Letter from the President

The Current Challenge for Manufacturers

Peter Klein, P.Eng., President

Dear Reader,

The changes that have occurred in our society through the effects of globalization are profound and impact most of us. Labour costs, and therefore the price of goods produced in economically advanced, western countries have steadily gone up. At the same time the much lesser paid labour force in developing countries assumed to assemble products in the Henry Ford way and is able to offer commodity products at very attractive prices. The result is that in North America and Western Europe, production that requires significant hand labour is no longer able to compete. So far this has mainly affected high volume, low value consumer goods.

However, the same mechanism is at work to undermine our ability to compete in the industrial goods segment. China starts to be noticed for its ability to produce ships and aircraft. Except for some niche markets, the manufacturing of commodity goods, and, to some degree, industrial goods in western, advanced countries is risky. It is typically profitable only when a very high degree of automation guarantees acceptably low unit cost, and volume and profit margins are high enough to amortize the associated capital investment

One of the places where I find these changes dramatically evident is trade shows. As a regular visitor of electronics, aerospace, and industrial goods trade shows in Europe, I have observed a dramatic shift in the exhibit space. Over the last five years, the floor space occupied by West European and North American companies has become flooded by names and symbols of companies coming from other parts of the globe. Commodities, such as lamps, displays, and connectors, are now almost exclusively offered at lower than ever prices by companies from Asia.

To survive in this highly competitive environment, proactive businesses have decisively substituted hand labour with automation.

An interesting example is high current electronic modules, predominantly for the automotive industry. Formerly, wires had to be cut, stripped, crimped and placed by hand to connect circuit boards to heavy duty connectors. Now, a stamped and formed sheet metal carrier gets fused to circuit boards. This subassembly is then encapsulated in a moulding process, and unwanted connections get stamped away subsequently; every step is a fast, automated process. High current quick connect tabs, to connect pre-fabricated wiring harnesses to, are now simply an integral part of the carrier.

Complementing the previous example in the low current realm, is a technology which eliminates discrete wires by way of altering the conductivity of a formulated plastic material through exposure to a laser beam. The plastic part now combines mechanical and electrical functions. This can, for example, be holding an electric motor and a circuit board mechanically in place whereby the current conducting electrical connections between them are formed by the laser exposed plastic areas, which in turn are rigidly embedded in an insulator, which is the unexposed plastic.

Some companies make it their business to come up with innovative concepts such as the ones above, and carry through to establish them as systems of tooling and processing steps. Other businesses use these new technologies to keep manufacturing products at much lower cost levels than ever before. Of course, the investments in product specific tooling and machines have to be capitalized, which has to be justified in the business context.

The manufacturing segment of our North American economy faces productivity and therefore cost challenges in this new, global business environment, and can respond by either giving up, or by re-thinking how it can meaningfully contribute.

Are you ready to act in the positive spirit of the examples above?

For our part, KLN KLEIN is constantly learning about innovative technologies and tools in order to be ready to complement your core competency, and to assist in engineering technical innovations with its proven team and facilities for accelerated time to market. When you are ready, please contact us!

Sincerely,

Peter Klein, P.Eng.
President
KLN KLEIN Product Development Inc.

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