Discrete Talk - Manufacturing and Aerospace

The Role of Quality Management within the Lean Manufacturing Philosophy

The Toyota Production System recognizes that managing quality is as important as managing just-in-time strategies in a Lean Manufacturing philosophy.

Quality management topics like Six Sigma, DMAIC, and Jidoka are important in the context of Lean Manufacturing because the ultimate goal is to eliminate waste in the value stream and one of the most common types of waste is the correction waste. Correction waste happens when it is necessary to work around poor quality in components or material from suppliers or it is necessary to repair, rework or scrap defective product units.

Six Sigma techniques and strategies are widely used in conjunction with Lean Manufacturing initiatives to help eliminate waste attributed to poor quality by providing the tools to focus on the right problems, diagnose the right root-cause of issues, and apply corrective action as quickly as possible. Six Sigma methodology uses statistical tools to systematically analyze processes and reduce process variations leading to better quality and performance.

Quality management requirements can be viewed sometimes as creating a burden of cost and time on the manufacturing process. The potential burden on the overall value stream should be a considered, but more importantly we should continually stress the benefits of predictable consistent quality to the entire team and identify the cost of poor quality to the overall performance of the organization.

Quality metrics are as important as throughput, cycle-time and schedule adherence metrics in our overall assessment of a Lean organization.  Metrics are needed to narrow areas that require attention for continuous improvement (Kaizen) initiatives, and to quantify the organization’s ongoing improvement achievements. We cannot improve what we cannot measure.

Quality management starts in product and process design. Concepts like Poka-yoke and Jidoka stress that the design of a product and process should eliminate the probability of error whenever possible, making the correct process visually obvious, and making any errors immediately visually obvious. Standardization, visual work instructions, and automated inspection are some of the tools used to minimize the potential for errors.

Automation in inspection, record keeping, and verification steps can relieve some of the burden of quality processes. Automation is also a double bonus because every time we can take some manual clerical steps out of the process, we are not only cutting down cycle time and labor, but we are also eliminating potential points of human error in the equation.

Statistical sampling and auditing methodologies allow us to further reduce the cost of inspection procedures by providing the appropriate quality confidence level with less than 100% inspection requirements. Automated data collection and statistical software tools are able to continuously monitor multiple processes and increase oversight as needed on suppliers and internal processes that are falling out of normal parameters. These tools greatly decrease overhead when compared to other traditional manual oversight methodologies.

Technology solutions can automate analysis in the background and alert assigned personnel automatically based on defined rules that are consistently implemented by the system. Technology can be viewed as a sidekick that is performing analysis on the side and bringing to the attention of the operator any out of control condition as soon as it is detected.

Another aspect of Toyota’s Lean philosophy is a culture of stopping to fix problems right away--the earlier the better. In order to do this we need (1) tools to help us achieve quality the first time, (2) tools to monitor processes that are susceptible to variables like environmental conditions, material variances, equipment wear and tear, or operator training, and (3) an efficient corrective action process.

Six Sigma practitioners use the DMAIC process to systematically reduce variability in a manufacturing process. Lean practitioners also refer to the Toyota problem solving methodology and kaizen workshops. All of these different methodologies can come together in a Corrective Action system to track all continuous improvement efforts. A  Quality Management System and Corrective Action System are essential to documenting and tracking the entire problem-solving process ensuring a consistent review process and a closed-loop methodology that verifies effectiveness of the corrective action or reopens the problem for further analysis. The corrective action system can be used to also track and resolve productivity problems that are not related to quality issues.

The inspection and genealogy data recorded during manufacturing is not only used for performance metrics and root-cause analysis. In regulated industries, historical data is required to allow process certification and audits. Regulatory and audit considerations are becoming more common in many industries. Regulatory guidelines from agencies like ISO, FDA, FAA, DoD, or ASME are all aimed at encouraging process control and quality assurance throughout the entire manufacturing process in order to achieve consistent quality results at the end. This general goal of the guidelines should be embraced as a goal to eliminate waste of poor quality due to deficient quality management processes.

In today’s highly outsourced manufacturing practices, it is critical that the requirements for quality management reach out to partners and suppliers.

