Gary Erickson, founder and principal of Garik Enterprises (a manufacturing and facilities consulting firm), has stories. He's got great stories from countries all over the world--working with farmers in Ireland; sacred trees of the Druids; trying to get factories built in countries while rioters take to the streets and governments wrap him up in red tape. They are wildly entertaining.
On a more formal note, Gary's work includes 35 years in solid manufacturing, facilities, and retailing experience in industry, holding key executive positions of Vice President of Operations, Director of Industrial Engineering, Director of Facilities, Director of Materials, District Manager (5-Retail Stores) etc. with Fortune 500 corporations as well as fledgling start-up companies. These accomplishments have taken place both domestically and internationally for Atari, Xerox, Honeywell, Qume, and XO Industries to name a few.
I've had the good fortune of meeting with Gary a few times in the last couple months. Recently, he kindly sat down with me for a quick interview regarding his experiences and advice in manufacturing and facilities development.
AU: Gary, thanks so much for your time. One of the topics I've been blogging on a little bit recently is the concept of Low Cost Country Sourcing--and you mentioned some of your experiences and the challenges of dealing with running business operations in places where these lower costs are found. The challenges can run the gamut, and sometimes have nothing to do with manufacturing at all, such as your run in with rioters in the streets of Ireland.
Gary: Yes. There were a few instances when I was working in Ireland and we had to be careful of the areas where rioters were running amuck. During our project, we had young men and women coming in from farms who were going to work in the factory. They had no training. How do you fill a factory with employees when no one in the area even has training to do what you need to be done?
The government offered incentives for hiring local people, but the university didn't have courses that taught people to do what we needed them to do. I had to go to the local university and get the U.S. company to bring over some engineers to establish and teach courses there to these folks so we could train them to become technicians and engineers. The university specialized in agriculture and farming, because that was the predominant industry in the area. High-tech courses? No way. Once they completed the classes we set up and became technicians, then they could sit down and we could train them to do specific tasks. But we needed to give them the basics in the first place. For instance, how to use a volt meter. They didn't even have that basic of a skill set. So you couldn't even make a technician out of them until you trained them how to use these basic testing tools.
AU: They'd probably never seen a volt meter before. These people were farmers for hundreds of years. You were starting from scratch.
Gary: We had to go from scratch to building electronic games. It probably took 1 to 1 1/2 years just to get that underway. But that's why checking out the university was one of the first things I did when I got over there to do a site search. In a site search, you need to find out whether the infrastructure is going to be there to support what you need to do. This includes potential locations, the skill sets of your labor pool, utility infrastructure--for instance if you have a large, bulky product that requires very high voltages and you need a lot of power capacity to test it, as opposed to small electronics products, they each have different voltage requirements.
AU: The utility infrastructure needs to support your need to draw certain levels of power off of it.
Gary: Absolutely. When I was in Puerto Rico, I had to actually pay the local electrical company to run power from a local hospital, which was two miles away, to the site where I was building the factory. I also had to put in a backup generator because the first week I was there, the power was going out every day. They told me, "oh no, this isn't a problem". So I went to the director of the facilities at the hospital, and he gave me a different answer. He said "that's why we have a backup generator because we can't be in the middle of an operation and have all the power go off--and that happens everyday". And they had riots as well, in which the rioters would take chains and throw them up into the power lines and short out the entire district's power supply. This kind of stuff happened all the time down there. I hadn't even put up the fence yet to secure all the building materials we were going to build the factory with, when someone ran off with the fence. That told me real quick what kind of environment I was going to be working in. At one point, the company had an entire 40' container of electronic video games stolen, which was probably worth $3 million.
AU: How's that for low cost, huh? So how long did it take the company to finally get up and running? Did they make it that far?
Gary: They did. But I had to overcome a lot of hurdles. Government regulations was another issue for us. They had it set up so that everyone on the island was allowed to bid on projects. And the rule was, I had to choose the lowest bidder. So for a contract job to paint the exterior of the 150,000 sq. ft. building, guess who shows up? One guy with a 3-inch brush who had every intention of painting this massive building. It would have taken him 10 years to paint the building. So I had to go work with the government again and get them to compromise on their regulations. I told them I was never going to be able to actually go into production, so therefore, I can't train and hire the local people until we do that.
