Product Warranties, Quality, Cost, Reputation,
Competitive Advantage, and Long-Term Profits
Copyright © May 1, 2023 by Robert Wayne Atkins, P.E.
All Rights Reserved.
Introduction
For several decades manufacturing facilities have been relocating to other areas all around the world for the following reasons:
- Labor Unions: In the USA labor unions became absolutely necessary in order to protect the workers at a company from being abused by the management of the company. Labor unions were successful in obtaining reasonable wages and benefits for their members. And they helped to prevent discrimination against a worker who filed a complaint against management. However, non-union companies that paid competitive wages and that offered competitive benefits were able to gain a competitive advantage because they could more easily install new equipment and make other reasonable changes without having to obtain the approval of a union. Therefore unionized companies gradually moved their manufacturing operations to countries that did not have labor unions, and where wages were extremely low.
- Aging of Equipment: As the manufacturing equipment gradually began to age at a manufacturing facility, it gradually began to cost more and more money to keep the equipment serviced and working properly. And the old equipment also was the cause of more equipment downtime and the loss of production while the equipment was being repaired. When the majority of the equipment at an old facility was in poor condition the company usually made the decision to build a new factory somewhere else. And the company purchased and installed the very best new equipment in the new factory, and then they trained new employees on how to operate the new equipment. A classic example is that the new steel mills that were built in Japan were able to buy the raw materials from the USA, have it shipped to Japan, and the factory in Japan would make the steel, and then ship it back to the USA, and the Japanese could sell a better quality steel at a lower cost in the USA when compared to an "old" steel mill that was relatively close to all the raw materials that were needed to make steel. However, now that the cost of fuel is increasing, and the technology to make steel has been improved, it may once again become profitable for a new steel mill to be built in the USA and they may be able to sell better quality steel in the USA at a very competitive price.
- The Attitude of Labor: It has become extremely difficult for all types of organizations in the USA to find people who are willing to work, and who will follow instructions, and who can be depended on to show up for work on a daily basis. This includes restaurants, automobile repair shops, schools, manufacturing companies, grocery stores, medical facilities, transportation companies, construction companies, retail stores, farms and food processing facilities, oil refineries, gas stations, and government organizations. Until this issue is resolved then it will not be feasible for a company to open a new business in the USA.
- The Attitude of Management: In the past an executive usually specialized in one area, such as finance or manufacturing or marketing or engineering or management. However, many things have changed over the past 40 years and most companies are now using technology instead of people to do many tasks, such as accounting functions, inventory control, product design, quality control, and product assembly. Therefore an executive needs to be intimately familiar with a wider variety of concepts in order to make good decisions that correctly balance the trade-offs that those decisions will impact. These decisions cannot be based only on numbers and statistics. A good executive should be able to integrate his or her knowledge about all the people that work for the company with the statistics provided by a computer so that the "human" element is not ignored and the impact of a decision on the "human" element is carefully considered to avoid problems that computers cannot predict.
Discussion
In the not too distant future, some companies may consider opening a new manufacturing facility in the USA.
However, that decision will probably take the following factors into consideration.
- Transportation Cost: If the cost of fuel continues to increase then the cost to deliver materials to a manufacturing facility will continue to increase. And the cost to deliver the company's finished products to its distribution centers or customers will continue to increase. If this happens then the transportation cost may become a more significant percentage of the total cost of a product. In this scenario it may become more profitable for a company to have several smaller manufacturing facilities in several different areas in order to minimize the total transportation cost.
- Robots and Automation: Technology has significantly advanced during the past 20 years. Many jobs that were once very labor intensive can now be done by automated equipment. This significantly reduces the number of people required by a company but it does not completely eliminate the need for people. However, the total labor cost of many products is currently a very small percentage of the total cost of the product. Therefore the cost of labor is no longer as important as it was 20 years ago. This means that a company can build a new manufacturing facility almost anywhere if the crime rate is low, and if political corruption is rare, and if there are enough people in the geographical area who desire good jobs where they can earn a good living.
- Quality: Automated machinery will usually produce items that are more consistent and that have fewer assembly defects. Therefore the quality assurance plans that a company uses will need to be designed to work effectively based on what the machines do and don't do. A quality professional should be able to design effective quality sampling plans for almost any company based on a company's products and the way those products are made.
- Reputation: Some name brand products still have an excellent reputation. But some name brand products have ruined their reputations by selling defective products to their customers. A vast number of the independent certified repair technicians who have been trained by a company to repair the products made by the company will no longer attempt to repair those products for the following reasons:
- Quality: The replacement part has the same quality problems as the original part and it will only work for a short period of time before it will fail.