Manufacturers have tackled regulatory requirements in the past with tons of paperwork, labor intensive validation processes, and a variety of disconnected systems and spreadsheets. Many of these old processes require double validation because manual procedures are prone to error. However, modern manufacturing and quality management systems are able to streamline and automate processes making it possible to improve productivity while enforcing compliance.

Bringing Back the Romance for Lean Six Sigma

This is a link to a blog entry I liked. Hope you like it too...

http://www.sixsigmaiq.com/article.cfm?externalid=829

Are We Giving IT Conflicting Objectives in Manufacturing?

“To innovate or not to be”― that should be the question. These days we often see CIO’s with a cost cutting agenda as a primary goal. Should the CIO be relegated to a penny-pinching job or viewed as an architect in the company’s future growth?  

Manufacturing companies are facing a major change in the business marketplace. The emergence of global markets, rapid technology changes, and better informed and more demanding customers have rewritten the rules of manufacturing. Achieving and sustaining a competitive edge today requires that manufacturing companies use information strategically to turn the new rules of the market to their advantage.

To innovate or cut cost? Can we afford to keep IT in cost-cutting mode much longer? Many manufacturing companies don’t think so. As an indicator, we are not seeing the 15%-20% declines in technology purchases that we saw during the 2001-2002 downturn. Instead we are only seeing 2%-4% declines because some companies are looking at their technology investments more strategically. A survey performed by Managing Automation for 2009 spending revealed that even though companies have tighter budgets this year, they are still spending on strategic technology to improve productivity and enable new capacity and new markets.

Many manufacturers are realizing that they cannot survive tied down by paper intensive processes in their supply chains and their shop floors. Paper-based processes that prevent quick upgrades to the product line and prevent real-time visibility of status and issues.  Manufacturers tied down by slow old processes will not be able to compete in the new marketplace.

Technology solutions are available and maturing, but the CIO needs to embrace a new role in the company. The CIO must learn about the processes required to manage processes in the supply chain and the manufacturing shop floors. These are areas that have not been traditionally supported by enterprise IT departments. 

To innovate or standardize? To customize or integrate? Do we use best-of-breed solutions or try to implement a solution with a broad footprint? Some CIO’s might favor taking the easy path and focus on one ERP vendor to provide a complete solution for their enterprise. However, we often see companies spending much more creating custom extensions to their ERP systems, and ending up with less functionality than if they would have integrated a COTS solution in the first place. Just because a solution works for the Accounting department, does not mean that it works for the shop floor and the supply chain. It is vital to spend time understanding what competencies will enable the company’s business plan and what different solutions are being used in industry and by competitors.

It is often difficult for the internal IT department to resist the urge to be creative and develop their own custom solutions. If the IT department has a history of developing custom solutions, it would be prudent to hire a neutral third party consultant to evaluate alternate solutions available commercially, like MES and MOM systems.

To optimize or centralize? Many CIOs have been cutting cost by standardizing and centralizing IT solutions for the corporation. However, these strategies might not work for the manufacturing shop floors that need to sustain 24x7 up time, provide good response performance, and not slow down the production line. It is common to install local shop floor systems with high availability platforms and integrate these to centralized ERP systems.

The IT department must work through this change of agenda and must help the company invest wisely. Efficient manufacturing and supply chain processes can be an effective competitive weapon. The CIO must be an architect and must invest in best-of-breed technology that will provide change agility, best quality, great customer support, and enable increased capacity to handle future demands.

Is Offshoring Fad Fading?

There are signs that U.S. manufacturing companies might be reconsidering the amount of work they send offshore.

Granted some companies have had good reasons for creating divisions offshore like reaching emerging markets, but many have been moving work offshore as a pure cost cutting measure. It has been a mantra among supply chain managers for the last ten years.

A recent study by Archstone, shows that many are now reconsidering and looking closer at the numbers given the volatility of oil prices, transportation costs, global economies and currencies.

In addition, during these tough competitive times companies are not just looking to cut cost, they are also looking to improve market share by improving not just price but also company image through quality, customer service and innovation. 

