 cents per unit, whereas the cost
using the old design was $0.108 per unit.
TABLE 3 Armature Production, Operation Requirements, and Costs at
1,800 Units per Hour, Old and New Design and Manufac~ng
Processes
-
Old Design and
Manufacumng Process
Operators to produce 60 15
Cost to insulate
(materials, labor, overhead) $0.26 $0.11
Labor cost $0.108 $0.025
Capital to produce $2,340,000 $795,000
Annual savings (labor and materials only): $540~000
New Design and
Manu,~actunng Process
OCR for page 57
R~VITALlZING MANUFACTURE AND DESIGA'
The Results of Double Insulation
57
The Double Insulation program worked for Black & Decker. It reduced
production costs, created opportunities for profitable vertical integration,
increased market share, and improved the company's capability for new
product development. Each of these changes is discussed furler in the
following sections.
Cost Reductions
Cost reductions due to We Double Insulation program came mostly from
labor savings, and Me balance came from reduced factory overhead, ma-
tenal savings, and savings from standardization of parts and modulan-
zation. In 1976 Black & Decker reviewed the program and compared
existing equipment and labor costs with the capital equipment and labor
costs that would have been required for the 1976 volume without the
Double Insulation program (see Table 41. If the company had not camed
out this program, estimated 1976 requirements for motor manufacture
would have been nearly 600 people whereas the new system required only
171. That is a labor cost difference from $6.4 million down to $1.8
million-of $4.6 million per year. The capital investment for the new
system was higher Man simple capital replacement-$4.6 million instead
of $3.0 million but with labor savings of $4.6 million per year, the
payback on Me investment was 4 months.
In its 1974 annual report, Black & Decker published its assessment of
TABLE 4 Comparison of Labor and Capital Requirements for Electric
Motor Production, 1972 and 1976 Volumes, Old and New Designs
1972 Volume 1976 Volume
Workers required
Old design 242 596
New design 86 171
Annual labor cost
Old design $2,700,000 $6,400,000
New design $ 900,000 $1,800,000
Annual labor savings 51,800,000 $4,600,000
Capital costa
Old design $1,300,000 $3,000,000
New design $2,300,000 $4,600,000
Capital cost difference $1,000,000 $1,600,000
Payback 1.25 years 4 months
.
aIncludes floor space at $201sq. ft.
OCR for page 58
58
Baslc Drill Price (U.S.)
. :: ~.:~::~,
tS18.95?
:..'
19!;8 1973
talc Jig Saw Price (U.S.)
~-50 ·,i.:.§
....
,:::::;
,.~"
:: .
1958 1973
ALVIN P. LFHNERD
Baslc Sander PrIce (U.S.)
5~
1958 1973
Baslc Circular Saw Price (IJ.S.)
::::.::::
.~ S69.50 .~
1958 1973
FIGURE 6 PriCes, 1958 and 1973, Of TOUT basic hand power tools.
Me effect of dais project on four basic power tools (Figure 61. In current
dollars, Black & Decker's power drills, for example, were $10 cheaper
in 1973 than Hey were in 1958.
Figure 7 shows substantial reductions in the real cost of Black & Decker's
products. The constant~ollar cost of products A, B. and C dropped by
47, 62, and 5S percent, respectively. The company was able to produce
each product at an almost constant current dollar cost despite steady in-
flation in materials and labor costs. For Black ~ Decker's pricing position
in the marketplace, We relevant comparison is between the top two lines
on each graph, which show the difference, in current dollars between
manufacturing costs wig and without Double Insulation.
Increased Vertical Integration
The cost and value leadership permitted unprecedented low prices to
the consumers and thereby expanded Black & Decker's market share and
increased household penetrations of power tools. The expanded volume
resulted in opportunities for cost-effective vertical integrations. Examples
include:
OCR for page 59
RE: VITALIZING MANUFAC7UR~ AND DESIGN
59
· Use of plastic materials grew from thousands of pounds per year to
millions of pounds per year. Black & Decker's molding facilities were
able to justify railcar bunk shipment of uncolored plastics resulting in
a cost advantage of 5, 10, and sometimes 15 percent per pound. The
coloring of plastic compounds at He molding machine reduced in-
ventones, provided instant response to color changes, and eliminated
material handing.
