Nordic cell production model outpaces Far-East assembly lines:
Factory work no longer going to cheap labour countries World class wobbler producer Rapala cuts jobs in Finland, increases
in Estonia
Nordic cell production model outpaces Far-East assembly lines:
Factory work no longer going to cheap labour countries*
Helsinki (25.10.1998 - Maarit
Huhtaniemi**) Anja Lamberg is a mechanic who assembles frequency transformers. She earns
much more than a mechanic in Asia. However, her weekly working hours at the ABB factory in
Helsinki are shorter than those in Far-East industrial plants.
Since the Asian devaluation spiral one
might think that transferring production from Finland to cheap labour countries would be
more profitable than ever. Finnish companies disagree.
It is the production model that makes the
difference between a cheap labour country and Finland. On an Asian assembly line women sit
side by side performing work divided into short stages. In Finland there are often
production cells made up of multi-skilled employees. The cell assembles the product from
beginning to end according to the customer's order.
"Here a worker knows the production
process for 10 to 20 different products", explains ABB health and safety manager
Taisto Flinkman.
According to Juhani Pylkkänen, a
technology director in the same company, independent work teams function poorly in
low-income countries because of differing educational levels and working culture.
"In China a young woman who comes
from the provinces to work, for instance, knows only one work stage after a year in an
electronics factory", notes Rami Raulas, head of the Finnish subsidiary of Japanese
computer producer Fujitsu.
Nowadays customers mainly make
complementary purchases so the employee must know how to make only a few components of a
certain model at any one time. While an Asian assembly line factory churns out huge
amounts of a single product, Fujitsu's plant in Espoo, near Helsinki, produces more than
7,000 different models.
The Nordic countries have been pioneers in
cell production methods.
The Chief Executive of Fujitsu was shocked
when visiting the computer factory in Espoo in the early 1990s. "Microcomputers are
not made this way", he said, horrified by the absence of an assembly line. "But
the customer wants it done in this way", was the answer which the Finns used to calm
down the indignant Japanese.
Nowadays, the Chief Executive himself
lectures on the advantages of customer oriented production. Factories are also closing
their assembly lines in Japan in order to pay closer attention to the needs of customers.
Raulas has no worries that Fujitsu's
computer factory will be transferred from Espoo to a lower wage country. On the contrary,
since the mid 1980s European production has been transferred into Finland and Germany.
Eero Eloranta, Professor of Industrial
Economics at Helsinki University of Technology, is also ready to debunk the persistent
myth of the inevitable transfer of production to cheap labour countries.
"In such countries the labour force
is cheap, but the level of skills is not very high", he says. "The key criterion
nowadays is no longer labour cost but overall productivity and quality."
Factory managers now swear by customer
oriented production. There is no point in moving capital and goods and in having work done
before there is a paying customer.
Labour costs are not significant if most
of the overall production cost depends on other expenses such as the use of machinery and
raw materials. It would likewise make no sense to move the factory to a developing country
unless there was a skilled labour force there.
"Here labour costs account for only a
few per cent of the price of a finished product. Problems in material flows or unnecessary
maintenance can easily become more expensive than the payroll", Raulas notes.
Savings also mean needing fewer
supervisors and quality controllers than there are in an assembly line factory. Employees
get a share of the savings in the form of idea bonuses. "Many improvements in
products and in production processes come from the factory floor", says Raulas,
expressing his gratitude to his skilled staff.
The cell production model has also
improved job satisfaction. An ordinary working day can look very convivial. A few
employees just sit and the work seems to advance slowly. According to Pylkkänen effective
production at ABB does not demand an especially tight rhythm of work.
"Here there is more democracy than,
for instance, in the United States, where work is more conditioned by the machinery",
Pylkkänen says.
Seeking maximum benefit from an expensive
machine often means shift work. Cell factories also operate in shifts, but the greater
degree of independence allows more flexibility in working hours. Both ABB and Fujitsu have
employees who prefer 12 hour shifts compensated by extra days off.