The recent study revealed that in the last three years, manufacturers have seen a significant increase in costs related to off-shoring manufacturing including:

·         Ocean freight costs have increased 135%, highlighting risks and cost volatility.

·         The global commodity price index has risen by 27%.

·         The Chinese Yuan has gained 18% in value compared to the U.S. dollar.

·         Chinese manufacturing wages have risen by 44%.

In addition to the rising costs of conducting business on a global basis, the study found several soft cost issues, which affect the true cost of off-shoring, including:

·         Slower Cycle/Delivery Time (59% of respondents)

·         Reduced Supply Chain Flexibility and Responsiveness (56% of respondents)

·         Lost Visibility, Coordination and Control Over the Supply Chain including Quality (50% of respondents)

·         Bottlenecks in Logistics Networks (e.g., ports, transportation) (50% of respondents)

The study found that almost 90% of the companies surveyed are considering or have begun changing their manufacturing and supply strategy and are being more and more selective in making off-shoring decisions. U.S. manufacturers have become increasingly aware of the need for a more sophisticated total cost model that considers factors such as supplier price and terms, delivery costs, operations and quality costs, customer-centric supply capabilities and other situational costs that arise.

This return to basics for manufacturers is coming at a time when we need it most as part of the economic recovery. Perhaps we start seeing more U.S. brand products that are actually made in the United States.

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Applying Lean Manufacturing 5S methodology to Information Systems

While we are going around making the plant shine with 5S initiatives in every department, why not apply some of the same principles to the information systems?

 

5S focuses on effective workplace organization and standardization.The goal of 5S is to simplify the work environment and eliminate distractions to improve quality, efficiency, and safety. The name “5S” is based on the following five Japanese words in parenthesis that begin with S: Seiri (Sort), Seiton (Set in Order), Seiso (Shine), Seiketsu (Standardize), and Shitsuke (Sustain).

 

Sort – Focuses on eliminating unnecessary items from the workplace. Review logs and reports used on the shop floor periodically and determine if they are still necessary. Remove or replace obsolete manuals collecting dust on the shelves. Use value stream mapping to identify wasteful steps in the information flow, red tag them and start initiatives to eliminate them. Application screens used by the mechanic on the shop floor should remove information that is not really needed to perform the job.

 

Set in Order – Organize the flow of information on the shop floor along with production. Designate areas for charts on bulletin boards, label areas for manuals. Minimize paperwork that travels with the product and standardize how identification and information will be attached to the product or transportation bin. Procedures should be simple and clearly identify the next step. For online information, make sure that the mechanic’s screen is simple with clear menu choices for online documentation required to perform the job.

 

Shine – Post responsibility and schedule for inspection and update of logs and manuals used on the shop floor. Periodically audit procedures with shop floor personnel and update procedures if required. Everyone on the shop floor should participate and provide feedback. Everyone should be proud of the procedures used on the shop floor or should be supporting initiatives to improve the procedures.

 

Standardize – Derive standards, patterns and models for best practices that can be applied to other areas. Establish a central shared repository for these best practices with change control and governance procedures.  

 

Sustain – Focuses on developing a methodology for sustaining the improvements made using the first four steps. Take extra effort to publicize the standards published and the achievements of different areas. Motivate initiatives for knowledge transfer to improve other areas and maintain a cycle of continuous improvement process throughout the company.

 

Should we apply 5S at the office, at home? Let’s not get carried away :-)

 

References:

 

I’m collaborating on a new guidebook that will be published by the MESA organization: “MESA
Lean Manufacturing Strategic Initiative Guidebook.” Please visit http://www.mesa.org for more information on this guide which is full of great process improvement ideas. Joining the MESA organization is easy and gives you access to great information.

 

For more information on 5S visit: http://en.wikipedia.org/wiki/5S_(methodology)

 

 

Root-Cause Analysis – Learning From Our Mistakes – Part 2

Can we spend too much time dwelling on the past? Is it worth it? If we can learn from it and avoid repeating the same mistakes, it is definitely worth the effort.

