Looking for a Low-Cost Country?

July 1, 2004
It used to be called moving off shore. Now, companies trying to reduce manufacturing costs, look for the low-cost country. Mike Ryan, president and CEO,
It used to be called “moving off shore.” Now, companies trying to reduce manufacturing costs, look for the “low-cost country.” Mike Ryan, president and CEO, Bobcat Company, says what a lot of manufacturers don’t realize is that they can find all the advantages of a low-cost country right here in America. He’s referring to North Dakota where Bobcat has been doing business for nearly 60 years.

“Sure it’s cold up here,” says Ryan with a so-what shrug. “It’s the business ‘climate,’ however, that makes the difference for survival these days.”

And while Ryan’s company is rooted in the North Dakota soil, newcomers like Microsoft are finding the business climate to its liking as well.

• Microsoft Business Solutions now has more than 900 people at its division headquarters in Fargo.

• Data storage media manufacturer, Imation, chosen by Industry Week as one of 10 Best Manufacturing Plants in North America, also calls North Dakota home.

Alien Technology, producer of radio frequency identification products, is moving to Fargo beginning next year with 300 jobs and projects it will have 1,100 employees by 2010.

“It just costs less to do business in this state,” says Ryan. “Labor costs are as competitive as anywhere and manufacturing or office rental space are a fraction of what a company might find elsewhere in the U.S.”

On a recent tour of manufacturing sites in North Dakota, I had an opportunity to speak with a variety of manufacturing and material handling executives. Granted, I would not expect them to openly speak against relocating to North Dakota; however their enthusiasm for the state’s business environment was undaunted.

“Creativity before capital” was a statement I heard often. Ryan says one reason his company has grown from 30 employees to more than 2,000, with multiple locations in the state, is the ingenuity of its people. “What a manufacturer needs is people who can think through a problem,” he says. “The attitude of most employees is to try to solve the problem themselves before calling for help.” Bobcat currently builds more than 40 percent of the world market share of skid-steer loaders.

Asked about the availability of raw material and supplies, Rick Kasper, president and COO of Fargo-based Global Electric Motorcars LLC, quickly destroys another myth about the hinterlands of North Dakota. “We get about 75 percent of our production material from sources within this general area,” he says. The company, known as GEM, is now a DaimlerChrysler company and subject to the same Just-in-Time mandates as its sister companies. “We’ve been doing lean manufacturing and managing inventory for years now,” says Kasper as we tour the meticulously clean plant. This facility is capable of producing 200 alternative-fuel vehicles a day.

To keep its production costs down and productivity up, a mini-mart (Kasper’s description) style of production is used. The inventory required to assemble each day’s production is loaded into the workstations at night. “We use our own form of kitting,” explains Kasper, “similar to what you might see in any large automotive production plant.”

A 21-carrier conveyor is used to move partially assembled vehicles along the production line. “We’re not looking for ways to build more than 200 vehicles,” says Kasper, “However, we are always looking for ways to build 200 vehicles better.”

Kasper does not view his company as being at the end of the supply chain. He thinks of it more as the beginning. “We get most of our supplies locally and ship our vehicles [sold through DaimlerChrysler dealers] in 53-foot trailers.”

Looking into the future, Kasper sees the potential for his company’s knowledge of alternative fuel vehicles as becoming another important export from North Dakota. “We’re proving that safe, reliable transportation can be created with battery power, aluminum and epoxies,” he says proudly.

Leaning toward lean

At the Bobcat Company production facility in Bismarck, I was touring the factory with Todd Schimke who carries the title of training coordinator, and knows a lot about production. Above the sound of robots positioning cylinders and parts for machining, Schimke says while lean manufacturing might seem like a new concept for some, here they’ve been working toward better productivity for a long time.

“We’ve been in a formal program for lean manufacturing for about a year now,” he explains, “and the success of the program is solidly based on the support it gets from top management. It’s the only way for the program to succeed.”

Just down the road (defined in North Dakota as an airplane ride of less than an hour) in Jamestown, is Goodrich Corporation’s Cargo Systems operation. Here they manufacture the conveyor and restraint systems found in the cargo holds of many commercial and military aircraft. Dale Riederer is operations director. Beginning with the end of his supply chain, Riederer explains that to assist the installation of Goodrich’s cargo systems into an air frame for customers like Boeing or Airbus, his material handlers create huge kits. “For a Boeing 747, for example,” explains Riederer, “the final kit weighs about 13,000 pounds and consists of about 4,000 items, all of which have to be in the proper order for installation on their assembly lines.” This is definitely a high-variety, low-quantity manufacturing operation.

This manufacturing plant has honed the skills of manufacturing-to-order and shipping-to-order to a fine skill. “We do cell manufacturing by product family,” says Riederer. “By having the storage of material right at the machining area, we’ve cut our set-ups down to minutes versus hours in the past. The flexible machine centers and commonality of parts aid the process.”

Back in Fargo, I was finishing my whirlwind visit with Mike Arntson, production manager at Cardinal IG. The IG stands for insulated glass. This company is one of the nation’s larger producers of supplies for commercial and residential window manufacturers. Cardinal supplies Marvin Windows, for example, another North Dakota company that has grown from six to 450 employees.

“Ours is a seasonal business,” says Arnston as we watch huge sheets of glass being reduced to all sizes and shapes of window panes. “We manufacture to a schedule that produces about 40 percent made-to-order and 60 percent for inventory. When construction season hits, however, that inventory drops dramatically in a really short period of time.”

Cardinal, too, follows lean manufacturing principles; however, it’s been doing so for a long time. “So much of the lean theory is just doing what makes the most sense,” says Arnston, “and we’ve always tried to do what makes the most sense.”

The company also does what’s right from the human side of the equation. A few years ago, company management began offering jobs to people from the war-torn regions of the world. Arnston says they currently have 17 languages being spoken in the plant. I watched as a crew leader, a young man from Iraq, briefed his charges from far-flung places such as the Sudan, Iraq, Nigeria, Bosnia and the Philippines. Asked how they manage to communicate, Arnston hesitates a bit, then says, “When you’re talking about building a product, and quality is the driver, the explanation of how to do it seems to be universal.” I noticed they also point a lot.

Throughout the state, every place I went, managers remarked about the support they get from the state, its Department of Commerce and its Manufacturing Extension Partnership program.

Lee Peterson, commissioner, Department of Commerce, says getting the word about North Dakota to others seems to be his greatest logistics challenge. “When you compare what North Dakota has to offer, versus what manufacturers can find elsewhere in the U.S., or particularly overseas, we beat them, hands down. People just don’t know the facts.”

Whether you’re lured to the state by its low real estate costs, low cost of energy for industrial users or admirable (13.7 to 1) student-to-teacher ratio, the number that catches most people’s attention is that the average commute time is less than 15 minutes. That’s half the national average. If you’re interested in learning more about doing business in North Dakota, call Commissioner Peterson at 701-328-5305 or check out its Web site, www.growingnd.com.