Sharp’s New Plant Reinvents Japan Manufacturing Model

Sharp Corp.s New Facility Demonstrates How “Mature” Countries Such as Japan Can Still Maintain and Grow a Homegrown Manufacturing  Base–Is the US Listening?

OSAKA — Sharp Corp.’s new production complex in western Japan is massive by any measure: It cost $11 billion to build and covers enough land to occupy 32 baseball stadiums. But it carries a meaning as large as its physical size. It’s a litmus test for the future of Japanese high-tech manufacturing.

The facility, considered the most expensive manufacturing site ever built in Japan, started churning out liquid-crystal display panels last month, and Sharp’s new flagship televisions featuring the energy-efficient LCD panels go on sale in the U.S. next month. Sharp moved forward the factory’s planned opening by six months, saying the new plant would help it be more competitive.

“When you look to the next 10 or 20 years, the existing industrial model doesn’t have a future,” Toshihige Hamano, Sharp’s executive vice president in charge of the Sakai facility, said in an interview. “We had to change the very concept of how to run a factory.”

Located in Sakai city along Osaka prefecture’s waterfront, the complex represents Japanese industry’s biggest gamble in LCD panels to remain competitive with rivals from South Korea, Taiwan, and China.

The factory’s size accommodates two main factors. One is the size of the glass used to make the LCDs. Sharp is using the industry’s biggest, or “10th generation,” sheets, which allow the company to produce 18 40-inch LCD panels from a single substrate — more than double the eight 40-inch panels per sheet it uses at its other LCD television panel-making factory.

The other factor: Sharp has decided to try and cut costs by moving suppliers on site, a kind of hyper-”just-in-time” delivery system.

The plant currently employs 2,000 people — roughly half from Sharp and half from its suppliers — although the work force will ultimately reach 5,000 as it adds production of solar panels as well.

It remains to be seen whether it makes sense for Sharp to keep seeking ever more-sophisticated production in Japan, or, as competitors have, to simply use less advanced production techniques at lower costs in places like China.

CLSA research analyst Atul Goyal warned in a report last month that the company is making a mistake by “chasing technology” with the new factory.

In the past, such efforts by Japanese electronics makers have resulted in costly capital investments, only to be confronted with limited appetite for cutting-edge technology and then eventually outflanked by a cheaper alternative.

Even Sharp’s Mr. Hamano acknowledged that the company only gave the green light to proceed during a boom period for LCD-panel demand, and that a similar choice might not be made in today’s market.

Rival Samsung Electronics Co. has said it is looking into building a new LCD-panel factory using even bigger glass sheets than Sharp, while LG Display Co. has said it plans to build a new factory in China using current glass size.

Sharp announced the Sakai project two years ago when LCD demand was surging. When consumer spending ground to a halt in late 2008, Sharp didn’t cut costs and curb production quickly enough. Saddled with excess inventory, Sharp posted the first annual loss in nearly 60 years in the fiscal year ended March 31, 2009.

The experience taught Sharp a painful lesson that its supply chain needed to be leaner and its production more efficient, especially if the factory was going to be in Japan, where the strong yen and expensive labor force put the company at a disadvantage to its Asian competitors.

Sharp aims to streamline the costly LCD-panel production process by moving 17 outside suppliers and service providers inside its factory walls to work as “one virtual company.”

In the past, Sharp kept suppliers within driving distance. Supplies are sent not by truck from a nearby factory but by automated trolleys snaking from one building to another.

The suppliers, which include Asahi Glass Co. and Dai Nippon Printing Co., built and paid for their own facilities and are renting the land from Sharp.

Despite their location inside the plant, Sharp says its suppliers are permitted to sell their products to other companies.

At Sakai, Sharp has also linked its computer systems with suppliers so an order to the factory alerts suppliers right away. In the past, Sharp would email or call suppliers and place orders, creating a longer lag time.

Sharp wouldn’t disclose how much, if any, cost savings will result from manufacturing LCD panels at Sakai, but analysts estimate a 5% to 10% savings.

Corning Inc. the world’s largest maker of LCD glass substrates, built a factory next to Sharp’s Sakai plant. Corning says the arrangement reduced total order cycle time from an average of one to two weeks to a matter of hours. Corning also says the proximity reduced the damage risk in transporting massive glass sheets on trucks.

While Sharp is a long-standing customer, Corning said it was concerned initially that building a factory on site would mean that it was “hitching its wagon” to Sharp since it’s the only customer for such large glass substrates. Ultimately, Corning decided to proceed based on its faith in Sharp’s Sakai plans.

“There’s nothing like it anywhere,” said James Clappin, president of Corning Display Technologies.

Daycare Centers Foster Kids TV Habit!

AP) 

Parents who thought their preschoolers were spending time in home-based day cares, taking naps, eating healthy snacks and learning to play nicely with others may be surprised to discover they are sitting as many as two hours a day in front of a TV, according to a study published Monday.

When added to the two to three hours many parents already admit to allowing at home, preschoolers in child care may be spending more than a third of the about 12 hours they are awake each day in front of the electronic baby sitter, said Dr. Dimitri Christakis, a pediatrician at Children’s Hospital and Regional Medical Center in Seattle and a researcher at the University of Washington.