A few months ago, I listened to a great presentation by Brian Hughitt from NASA’s Office of Safety and Mission Assurance. His presentation left on impression on me and I would like to share some highlights with you. The story is another testimonial to the importance of finding the true root-cause of a problem. However, this story is not about NASA, its about Boston’s Tunnel Project.

Boston’s Central Artery/Tunnel Project is the most expensive highway project in U.S. history. The 7.5 mile underwater tunnel to Logan International Airport used 3.8 million cubic yards of concrete (enough for a sidewalk from Boston to San Francisco and back 3 times) and 541,000 truckloads of dirt (about 15 stadiums filled to the rim with dirt.) The tunnel has been plagued by leaks, falling debris, delays and other problems linked to faulty construction. The initial price tag was $2.6 billion and it was supposed to be completed in seven years. Instead, it took nearly 15 years and repeated cost overruns drove the price tag up to $14.6 billion.

At 11:00pm on July 10, 2006 a 1991 Buick passenger car occupied by a 46 year-old male driver and his 38 year-old wife was traveling eastbound in the I-90 connector tunnel, en route to Logan International Airport. As the car approached the end of the connector tunnel, a section of the tunnel’s suspended concrete ceiling (26 tons) detached from the tunnel roof and fell onto the vehicle, crushing its right side. The driver’s wife, occupying the right-front seat, was fatally injured.  The driver escaped with minor injuries.

The investigation of the accident revealed a history of findings and reports that should have led to earlier action that might have prevented this fatal incident.

The proximate cause of the structural failure has been attributed to the use of an epoxy anchor adhesive with poor creep resistance. The anchor attaches the hanger for the ceiling panels to the concrete roof of the tunnel. Post accident testing revealed that fast-set epoxy had been used and that, while both fast-set and standard-set epoxy performed similarly in short term tests, they differed dramatically under long term load.

                             

                            ***

Creep - Epoxy is a polymer and its stiffness is time and temperature dependent.  If a load is applied suddenly, the epoxy responds like a hard solid.  But if that load is then held constant, the molecules within the polymer may begin to rearrange and slide past one another, causing the epoxy to gradually deform.  As the deformation increases, it becomes irreversible

                            ***

Fast-set epoxy was used because it was more convenient and perceived to have very similar performance qualities. Why were the engineers working on this project unaware about the creep characteristics of the fast-set? Was it negligence by designers, suppliers, procedures, or all of the above? There is much to learn from the story leading up to this event.

The following fishbone diagram gives an idea of the wide variety of factors requiring investigation on an incident like this. A thorough root-cause investigation is a big investment, and the reality is that we cannot perform analysis to this detail on every incident. The size of the potential impact of the issue at hand must be considered and balanced with how much effort goes into an investigation. However, some companies like Toyota strongly believe that it is good to contain a problem right away and investigate the root-cause to prevent further impact and variability on the planned production process.

 

The root-cause analysis on this incident yielded some interesting findings. Let’s look at the main contributing causal factors identified by the Safety Board’s report.

The Safety Board analysis starts with the tunnel design. The tunnel design didn’t have redundancy built into the ceiling suspension. The majority of U.S. tunnels have continuous ceiling panels that extend into the concrete wall. If the hangers fail, the ceiling is self-supported. Design specifications for this tunnel did not incorporate a provision for attaching a suspended ceiling, even though it was known that one would be needed.  Consequently, the tunnel had no embedded ceiling supports. The design consultant repeatedly recommended undercut anchors versus the adhesive anchors ultimately chosen. In addition, in order to save cost and time, a change was made to deviate from the original design and use heavier pre-cast concrete panels in lieu of custom-engineered laminated lightweight concrete panels.

Failure Modes and Effects Analysis (FMEA) was incomplete. Creep was not identified as a potential failure mode. Consequently, risk mitigation measures were not implemented.

The Safety Board identified a high concern with the ICBO industrial standards. The ICBO AC58 calls for either a design safety factor of 5.33 or a 120-day creep test for fast-set epoxy. The creep test is optional even though the ability to sustain a load over a period of time is a typical requirement for almost any type of fastener.