AU: This happens in rural regions in China. Local governments are trying to attract foreign capital and businesses, thus they offer tax incentives and other rewards, but a lot of stipulations come tied to those.
Gary: You'll have to hire X number of employees. You have to guarantee that they'll be employed for a certain amount of time--whatever you can negotiate with the government. And each instance is different. Each country and region have their own incentives, so to speak. Occasionally, you can make some great arrangements. For instance, in Ireland, I was able to get the government to give us money for every worker we trained, and our company used that money to fly over engineers to train them. So it didn't come out of the company's wallet.
AU: In your experience, when companies come to you, do they typically ask you to go out and pick a country to locate their factory in? Or, do they generally have the location worked out, and just want to make it happen?
Gary: It happens both ways. Either the CEO or someone high up in the company has some previous experience with a country or they golf with someone who does, and it becomes a "me too" thing. They hear their buddy has a factory in country X and their buddy raves about how successful it's been. But the truth is, you don't hear about all the challenges that guy had to deal with to get it to the point that it's at. And if you're looking at different areas or different countries--the issues can be wildly different. You might deal with excessive rain, or sunken foundations, or even local superstitions. In Ireland, there was an area of trees inhabited by druids hundreds of years ago and you cannot touch them. They are sacred. But someone unwittingly might buy the property without having any idea about that.
AU: When you go into a factory in China, Malaysia, or Puerto Rico, what are the things you look at?
Gary: First, I look at the safety of the working conditions for the employees. So I look at the electrical distribution system. On a job in Taiwan, I saw a very powerful electrical component completely exposed. Anyone who accidentally touched it--say "goodbye". So I start with stuff like that. Why? One: the safety of people. Two: is because liability in these cases can become a problem. Not just for safety, but for product quality as well. You don't want to be guessing in these areas. It may look good on the surface, but a little use might breakdown your product. You need to specify your requirements and control the quality of not just your product, but the materials and components as well.
AU: Companies are going over to China, for instance, but they're not prepared to deal with these things.
Gary: It's the "me too" thing. They go over and they get the nice tour of the facilities and get taken out to a nice dinner and think everything is great. Then, a few months after the product launch, they start getting reports from customers of your product falling apart. Once you degrade the quality of your brand, it's near next to impossible to get it back.
AU: Although China is slowly starting to get better in terms of their quality, it's still in its infancy in this capacity, and the variance between factories and quality can be dramatic.
Gary: Yes. They are improving but you really need to look at what you're getting.
You need to get over there and really look at their capabilities and see if they can support the quality that you need.
Timely advice!
Amidst the flurry of news stories going on right now about product quality and China, the NY Times recently ran an article (free registration maybe required) about the world's biggest toy maker, Mattel, as an exemplary model for offshore manufacturing and product quality. Hats off to Dan Harris of Chinalawblog for writing up a post about the article. I sent the blog post and article to Roger Rambeau, a partner at Global Sourcing Specialists, this morning and we chatted about the "old days" when he worked his way up from the production line with Mattel to become a Vice President of manufacturing. Roger managed and worked with Mattel's manufacturing plants and offices both at home and in several countries, including Mexico, Taiwan, China, Hong Kong, Singapore, and others. Throughout his career, he was responsible for Mattel's quality and manufacturing. The NY Times article quoted M. Eric Johnson, a management professor at the Tuck School of Business
at Dartmouth, who has visited numerous factories in China, including
some of Mattel’s as saying Sometimes problems are the result of design oversights. A few years ago, a child got their tongue stuck in a product in a way that the Mattel design team hadn't even considered possible when they designed the product. In another instance, a plastic toy horse named "Blaze" that a child could sit on and play was being sold. The horse was made of two parts--front and back--with a seam in the middle where the saddle was. One little boy, exuberant about his horse, was taking a bath and jumped out of the bath naked and ran over to his horse and jumped into the saddle. The force of the boy coming down on the horse caused the seam in the saddle to open, catch his member, and shut tight.
