Insourcing Innovation
GE is in the process of overhauling design of their signature appliances. And starting to manufacture them in Kentucky instead of Mexico and China.
“So a funny thing happened to the GeoSpring (water heater) on the way from the cheap Chinese factory to the expensive Kentucky factory: The material cost went down. The labor required to make it went down. The quality went up. Even the energy efficiency went up.”
In 1951 GE began construction on what would become the largest domestic appliance manufacturing plant in the United States, aptly named Appliance Park, zip code 40225. Housing the appliance division of GE, and featuring the first-ever use of a computer (a gigantic UNIVAC) in a manufacturing setting, appliance park became the centerpiece of GE’s appliance production division and within just a couple years employed 16,000 people. By 1973, twenty years after opening its doors, the immense plant, with its mile-long parking lot, and its own fire department, employed over 23,000 people and turned out washing machines, dryers, refrigerators, and other appliances to Americans eager to embrace the conveniences of technology.
Within another just ten years, by 1984 the plant had been nicknamed Strike City for the constant divisive and productivity-killing strikes that were pervasive, and the working population had dropped back to 16,000 workers, then fell steadily through the 1990s as GE continued to outsource manufacturing to Mexico and China, until finally a mere 1,863 manufacturing employees remained at Appliance Park, KY in 2011.
Then, an interesting thing happened in February, 2012. GE fired up a manufacturing line in Building 2 of Appliance Park to build high tech, low energy, water heaters than had been made in China for over a decade. And then, a month later, in Building 5, another assembly line opened up to begin assembling fancy refrigerators, previously assembled in Mexico.
The GeoSpring was re-engineered to have 20% fewer parts, and is now produced in Kentucky in 80% less time than it was made in China. Partly because of the device design, but also because they have redesigned the workplace and assembly lines themselves. For example, their revamped dishwasher assembly line requires only 20% of the physical space previously required and reduces production time by 68%
By the end of 2012, GE expects to have over 3,600 professionals employed at Appliance Park, KY including salaried designers, engineers, and IT professionals. These product designers work hand-in-hand with the assembly line employees to ensure the design conveys efficiently to the actual construction process. As Jeff Immelt writes in the March, 2012 edition of Harvard Business Review, “At Appliance Park we have torn down functional silos and replaced them with a “one team” mentality. Designers, engineers, and assembly-line workers together determine the best way to meet their goals; they own the metrics.”
Meanwhile, on December 6, 2012 CEO Tim Cook announced to NBC that Apple intends to invest $100 million dollars to begin producing a line of Apple products within in the United States in 2013 for similar reasons.