- Time: Replacement parts are frequently not available and the repair technician and the customer has to wait a long time for the replacement part to be delivered.
- Reputation of the Service Technician: When the replacement part fails then the customer usually blames the repair technician for not correctly fixing the poor quality product. However, the problem was with the replacement part and the repair technician did not do anything wrong.
- Payment: The repair technician sometimes has to wait months to get paid by the parent company for the labor the repair technician invested in repairing the product. The reason is because the company knows the replacement part is going to fail and then the company can blame the repair technician for not installing the part correctly and the company can refuse to pay the repair technician for the work the technician did.
For all the above reasons the market is now receptive to the introduction of new "Made in the USA" products with new brand names made by a new company. Some companies will take advantage of this opportunity and they will create really high quality new products that have extremely long life expectancies and those companies will capture a significant share of the market for the products they make.
- Product Life Expectancy: The useful life of a product is not the same thing as the product's warranty period. Companies are now able to statistically predict how long the individual components inside a product will work before the component will fail. Each component usually has an average life, a minimum life, and a maximum life based on the normal distribution or the bell curve. Consider the following simple example:
A Product with Four Component Parts
| Component | Minimum Life | Average Life | Maximum Life |
| A | 28 months | 36 months | 44 months |
| B | 34 months | 40 months | 46 months |
| C | 38 months | 60 months | 82 months |
| D | 32 months | 54 months | 76 months |
As long as all four components (A, B, C, and D) are working correctly then the product will work correctly. But if any one of the four components stops working then the product will stop working.
The company that makes the product will probably have a maximum warranty of 24 months on the product because they know that the minimum life of the weakest component "A" is 28 months. Therefore the chance of a product failing before 28 months will be very small.
However, the average life of component "A" is 36 months and the maximum life of component "A" is 44 months. Therefore some products will fail due to components B, C, or D because their minimum lives are less than the maximum life of component "A" or 44 months. This makes it more challenging for repair technicians to keep replacement parts in inventory because any part could fail.
All of the above factors have created a unique business opportunity for a company that wishes to make a new "Made in the USA" product with a "new brand name" in order to capture a share of the market that is currently being lost by some of the previous "big brand name" products. A new "Made in the USA" product should be made of high quality components with very long life expectancies. As an engineer I know from personal experience that in many situations the difference in cost for a "high quality component" compared to an average or low quality component is frequently only a small amount of money on a per product basis. However, when that small amount of money is multiplied by thousands of products per year then top management can sometimes be deceived into only looking at the impact on short-term profits and ignoring the impact on the company's reputation and on the company's long-term profits. A smart executive who is not motivated by "short-term salary bonuses" will insist on the best quality component parts available in order to significantly extend the life of the company's products that are bought by the company's customers. This will enhance the reputation of the company's products in the minds of all of its current customers and in the minds of its potential future customers because customer product reviews can now be easily found on the internet. A new "Made in the USA" company that makes high quality products that work correctly for a very long time will be guaranteed to capture an ever increasing share of the market for those products with each passing year.
Conclusion
Manufacturing products in the USA will not be successful unless our nation can return to the principles on which we were originally established.
The Declaration of Independence is the original foundation on which our nation was built and it contains the following statement:
"We hold these Truths to be self-evident, that all Men are created equal, that they are endowed by their Creator with certain unalienable Rights, that among these are Life, Liberty, and the Pursuit of Happiness -"
Our forefathers "unanimously" believed in God (our Creator) and they believed that we are all equal in the eyes of God. Our forefathers did not believe in the "theory of evolution." Our forefathers believed that God intentionally created us as individuals. And our forefathers had a deep reverence and respect for the Holy Bible and for the teachings of the Holy Bible in regards to honesty, integrity, faith, and marital fidelity between one man and one woman. Witchcraft and sodomy were detestable in their eyes.
The USA must once again become a nation where most of us have an unyielding faith in God our Creator, and in the teachings of the Holy Bible. The Holy Bible condemns dishonest business practices and it condemns corrupt legal procedures. The Holy Bible insists that every able bodied man should earn an honest living and that he should support his own family. His family includes his spouse, his children, and his elderly parents if they have no other means of support. Unless our nation will once again respect the teachings of the Holy Bible then our nation will continue to spiral further and further down into the depths of depravity.
