low+_skilled_+jobs - ‘ nets with ‘whiz-bang gimmickry...

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Unformatted text preview: ‘ nets with ‘whiz-bang gimmickry that doesn’t always fill an actual consumer need. 3Com Corp. was determined to avoid that trap with Audrey. launched in October, as the first in its Ergo line of Internet appliances. Audrey was sup- , posed to ease access to e-mail, the In- ternet, and an electronic calendar. To ‘ make stu'e it turned out that way, 3Com spent four months videotaping 64 house- holds in three cities to see exactly how they used existing devices—from pad and paper to PCS—to organize their days. A crucial insight: It took, on av- ' erage, an hour and 10 minutes between the time consumers decided to use their PCs and the time they actually logged .1 on, meaning PC use was treated as a j planned activity. By contrast, they used , their Palm handhelds more like a tool, logging on less than 10 seconds after making the decision. Designing Audrey to be more like a tool than an activity became an overriding goal, says Ray‘ Vaninger, product development director for Internet appliances. j Ethnographic insights can help even . with more humdrum products. By video- j taping consumers in the shower, plumb- ing fixture maker Moen Inc. uncovered safety risks—such as the habit of some women who were shaving their legs of holding on with their free hand to one i unit’s temperature control. Uncovering such design flaws by simply asking i questions is almost impossible. “In many ways, these become unarticulated l needs,” says Jack Suvak, director of 1 marketing research at the North Olm- sted (Ohio)-based manufacturer. , DIGGING DEEP. Indeed, focus groups, , though still huge in the research arse- : nal, have many limitations. Stronger , personalities can wield undue influence, ‘ and participants often won't admit in public—or may not even recognize— their behavior patterns and motivations. Focus groups, for example, told Best Western that men decide when to pull ' off the highway and where to stay. The ' videotapes proved it was usually the women. For some hard-to—reach classes of consumers, any regimented setting may restrict their responsiveness. "If you want to learn about preteens. you have to see them in their natural envi- ronment, not a research lab they see as alien,“ says Hy Mariampolski. presi- dent of QualiData Research. a New York-based ethnographic research firm. Best Western captured such a wealth of customer behavior on tape that it has delayed its marketing plan in or- der to weave the insights into its core strategy. "The process definitely opened our eyes." says Dougherty. Unfortu- nately for seniors. that means the rooms won't be getting any cheaper. By Gri‘rg/ Kliei'mouc/l in New: York 94 :-*'_19ice=5.‘.‘eek / Eeb’..1rv I to do the work of six us- ' that makes the same COMMENTARY By Aaron Bernstein LOW-SKILLED JOBS: DO THEY HAVE TO MOVE? Shoe Inc.’s factory in Norridgewock, Me., and you will see workers using high-tech skills to make a low-tech prod- uct. Well-trained, $14-an-hour employees work in small teams, perform a half- dozen jobs, and switch tasks every few minutes. Some operate computerized equipment with up to 20 sewing-machine heads running at once. Others control an automated stitcher guided by cameras, which allows one operator Stroll through New Balance Athletic ing ordinary sewing machines. Now, visit a Chinese subcontractor’s factory shoe for New Bal- ance. You might think you had traveled back in time 100 years. In the factories that manufac- ture shoes for New Bal- ance, Nike, Reebok Inter- national, and other U. S.-based athletic— footwear companies, hun- dreds of women hunch over sewing machines much like ones used in their grandmothers’ time. The story is the same across China and in In- donesia and Vietnam. Young women in their teens or early 20s, with lit- tle education and few skills, put in long hours six days a week, usually per- forming the same task in mind-numbing repetition for 20¢ to 40¢ an hour. The ability of New Bal— ance’s five U. S. factories to offset this vast labor-cost gap raises an intriguing is- sue: Would the U. S. be better off if low—skilled jobs could be upgraded in— stead of moved to low- wage countries? Econo- mists have long argued China Data: anmessWeek. New Balance Athletic Shoe inc. Balance‘gkéepssome production: at home - that the U. S. as a whole is better-off when low-skilled manufacturing goes abroad. True, a company usually earns more profit by slashing labor costs. But to economists, that’s not the point. Rather, according to the doctrine of com— parative advantage, U. S. productivity and living standards will rise if we allow countries with a relative abundance of low-priced labor to perform our low- skilled work. Doing so frees up U. S. in- vestment and workers to move to indus— tries that require more skill and capital investment—areas in which our advancet: economy has the edge. IRON LAW. Now some trade experts are wondering if the seemingly iron law of comparative advantage always holds. The theory rests on the as- . “ sumption that a low-skilled U. S. jo‘r shifted offshore would have re— mained low-skilled had it stayed home. But if U. S. companies could raise the skill level for such work and perform the task ~ more efficiently, as New Balance does, the gains from shifting production would diminish. If the work can be upgraded, “it's ‘1 ' U.S. employees get" " not so obvious which coun~ constant