Once again we’ve come across a great example of a company that knows how to be globally competitive from U.S.-based factories, even in a relatively low margin industry. No chasing low labor costs around the globe, no complaining about trade issues, currency issues, or the lack of government handouts. Just good old fashioned lean manufacturing excellence, looking inside to be the best you can be. Today’s example is Sam Medical Products in Oregon.
Sam Medical has been around over twenty years, making an innovative splint system and eventually branching out into several related products.
The Scheinbergs began making splints in a small shack in Yachats. Each splint took four minutes to make.
Not too shabby for working out of a shack. Over time demand increased, but instead of looking overseas, they found a better way.
Through an Oregon grant, the Scheinbergs learned about Lean Manufacturing, the same technique used by the Toyota production system. It now takes 6.5 seconds to make a splint in the Scheinbergs’ factory. They produce 5,000 splints a day.
Four minutes down to a few seconds. That pretty much offsets any labor cost advantage from moving overseas, not even considering the cash that would have to be sunk into inventories floating on the high seas. That is the value of knowledge and creativity… something not found on a traditional P&L or balance sheet.
It really is a global business:
Charles Norman, shipping manager, said 20 to 40 boxes go out a day from the factory to South Africa, Australia, Austria, Canada, United Arab Emirates and Japan, among other places. The quantity shipped by Sam Medical Products helped lead, in part, to establishment of a FedEx operations center in Lincoln County.
But here’s where I have the most minor of problems.
With local FedEx air service, Polliack explained shipping is faster with a later pick-up time, allowing for more production time.
Huh? Last time I checked, the fact that there are 24 hours in a day, every day, is set by the Earth and the Sun and probably at least one deity, not FedEx. Yes we know what they really meant, but there are numerous ways to accomodate shipment cutoff times.
Let’s get back to what lean means to Sam. Quality and local control, which are interrelated.
Scheinberg said, "Quality is a big deal for us. If something doesn’t function we want to know, and we’re grateful to customers to let us know." This emphasis on quality is almost an obsession as Sam and Hyde recall that a customer in Australia claimed a pelvis sling didn’t function. The factory tested all 2,500 slings in inventory and all of them worked. "They don’t have that option in China. There’s a culture in our country that lost that ability, they don’t control manufacturing, they’ve lost ownership," said Cherrie.
They just hit on one of the other hidden costs of outsourcing: the risk of a problem being found… while a few thousand containers of product are floating on the ocean. Local control gives a company the opportunity to have minimal inventory and the ability to find, analyze, and disposition a potential problem within that minimal inventory, immediately. Local control means a deeper assurance that all aspects of production are occuring exactly right.
That’s another value not easily found on a traditional financial report, but one that Sam Medical Products understands. Apparently their financial acumen exceeds that of many multi-billion-dollar corporations… such as Mattel.