A design engineer should be provided with all of the relevant information about a product before it is used in a safety critical application. However, no documentation was provided by the supplier specifying which epoxy formulation was being supplied, and neither the contractor nor the design consultant questioned which epoxy was used. Both assumed that the epoxy provided by the supplier was suitable. 

To support product qualification, the supplier provided an Evaluation Report (ER) which included bond strength tables specifying a safety factor of 5.33 for fast-set epoxy. Nothing in the ER tables or footnotes indicated that the fast-set epoxy should be limited to use with short-term loads regardless of the safety factor employed. A restriction for use in short-term load applications was contained elsewhere in the ER, but could have easily been overlooked.

The Safety Board learned during the investigation that fast-set epoxy had been tested for creep performance in 1995 and 1996 and had failed to meet the standard, but still qualified under the current AC58 standard.

The supplier should have made a clear distinction in all its literature between the relative capabilities of its standard-set and fast-set formulations.  It did not do so, even though before the epoxy was provided, the company had conclusive evidence that its fast-set epoxy was susceptible to creep. The Safety Board concluded that the information provided by the supplier was inadequate and misleading.

The Safety Board also found fault with the construction contractor and the design consultant for not adequately reviewing the product qualification documentation.

But the story gets even better… I mean worse…

On September 9, 1999, (seven years before the accident) a construction contractor employee installing ventilation ductwork over the tunnel ceiling noticed that several of the anchors had begun to pull out.

The finding was documented and on November 12, 1999, a proof load test was performed on one of the anchors that had shown significant displacement (9/16”).  The engineer noted that “the bolt held for a few seconds, then began to pull out with almost no resistance.

When the supplier was called to examine the anchor displacements, they seemed surprised that the anchors that had been successfully proof tested only a few months before could be failing. The fact that the fast-set epoxy was subject to creep, was apparently not considered or was not known by the representatives who evaluated the failed anchors.  Even if the information about poor creep resistance was not common knowledge, some research into historical performance testing would have likely revealed it. 

Installation problems (e.g., excessive preload) were postulated by the supplier as the cause. There was no evidence of further testing or research by the supplier. Shouldn’t a supplier be more proactive about one of their safety critical components failing?

The response from the builder, design agent, and project manager was to perform more proof load testing. The original design service load was calculated at 2,600 lb-force. After original bolt installation, a proof test was conducted at 25% higher than design service load (3,250 lb-force) and the bolts passed. After the slippage was found, bolts were proof tested at the maximum load of 6,350 lb-force and the bolts passed again. Analysis determined that the actual load would be well under that, at a maximum of 2,823 lb-force.

At this point the builder and project managers decided to proceed with repairs and move on confident that the bolts would hold based on the testing performed. They do so even though a couple of employees had raised some concerns on emails.

"You’ve noted the key piece of information that is missing.  That is the cause of the anchor failure and how the repair procedure will overcome that… We are not trying to hold up construction, we are trying to make a determination that the installation is safe…”
      Design Manager e-mail concerning response to Deficiency Report

“Glaringly absent from the Deficiency Report is any explanation why the anchors failed and what steps are proposed to ensure that this problem does not reoccur.”
      Structural Engineer e-mail reply               

The root cause for the anchor displacement was never clearly identified and surveillance monitoring inspections were never implemented.

But wait there is more…

On December 17, 2001, a quality control inspector submitted a Noncompliance Report which stated: “Several anchors appear to be pulling away from the concrete.  The subject anchors were previously tested to the revised value of 6350 lbs, all of which passed…. Reason for failure is unknown.”

At this point, it should have been obvious that the prior remedies in response to the anchor displacement in 1999 had not been effective.  This was another opportunity to inspect all the installed anchors and, more importantly, to determine the cause of the anchor displacement.  Instead, the oversight team apparently considered the continuing failures as isolated instances and took no further action to address the problem in a systemic way. Even after being presented with evidence of anchor creep, project managers and overseers failed to recognize the inherent weakness in the epoxy adhesive – a weakness that could not be overcome even with the best installation practices or the most rigorous short-term proof testing.

This type of denial and cognitive dissonance is something to keep in mind when performing root-cause analysis. Our minds can filter information that conflicts with what we might already believe, making it hard to see other alternatives.