training, ' master a variety of ' skills, and work in small teams ° Managers are creative in adapting new technologies to shoemaking ° The productivity gains allow U.S. workers to produce a pair of shoes in 24 minutes, vs. 3 hours in China. That whit- tles the cost per pair of shoes to $4 in the U.S., vs. $1.30 in tries should do the export- ing,” says Robert C. Feen— stra, a trade economist at the University of California at Davis. “Our predictions about trade patterns get a little hazy when this hap- pens; economists haven’t really worked it out.” The issue raises interest: ing questions for U.S. poli- cy, especially at a time when manufacturing work— ers are facing a new wave of layoffs as the economy slows. Trade economists have shown that the shift of jobs overseas is one rea— son for the decades~long decline in the wages of low-skilled U. S. workers. And indin‘dual job losers ' ‘u in“- mun". a j i ( I ' ' Computerized sewing equipment allows on“ ’ operator to do the work of many suffer economic setbacks that can last for years. Still, economists say, the gains to the overall U. S. economy outweigh such losses. If it turns out that improving the jobs ofi‘sets that gain, U. S. may want to encourage companies to take this path. For example, Congress might offer tax credits or other incentives to companies that invest in training or technology for low-skilled production. If nothing else, New Balance’s efforts show that it’s possible to improve jobs instead of move them. In this case, the drive to do so comes from owner Jim Davis, who bought the private company in 1972 when it had sales of $100,000. As he watched Nike and other rivals move offshore, Davis came to think that pro~ ducing close to his customers could give him an advantage in quick turnaround on new styles and in fulfilling orders for shoe stores. The son of immigrants who prospered in America, Davis says he also feels a personal obligation to pro- duce in the U. S. “It's part of the compa- ny's culture to design and manufacture here,” he explains. But doing so requires constant innOva- tion. Over the past five years, New Bal- ance has doubled its U.S. workforce, to 1.200, and opened a fifth U. S. factory. But back in the mid-1990s, sales explod- ed~from about $300 million to $1.1 bil- lion today. The company couldn't ramp up U. S. production fast enough to keep pace, so it turned to subcontractors to fill the gap. The share of its shoes produced at home fell to 25%. \\ith the rest com- ing from Asia. Over time. Davis says. he aims to get back to the 70% production New Balance maintained in the US. years ago. How can New Balance make shoes at home when Nike, Reebok, and the rest can’t? Mainly by adopting the latest manufacturing techniques used by U. S. companies in higher~skilled industries. Employees start with 22 hours of class- room instruction on teamwork and other techniques and get constant training on the factory floor. They work in teams of five or six, sharing tasks and picking up the slack for one another to make sure they get everything done. SEE-AND-SEW. New Balance managers also spend a lot of time looking for new technology and adapting it to their needs. For example, the company’s 70 see-and-sew machines, which cost $100,000 each, come with standard metal templates that were designed for the clothing industry. New Balance factories set up on-site machine shops to grind their own templates, which guide a nee— dle in the shape of each shoe part. It takes a week to create the 30-odd tem~ plates needed for a typical shoe. The combination of teams and technol- ogy has slashed the cost disadvantage of producing in the U. S. New Balance’s MADE IN CHINA: Workers at the Power Beautytl’lctorg in Guangdong U. S. workers turn out a pair of shoes in just 24 minutes, vs. about three hours in the Asian factories that make the same product, says Herb Spivak, New Bal- ance’s head of operations. If the U. S. workers were no more efficient than those in China, New Balance’s labor costs in the U. S., where it pays $14 an hour in wages and benefits, would be an untenable $44 per pair of shoes. But the company has whittled the cost down to $4 a pair vs. $1.30 in China, Where labor costs are about 40¢ an hour. “[In Asia,] their labor is so inexpensive that they can waste it," says Spivak. “Ours is so dear that we come up with techniques to be very efficient.” Davis says New Balance can remain competitive under these circumstances. The remaining $2.70 labor cost differen- tial is a manageable 4% of a typical $70 shoe. And it’s offset by the advantages of producing in the U. S., says Davis, where he can fill store orders faster than rivals and whip out style changes more quickly. This also allows New Balance to forgo extensive advertising, so it can af- ford the $15 million or so in annual capi- tal investments required by its high-tech approach. Profits come in at midrange in the industry. Of course, many of the millions of U. S. jobs that have gone offshore over the decades could probably never have been upgraded enough to offset the vast wage differentials with developing coun- tries. But New Balance’s experience pro- vokes the question of whether the U. S. should begin to encourage companies to take the alternative path to profits. Bernstein writes about labor markets and soda! f.“,>’I/.é’8"fl'I)//J llhs/u'ngton. NW" q: 'r..-.,, -':;"r'1.’/ .1‘, Fol 'i/u' .- h M. H‘EI‘I'H ill \Mll .[ ..-q>,: ...
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