The division of production models cannot
be made solely in terms of geography as Europe still has a variety of factories. Moreover,
cell factories in Nordic countries have not been an overnight success. The idea of
independent cells was enthusiastically received in car factories as long ago as the 1970s,
but at the start of that decade Saab had to close down its new cell factory in Malmö in
Southern Sweden.
At ABB we don't talk about self-regulating
but rather independently operating cells and teams. "Workers do not regulate
themselves. The origins of both product and production lie in the needs of the
customer", explains Taisto Flinkman at the frequency transformer factory.
Fujitsu also experiments with forms of
work organisation differing from pure cell production. Some of the employees assemble
computer circuit boards and mechanical parts in advance, but hard disks, memory and
processor chips - the parts which most rapidly fall in price - are installed only after
the order has been placed.
Professor Eloranta thinks that the most
effective way to improve western factory efficiency in recent years has been by refining
their logistics. This means rationalising the flow of capital and materials. After
delivery the invoice is quickly despatched, but processing incoming invoices is not so
urgent.
In Eloranta's opinion there is no need to
fear the countries of the Far East as it is rational to serve Europe with products
produced in Europe. Local networks are playing a more important role than ever. Mother
factories often concentrate on assembling while everything else is shared between
subcontractors. Thus, a local subcontractor may become cheaper.
"It seems to me that the proportion
of local subcontractors is growing", Raulas notes.
The actual mother factories generally
either employ fewer or the same number of workers as before, even though there are more
end products. At the same time in Finland a huge army of subcontractors has come into
being over a short period of time.
While the ABB frequency transformer
factory employs over 500 workers, its subcontractors already have 3,000 employees. When
transferring production, ABB has endeavoured to avoid redundancies by redeploying workers
to other jobs.
This is not possible in all companies.
Sometimes work which is divided into short stages goes to other companies or other
localities. Work stays in Finland, but those who do it may change.
* The article was originally published in
Helsingin Sanomat, the leading newspaper in Finland.
** Maarit Huhtaniemi is a Finnish
journalist working for Helsingin Sanomat
© Maarit
Huhtaniemi
World class wobbler producer Rapala cuts jobs in
Finland, increases in Estonia*
Asikkala (13.10.1998 - Lauri Muranen**)
Rapala is transferring its labour intensive production stages from Asikkala in Finland to
Estonia. The company currently employs about 60 workers at its Estonian factory in Pärnu.
As Rapala's production grows and natural wastage reduces the number of staff in Asikkala,
the company is employing more workers in Pärnu.
Production manager Juhani Pehkonen refers
to a transfer of 40 jobs within two years as the rate of job reductions in Asikkala and
job increases in Pärnu.
"At the moment we have about 240
employees in Asikkala. In two years we shall still have more than 200 jobs." Pehkonen
emphasises that the reduction will be based entirely on natural wastage.
He pledges that the Asikkala plant will
continue to be the group's main factory. "Nobody has questioned this at any
stage."
The most demanding aspects of wobbler
production will continue to be concentrated in Asikkala. Semifinished wobblers will be
sent for further processing to factories in Estonia and Ireland.
The fate of Rapala jobs in Asikkala has
recently been under discussion as the Rapala Group is in the process of becoming a listed
company. In its stock market brochure the company says that it is considering redeployment
of labour intensive operations in order to increase cost effectiveness.
The factory in Pärnu was opened in
January 1997 as labour costs in Estonia are much lower than those in Finland and Ireland.
About a third of the Rapala group's 765
employees work in Asikkala while the rest are abroad. Group turnover in 1997/98 was FIM
577 million (FIM 1.0 = USD 0.2) and its operating profit was FIM 123 million.
The Rapala group has plans to purchase a
trollmaking company in Mexico. Elsewhere in Latin America and in Asia the group will
increase its marketing efforts and is currently seeking new sales personnel.
* Originally published in Päijät-Häme,
the local newspaper of Asikkala, where Rapala has its roots and main factory.
** The writer Lauri Muranen is
Editor-in-Chief of Päijät-Häme.
© Lauri
Muranen |