In November, 2003, the Design Agent published Inspection Manual for Tunnels and Boat Structures.  The manual required each ceiling hanger component to be inspected visually or by NDT. From the time the tunnel was opened to traffic until the day of the fatal accident, no tunnel inspections were performed.

Post accident inspection of the suspended ceiling displayed large numbers of anchors that had become displaced (~25%), and that the displacement was so obvious that even a cursory examination would have revealed that structural integrity was threatened.
 
Investigators asked MTA officials why the inspection manual was not used. The officials stated that the inspection manual was not used because (1) a tunnel inspection database needed to be developed, (2) the inspection manual was being reviewed by the FHWA and the MTA, and
(3) MTA personnel needed time to be trained on the manual.  

It is also amazing that federal regulations were not in place for tunnels. The FHWA National Bridge Inspection Program (NBIP) mandates bridge inspections at least once every two years, but there are no similar mandates for tunnel inspections. The FHWA’s Road Tunnel Design Guidelines does not address the design, construction, and inspection of tunnels.

The result of the investigation was that the panel support system had to be completely replaced with Hilti mechanical fasteners which had to be individually proof loaded.

In summary,

The investigation of this incident yielded incredible findings. Contributing causal factors included:
• Lack of Redundancy in Design
• Inadequate Regulations
• Lack of Awareness and Documentation on Product Performance
• Lack of Adherence to Quality Assurance Procedures

What sticks in my mind the most is that even though some emails expressed a concern, the root-cause was never identified and both builder and supplier went on with their business when  the hanger anchors, a critical safety component, appeared to be failing.

When it comes to safety, we need to perform adequate FMEA, we cannot afford to focus on project dates, and we definitely cannot afford to move on without identifying the root-cause of a failure. At a minimum, surveillance inspections should have been implemented to monitor the situation.

Paraphrasing Brian Hughitt, "The study of incidents like this one, incidents of “un-quality”, helps us become better students of quality."

Root-Cause Analysis – Learning From Our Mistakes – Part 1

What does the Titanic and the Boston I-90 connector tunnel have in common? It seems that both had problems keeping things together and both suffered from lack of attention to quality assurance procedures.

These stories stand as testimonials to the importance of finding the true root-cause of a problem. We often act in haste to declare a problem addressed by implementing a patch to the problem even when the root-cause has not really been found.

Even when everyone involved has best of intentions, we still read about awful incidents that could have been avoided by following prescribed inspection procedures and resisting the temptation to favor cost cutting measures over safety concerns.

Let’s start with the Titanic…

Shipbuilders wondered for years why the Titanic sank so quickly. Almost a century after the tragic accident, we are learning more about the unresolved mystery thanks to root-cause analysis on the ship’s remains. A few weeks ago, I saw on the Colbert Show, a fun interview with Jennifer Hooper McCarty. Jennifer is a materials scientist who co-authored the book “What Really Sank the Titanic” with Timothy Foecke from NIST. Her Ph.D. thesis on recovered material from the RMS Titanic led to her conclusions that substandard rivets on the Titanic may have been to blame for the quicker than expected sinking of the ship. According to the builders of the Titanic, even in the worst possible accident at sea, the ship should have stayed afloat for two to three days.

It seems that in order to cut cost or to expedite launch, substandard rivets were used in certain areas. Rivets were in tight supply during that timeframe. Metallurgical testing of 48 rivets recovered from the Titanic showed higher corrosion than expected for the prescribed rivets. Design engineers placed the weaker rivets in areas expected to see less stress, such as the bow. Unfortunately, that is right where the Titanic scraped an iceberg. McCarty and Foecke believe that fewer compartments would have burst if the higher quality rivets had been used. It’s even possible that the Titanic could have limped its way into Halifax.

Dr. McCarty also found evidence of complacency. For instance, the Board of Trade gave up testing iron for shipbuilding in 1901 because it saw iron metallurgy as a mature field, unlike the burgeoning world of steel.

Hindsight is 20/20, but have we learned our lessons, are the iceberg scenarios now part of standard Failure Mode and Effects Analysis (FMEA) on new naval ships?