· The standardization of gears, and design revisions that allowed the
change to spur gears from bevel gears, permitted the use of gears
made from powdered metal. This change eliminated the need for gear
cutting and bobbing, heat treating, and gauging. These activities all
contributed to high capital cost, high labor cost, and inefficient use
of material in production. The volumes were large enough to pelt
vertical integration of fabrication of powdered metal gears.
Before the Double Insulation program, 29 percent of the total cost of
a drill was in the cost of a purchased chuck. Production volumes,
again, coupled with a modern state-of-art processing system enabled
backward ~ntegrabon into chuck manufacturing at reduced costs of
about 40 to 50 percent.
Standardization of bearings, switches, cord sets, cartons, fasteners,
and so on resulted in component volumes high enough to justify seeking
sources on world markets for the best pnce.
The "inflation offset" idea proved to be recursive in Cat low production
cost permitted low sales pnce, which increased unit sales, fueled vertical
integration, and Archer reduced costs.
.
.
Competitive Performance ants Market Share
In Be U.S. market, Black & Decker's competitors in consumer power
tools were caught absolutely flat-footed. Their product designs and manu-
facturing processes were costly, and in an attempt to continue to compete
Hey tried to match Black & Decker pnces. This diluted their profitability
and collapsed Heir ability to redesign to match Black & Decker. hn the
resulting shakeout in the market for consumer power tools, Stanley, Skil,
Pet, McGraw Edison, Sunbeam, General Electric, Wen, Thor, Porter Ca-
ble, and Rockwell all left He consumer market. Sears Roebuck and Co. was
able to stay In the domestic consumer market with Black & Decker.
In He European market, consumer power tools were much more ex-
pensive because He tool offerings were different. European tool producers
provided a power driver in He drill configuration, but all other power
tools-sander, circular saw, hedge trimmer were sold as attachments.
The availability of new low-cost single-purpose power tools enabled He
OCR for page 60
60
~0
to
to
cat 1~5
_
1.0
Cl)
o
c'
0.5
FIGURE 7(a)
25
2.0
o
~ 1.5
l
o
° 1.0
o
FIGS 700)
ALVIN A. [FHNERD
,2.46
2.5 - Product A
. _
Do Nothing ~ Current S
Vs.
Standard Cost ~ Current $
Vs.
Standard Cost --1967 S
Do Noth= -
-
-
Current S
1
1968 1970 1972 1974
YEAR
Product E'
Do Nothing -- Current S
Us.
Standard Cost ~ Current S
1s67s
vs.
Standard Cost --1967 S
Do Nothing ~ Gunent~
-
-
-
1 1
1968 1970 19721974
YEAR
,1.30
1
-
-
1
1976 1978 1980
0.53
~ 2.46
Current S
1
0.94
0.38
1
1976 1978 1980
OCR for page 61
R~VITALlZl~G AlANUFACTU~ AND DESIGN
25
2.0
-
n
~ 1
It
o
° 1.0
o
0.5
61
Product C
Do Nothing ~ Curtsy S
VS.
Standard Cost ~ Current S
_
_
Vs.
Standard Cost-1967 S
Do Nothing -- Current S_'
A ~
ARC
.
O
-
/
-
-
Current S
_
-
-
J
-
-
J
i' 2.46
~ 1.12
1976 1978
I ~I
1980
1968 1970 1972 1974
YEAR
FIGURE 7(C)
FIGURE 7 Product cost trends ~ current dollars with and without Double Insulation and
product cost trend win Double Insulation in constant 1967 dollars for three products,
1967-1980.
consumer to el~ate the inconvenience and performance compromise of
attachment technology. Black &Decker performed well throughout Europe
as the new tools both greatly expanded Black & Decker's market share
and increased household penetration.
Impact on New Product Development
Another benefit of Black & Decker's efforts was a substantially improved
ability In product development. As new product concepts emerged, much
of He work in design and tooling was eliminated because of Be stand-
ardizabon of motors, bearings, switches, gears, cord sets, and fasteners.
Design and tooling engineers working on a new product had only to concern
themselves with Be "business end" of Be product and to perfect its intended
function. New designs could be developed using components already
OCR for page 62
62
ALVI]VP. HERD
standardized for manufacturability. The product did not have to start win
a blank sheet of paper and be designed from scratch.
As products reached their maturity and had to be dropped, massive
write-offs and scrapping of tools and equipment were avoided because
Here were few special-purpose tools or equipment. This flexibility allowed
marketers and managers to pivot quickly and avoid being tied to a dying
product because they could not afford the wnte-offs.
