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Tale of Two Factories: Automation and Reshoring Examples - Part 1

August 4, 2023

 by David Collins III

Engineer monitoring automated welding robot in an automotive factory

Renaud Anjoran, one of MTG/CMC’s partners, recently sent me two Wall Street Journal articles. These articles illustrate two distinct outcomes of reshoring operations—a success and a failure. The approaches taken by each company can teach us a lot about the do's and don'ts of moving production to a higher-cost location.

Two Brands, Two Outcomes

The companies in question are both well-known brands: Craftsman Tools and Bath and Body Works (BBW). Each perceived an advantage in moving production from Asia to the United States. Without knowing the details, you might expect the higher-value product, Craftsman Tools, to be the more successful case. However, the reality proved otherwise. Craftsman failed in its attempt to move socket manufacturing out of Asia (particularly Taiwan) due to poor automation implementation. In contrast, BBW successfully leveraged “economies of scope” and increased flexibility to establish thriving manufacturing operations in Ohio.

I urge everyone to read the articles before we go into this deeper analysis. The Craftsman article can be found here and the BBW article here. This blog will start with Craftsman and then the next blog will provide the contrast Craftsman’s failure with BBW’s success.

 

The Failure of Craftsman: Automation Missteps

The article discusses Stanley Black & Decker's attempt to reshore its Craftsman brand by building a $90 million factory in Fort Worth, Texas. The company aimed to manufacture mechanics' tools with unprecedented efficiency by leveraging automation to compete with cheaper imported products from China. However, the automated system encountered significant issues, leading to a lack of available tools in the market. Consequently, after three and a half years of operation, the parent company, Stanley, announced the closure of the factory and put the property up for sale

Automation as a Tool, Not a Solution

Craftsman's rationale for the new factory was, on the surface, sound. The issues arose due to an over-reliance on automation as a solution rather than a tool. As we mentioned in our previous blog post, "How To Get Your Manufacturing Automation Timeline Right":

“…many managers forget to consider before going all-in on automation is whether automation will be truly beneficial in their operations. It's common to see factories putting so much time, money, and resources into upgrading all their equipment, only to see minimal benefits to production efficiency.”

Why is that? The simple answer is that humans can engage in many complex operations that automation has difficulty without substantial technical effort and testing. Just putting a robot onto the line does not make the process more efficient.

Challenges with Foreign Equipment Suppliers

The article mentions that Craftsman had significant difficulties with the equipment supplied by a Belarussian company. Although our company has not personally worked with a Belarussian supplier (and it seems highly unlikely that we will do so in the near future), this detail caught my attention. When building a new automation system, as was the case with this factory, very close cooperation with the equipment supplier is necessary. This cooperation should include pilot runs at the supplier's site, so that tooling can be worked out and fixed in advance. This could be achieved by using a domestic supplier (the preferred solution) or by maintaining a robust Craftsman presence on-site in Belarus to work with the supplier. We have seen this solution work exceptionally well with Chinese equipment suppliers.

According to the article, there were numerous adjustments needed for the equipment, and the arrival of the new tooling took several weeks. We have observed that it is often worth the additional cost to have equipment suppliers within reach. For instance, MTG/CMC is currently working with a company that is purchasing paint equipment and sandblasters from the U.S. because the process is unique and will require iterations before it's ready for full production.

Ambitious Timeline and Unforeseen Challenges

The delays also present an issue with the timeline. Craftsman announced that the new production
would start in 18 months after the initial announcement. That is very aggressive for a new automation process. Craftsman can be forgiven for not expecting a global pandemic to gum up its supply chain, however, even without COVID, it is unlikely that the company would be able to make that deadline.

 

Key Lesson from Craftsman's Reshoring Attempt

The lesson to be learned here is that automation is not the solution to a problem, but a tool to help a company meet its objectives. Many companies produce tools in the United States, and Craftsman could have done the same if it had carefully considered its objectives and how it could use automation as a tool. This would require giving themselves more time to work through challenges, rather than assuming that implementing automation would instantly solve the problem.

Understanding how your product is made is a crucial step before automating the process. Nick Pinchuk, the CEO of Snap-on, is quoted in the article as saying, "Sometimes, the ease of installing automation is a bit overestimated. This often stems from a lack of understanding of how the product is made in the first place."

These are wise words for any company considering relocation and focusing exclusively on automation. It's vital to understand your process and consider the most effective solution given your particular situation.

 

In our next blog, we will contrast Craftsman's performance with the successful reshoring efforts of Bath and Body Works.


plant relocation

Topics: Plant Relocation

David Collins III

David Collins III

David was a Senior Strategy Consultant for Deloitte, served in Iraq as a Special Operations Civil Affairs soldier, and as a Governance Advisor to the Afghan Government with the Department of State. At CMC, David advises clients on strategy and investments.

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