On July 10, 2006, there was a fatal accident on the Boston I-90 connector tunnel to Logan airport. I will share more about that story on Part 2 of this article because I find similarities in the lack of attention to specifications and proper inspection procedures.

Recently we heard that delays in fasteners were partly to blame for some of the delays of the Boeing 787 Dreamliner. Let’s hope that we have learned from the root-cause analysis of these prior historical events and we don’t rush into replacement decisions without thorough analysis.

References:

Article in New Your Times April 15^th

http://www.nytimes.com/2008/04/15/science/15titanic.html?_r=1&oref=slogin

Blog: Women in Science:  http://sciencewomen.blogspot.com/2008/05/jennifer-hooper-mccarty-on-colbert.html

Vicente Fox on the Importance of Open Markets for Global Collaboration

I was privileged last week to hear Vicente Fox, former President of Mexico, talking about the importance of open markets and trade agreements like NAFTA in today’s complex global trading economies. It was the highlight of AMR Research’s 2008 Supply Chain Summit and most of the people I talked with were very impressed with the speech.

I admit that it is easy to question trade agreements like NAFTA when we see so many U.S. manufacturing jobs moving overseas. But the arguments in favor of open trade are strong and need to be considered. I will try to share some of Vicente’s thoughts in this article and I urge that you also keep an open mind.  Even if we don’t agree with some of his message, we can respect that it comes from someone that has done a lot of research, collaborated with international leaders, and has a lot of international business experience. Before entering politics, Vicente Fox was a successful President for Coca-Cola Latin America.

I would also like to note that Vicente Fox is a very clear and charismatic speaker. He was able to engage us, make his points with humor, and keep us focused on topics that are usually full of boring political rhetoric. If you ever have a chance to listen to him, don’t miss it.

Paraphrasing some nuggets from the former President...

In the 70-80’s, nationalism and protectionism was the name of the game. Several dictatorships and corrupt governments made it hard to do business and make a profit. While other parts of the world were advancing, Latin America was falling behind.  We had to change and let go of the dictators. We needed new leaders with great vision.

Today we know that in Latin America, democracy and open markets work. We are finally returning to growth in the region. Capital per person is increasing. We are making a small dent on poverty numbers but we know this path works. We need to continue increasing our middle class.

The theme of this conference, Globalization Comes Home, is very important, because globalization is still not a fully accepted concept around the world. Mexico has one of the most open markets in the world with a large number of trade agreements. A lot of of the world’s exported products move through Mexico.

I am surprised that this US nation is moving back toward protectionism. We are also concerned about China, but building walls is not a long term vision. I don’t believe that thinking global translates to losing jobs.

Mexico, US and Canada are all losing jobs to China and we could benefit from working closer together. There are also many other stable countries in Latin America like Chile, Brazil, and even Colombia who has been trying to control problems with drug trafficking.

There are also currently a few countries like Venezuela that are causing worries in Latin America. It seems that we have not learned our lessons from the past. Fortunately globalization does not really enable Totalitarian governments to thrive in the global economy. Hugo Chavez withdrew from the G3 Trade Agreement between Colombia, Mexico and Venezuela. The current few dissident Latin American leaders opposing free markets have eroded the process, but it will come back. 

I am not just talking optimistically about democracy and open markets. We have sound figures that show us the results and point to what we have to do to move forward in the future. What we need the most is leadership and institutions that generate those leaders. So we are creating initiatives like Mexico’s Presidential Library to help educate the next generation of leaders for Latin America. We need to recover the time lost during the 20^th century in Latin America.

We hope this great US nation comes back to show its leadership in the area of globalization and open markets; a nation with great ideas and innovation like the Internet.

Not everything that shines is gold. The race to China might be overrated. A big advantage of doing business in Mexico for US companies is the benefit to logistics from the proximity. As an example, in the maquinadoras industry we can turn around raw materials into final product and have it back in the US in one day.  