In short, me pace of new product development and product retirement
was greatly accelerated. Products could be introduced, exploited, and
phased out with minimal expense related specifically to Be decision to
develop or retire a product.
SUMMARY AND CONCLUSIONS
In accomplishing the dramatic cost reductions though the Double In-
sulation program, the attitudes of the management were extremely im-
portant. Black & Decker management had a target of 15 percent compounded
growth rate, and they wanted to remain independent and to service world
markets. To do these things, the management focused not on marketing
or financial manipulation, but on cost and value leadership in the industry.
The management, as a team, projected how a successful program of this
type could affect the marketplace and had the courage and tenacity to see
it through. Black & Decker was also fortunate in having a large amount
of latent talent: Many ordinary people proved capable of performing ex-
traordinary tasks. Win pricing and promotional strategies, the corporation
was able to provide enough grown with the product improvements to
avoid either reductions or expansions of its labor force.
Black & Decked experience with the Double Insulation program shows
the potential benefit of aggressively evaluating Be design and production
of "mature" manufactured products. Considered in relation to developed
global markets, advances in matenals and manufac~.ng processes provide
opportunities for redesigning products to decrease the cost and increase
Be quality of manufactured goods.
Although Be success Cat Black & Decker had with power tools may
not be replicated in over industries, the principle of redesign and retooling
for cost and value leadership In global markets can provide a focus for
other manufacturing firms. It is a valid approach to achieving global
competitiveness in manufac~nng. By this means, U.S. films can design,
develop, and manufacture world-class products in the United States and
at the same time achieve leadership in product value.
OCR for page 63
REVITALIZING MANUFACTURE AND DESIGNS
63
APPENDIX
Competitor Analysis by Sunbeam Appliance Company
~ 1982 Sunbeam Appliance Company launched a program aimed at
capturing at least 30 percent of Me worldwide market share for the steam/
Try iron In markets they wished to participate in. The first step was to
assess global production capabilities and me~ods. Sunbeam obtained
samples of competitive products from around the world for analysis of
materials and labor content estimated in time, not dollars. Components
were reviewed and estimates of production costs were developed for aD
Of the designs. After this material was puBed together, project management
convened a 2-day review for Sunbeam engineers from Australia, Germany,
England, Canada, Mexico, and Me United States to tank over what had
been uncovered In this global product evaluation.
That analysis revealed some interesting aspects of Me design and man-
ufacture of steam/dry irons around die world. The number of parts used
In the product ranged from a high of 147 parts to a low of 74 parts. The
number of fasteners ranged from 30 to 16, and We number of fastener
types In tony one design ranged from 15 to 9. Sunbeam's existing product
used 97 parts win 18 fasteners in 10 configurations. Reducing the cost
Of blat design, incorporating evening learned from composite design,
yielded a design which had 73 parts, 13 fasteners, 7 types.
Design Engiwing
DrNes Down Part Count
80
70
-
-
o
60
_~:B1
50 (
40
.~
3.50 4.00 4.50 {;.00 5~50 6.00
MATERIAL & LABOR COST (S)
Part
Count Cost
A ~73 5.38
A2 68 4.58
B 5.59
B 4.44
C 74 3.93
.. ,., i . ~... .....
. :. A3 .:. 52 ~ 3.75
................... ~
Design ~ Process Engineenog
Dnve Down LAM Costs
4.
V - lea Integration Dnves
Down l&M Costs
FIGURE A-1 Relationship of part count to material and labor cost per iron.
OCR for page 64
64
ALVIN P. HERD
To gain a significant share of Me market, however, it was necessary to
leapfrog existing products and come up win a design win significantly
lower cost and complexity over competitive offenrlgs. Such a design was
developed, win 51 parts and 3 fasteners in 2 configurations. Figure A-1
makes We point that diving down the part count also drives down cost.
Although reducing the part count entails a considerable effort in design
engineenng, effective design and process engineering will drive down
labor and material costs.
The result of that effort was a composite design that would be Me best
of ad of Me products collected win attention to what Me product would
cost if Me design were used throughout Me world and compatibility were
maintained. The new design is substantially cheaper to produce clan either
Of Sunbeam's existing designs. The product was launched in 1986.
Representative terms from entire chapter:
power tools