Some of the specific things that need to change in the USA are the following:
- Legal and political corruption: There is no reason for a company to consider building a new manufacturing facility in a state that is obviously corrupt at the highest levels. Companies need fair and honest laws that are legally enforced to protect the company from theft (which includes shoplifting theft) and from other forms of abuse.
- Accidental Manslaughter and Intentional Murder: The Holy Bible clearly explains the difference between an intentional murder and the accidental death of another person. And the Holy Bible clearly says that if a person is convicted of an intentional murder then the murderer should be executed promptly by the government.
Exodus 20:13 (English Standard Version)
13 "You shall not murder."
Exodus 21:12 (New International Version)
12 "Anyone who strikes a man and kills him shall surely be put to death."
Genesis 9:6 (English Standard Version)
6 "Whoever sheds the blood of man, by man shall his blood be shed,
Leviticus 24:17 (New International Version)
17 " 'If anyone takes the life of a human being, he must be put to death.' "
Ecclesiastes 8:11 (New International Version)
11 When the sentence for a crime is not quickly carried out, the hearts of the people are filled with schemes to do wrong.
As long as the USA tolerates one of the worst crimes against its own citizens then why should the honest law-abiding citizens of the USA respect their government? Fortunately capital punishment is still at the discretion of the individual states in the USA and some states may decide to begin executing convicted murderers within 30 days of their conviction. This would help to reduce the crime rate in that state and it would make that state more attractive to investors.
- Hiring Quotas Based on an Area's Population Demographics: In the USA people of all races have had equal educational opportunities and equal job opportunities for more than 50 years. That is enough time for anyone in the USA to have learned the knowledge and the skills required to do any job in the USA including doctors, lawyers, accountants, managers, and every other job in every organization. Companies should no longer be required to hire some percent of people from every racial group or gender. Companies should be allowed to hire people based on their skills and abilities. If a company is allowed to do this then the company will prosper because the company will be able to acquire the best qualified people for every job in the company from the president down to the janitor.
- Equal Treatment of all Employees: A "few" people in one racial group are currently able to do almost nothing while they are at work and their employer cannot discipline them or fire them. But if a white person were to exhibit that same unacceptable behavior then the white person would be warned, and if the white person did not change their behavior then the white person would be fired. All people of all races should be treated the same way and a "few" people in one racial group should not be a financial burden on a company.
- Top Management Priorities: The employees of a company know what is important to the executives of their company based on what the employees actually observe while doing their jobs. If the products the employees are making are poorly designed then the employees will know it. If the materials that are used to make the products are sub-standard then the employees will know it. The employees of a company will model their behavior based on the actual decisions that are made by the company's executives when those executives approve product designs that are inferior, and the executives approve of the purchase of low quality materials. The employees of a company are intelligent individuals and they will not be deceived by smiling faces and fancy slogans.
- Competitive Wages and Benefits: This should be easy for any company to implement. The employees should not need a union to negotiate with management for fair wages and fair benefits. All the companies in one geographical area will be in competition with one another and the best qualified people in each area will accept jobs with the companies that offer them the best employment package.
- State Laws that Discriminate Against Companies: Some states are intentionally passing laws that are causing companies that have been making things in their state for more than a hundred years to move to another state that has fair laws that do not discriminate against the company based on the opinions of a few unethical lawmakers. Companies that wish to open new manufacturing facilities should be able to clearly see the history of how a state has treated their existing companies and it should be easy to find a state that is eager to have the company build a new manufacturing facility in their state.
- Faith in the God of the Holy Bible: A company should consider locating in an area where a significant majority of the citizens in that area are honest Christians. The elected government leaders in these areas will usually need to take the moral and ethical beliefs of the majority of the voters into consideration or they will risk being impeached or not re-elected. True Christians believe in the God of the Holy Bible and they believe that a Christian should put forth their very best effort on any job that they do, and they should pay their taxes without complaining, and they should pray for all their leaders, and they should be kind to all people, and they should not steal, lie, murder, or commit adultery. If a company is able to hire a significant number of employees who attempt to practice these moral guidelines then that company will have a better opportunity for being successful compared to a company where most of its employees define their moral choices based on whatever will maximize the employee's current life style.
A company that carefully considers all of the above variables when they are evaluating different places to build a new manufacturing facility will have a long-term competitive advantage compared to a company that ignores some or all of the above variables.
Proverbs 14:34 (English Standard Version)
34 Righteousness exalts a nation, but sin is a reproach to any people.
May God Bless,
Grandpappy.
Grandpappy's e-mail address is: RobertWayneAtkins@hotmail.com