Mexico also represents a huge local market for the United States. Mexico still has 33% poverty; we need to continue growing the middle class. But the 77% that consume represent a big buying market. Imports from the US to Mexico are bigger than for the rest of Latin America together. Mexico as a market is bigger than several European nations together. Around 70-75% of imports into Mexico are from the US.  

Q: Your book, “Revolution of Hope”, talks about a “Super NAFTA” can you elaborate?
A: We must study and learn from models like the Europe Union. We are learning in Latin America and making some progress. For example, it is not necessary to have a passport to move between Guatemala and El Salvador.  We should pay attention and learn from what is working over there.  

Q: How much can Chavez derail progress in Latin America?

A: We have not increased education levels enough and middle class enough in Latin America, so these leaders have been able to hold on to power. I don’t believe that 21^st century socialism is going anywhere. It is just a nostalgic concept and does not have a plan for future prosperity. There is no long term vision.

Education and democracy is the only way to prosper in the future. It gives people choices. Authoritarian governments will try to keep people ignorant so they don’t have choices. We learned the lesson in Mexico and we have been educating. Now 100% of schools have IT technology and a big percent of them are connected to the Internet. We expect the returns not only in numbers but also in the quality of the education.

I believe that we need to be able to handle more than one issue at a time. We cannot just focus on terrorism. We also need to address issues of trade, immigration, and manufacturing globalization. I have campaigned a lot, and when you campaign you make a lot of promises. Once you sit on the chair, you feel the weight on your shoulders and you ask yourself “Now what are you going to do Vicente?” After the elections, the same will happen here and we will need to more seriously address issues like immigration and the NAFTA trade agreement.

“Better tomorrow” is a great Mexican concept :) But some of these issues need attention now and we should act soon. We need to figure out soon how to turn issues like immigration into a plus for each country.

***

More references on Vicente Fox:

http://www.elbalero.gob.mx/kids/government/html/gobierno/bio_foxkids.html

http://en.wikipedia.org/wiki/Vicente_Fox

Information on NAFTA:

http://www.fas.usda.gov/info/factsheets/NAFTA.asp

More on the G3 Trade Agreement:

http://en.wikipedia.org/wiki/G3_Free_Trade_Agreement

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Fresh Is Best!

If you are not enjoying delivery of fresh produce from local farms you are really missing out. Our local organic farm, South Coast Farms (http://www.southcoastfarms.com/), has a Community Supported Agricultural (CSA) program which delivers a basket a fresh seasonal produce to a nearby pickup spot every week.

It is exciting to receive a basket full of fresh produce each week and then plan the menu for the week around our fresh produce. This encourages us to do more traditional seasonal cooking and try out new recipes.

What does this have to do with Manufacturing? Well, besides supporting our local farms, I also believe in supporting our local manufacturers and buying products made locally even if it costs me a little more money. I do not buy at certain stores that sell primarily foreign made goods, even when these are cheaper. I believe that we, the consumers, can only make a statement with our wallets.

When you spend that extra tax rebate this year, perhaps spend it on US made products. This way some of the money will make it back to manufacturers that are paying workers in the US and making a bigger contribution to our economy. Perhaps don’t spend it all shopping at a big mart store that is buying mostly foreign products. Let's stimulate our economy, instead of someone elses ;)

Farmer George is running a business and trying to make a profit while competing with big farms and imported goods. His farm is part of the community and it feels good to be buying from a local producer that is delivering a much needed quality product to us. I strongly encourage everyone to seek out their local farms and become a member. Also be mindful of where your products are coming from. We can each make a difference.

Good eats!

Are we Doing Enough to Develop the Next Generation of Manufacturing Leaders?

My friend Tim Jemal's blog has a great post on California education cutbacks, "California Not So Golden" ( http://jemalpublicaffairs.com/?p=15 ) and it stroke a chord with me.

Other countries are investing in education and its paying off. Medical research, computer software, and manufacturing jobs are leaving the country and moving to these countries that are investing and providing incentives. Once the expertise moves to other places it will be very hard to get it back.

We all need to voice the need for more education budget. I would gladly pay more taxes for this. Instead I am having to donate money and work on fundraisers. Ratios of 30-35 students to one elementary teacher are not acceptable.

Please read Tim's blog entry.