That’s double the TV time he found in a previous study based on parental reports of home viewing, according to findings published Monday in the journal Pediatrics. The study is the first to look at TV watching in child care in more than 20 years.

The figures come from a telephone survey of 168 licensed child care programs in Michigan, Washington, Florida and Massachusetts. Christakis said he thought television use was probably underreported.

Of the child care programs surveyed, 70 percent of home-based child cares and 36 percent of centers said children watch TV daily. The children were watching TV, DVDs and videos. The study did not track what kind of programs were shown.

“It’s not what parents have signed up for,” Christakis said. “I’m not sure how many parents are aware of this.”

The American Academy of Pediatrics discourages any television viewing of any kind in the first 2 years of life and recommends a daily limit of 1 to 2 hours of quality programming for older children.

Children go to day care to develop social skills, build on cognitive abilities and enjoy imaginative play, as well as allowing their parents to work, Christakis said.

“We know what’s good for children and we know what’s not,” Christakis said. “High quality preschool can make a very, very positive difference. We’re so far from meeting that, that we really have a lot of work to do.”

His research found a difference between the amount of TV watching at home daycares and larger child care centers, although both reported some TV time.

The study found that among preschool-aged children, those in home-based day cares watched TV for 2.4 hours per day on average, compared to 24 minutes in centers. Toddlers watched an average of 1.6 hours in home care and about 6 minutes in centers. Only home-based day cares admitted putting infants in front of the TV, for an average of 12 minutes a day.

“It’s alarming to find that so many children in the United States are watching essentially twice as much television as we previously thought,” he said.

Other research has connected excessive TV watching during the preschool years with language delay, obesity, attention problems and aggression.

Dr. Michael Rich, director of the Center on Media and Child Health at Children’s Hospital Boston, wasn’t surprised by the findings in this study but he was forgiving of the parents and child care providers who put kids in front of the TV.

“In general, we still have a culture that sees television as benign,” said Rich, who is also an associate professor of pediatrics at Harvard University. “This is an area where we’re learning more and more all the time.”

He compared society’s growing knowledge of the impact of TV on child development to the early days of seat belt use. Today’s parents and child care providers grew up on TV, Rich said, so it’s understandable that they do not recognize the problem.

“We can always do better,” he said.

Christakis said one of the main problems with TV for young children is that it takes away time that could otherwise be spent playing outside, being read to, playing with blocks and talking with adults and other children.

The study did not include passive TV time, when the TV is on in the background but no one is actively watching it. Christakis said any time a TV is on, children speak less and adults interact with them less frequently.

Instead of urging parents to turn off the TV, President Barack Obama might want to start sending the same message to child care providers, Christakis said.

“Hopefully this will serve as a wake-up call,” he said.

Job Cuts Kept Eaton on Track

 

CEO Cutler Seek Growth Overseas, Skeptical of US Growth, Fears Debt Accumulation

 

Timothy Aeppel. Wall Street Journal. (Eastern edition). New York, N.Y.: Nov 16, 2009. pg. B.1

Early and deep cost cuts by Eaton Corp. Chief Executive Alexander “Sandy” Cutler have helped the industrial stalwart weather the recession better than many other big manufacturers.

The company, whose machinery and parts help run everything from trucks and ocean liners to fighter jets and water-treatment plants, cut 15% of its 83,000 full-time workers. Mr. Cutler also ordered the workers who remained — including top managers — to take a week off without pay each quarter. And he personally forfeited four weeks’ pay.

The company believes the job furloughs allowed the company to avoid the additional layoff of 3,000 to 5,000 employees.

Now, the company is again thinking growth, almost exclusively in fast-growing foreign markets like China and Brazil. Mr. Cutler worries that U.S. policies, particularly the rapid accumulation of government debt, will hobble the economy and make the U.S. a less attractive place to invest.

In an interview at Eaton’s headquarters in Cleveland, Ohio, overlooking Lake Erie, Mr. Cutler discussed the global slowdown and his navigation through tough times.

Excerpts:

WSJ: You cut workers during this recession but left your R&D spending almost untouched. Why?

Mr. Cutler: Our very strong feeling is that you gain market share during down times. That’s when our customers have time to engineer in our new solutions even if they may not be able to buy a lot of the new products right now. That’s why we said, “Don’t cut that back.”

WSJ: What mistakes did you make in responding to the recession?

Mr. Cutler: We went through two rounds of layoffs instead of one, and we would have preferred to have to go through one. It creates uncertainty. Every time you make a major change in a company, you’re pulling people off the task they do on a daily basis. They have to think about wholesale changes of resources and how those affect priorities.

WSJ: What are you doing right now to navigate through the recession?

Mr. Cutler: We’re being very careful about adding back resources. Our concern going forward is that everyone is understandably hopeful that things will get better. We feel you’ve got to be cautious through this time period because there’s a lot of damage in the economy. Different segments will come back at different times.

WSJ: But many economic indicators are looking up, including the recently reported 3.5% growth in third quarter GDP. Why are you feeling so cautious?

Mr. Cutler: I think the 3.5% GDP third quarter is in many ways the invitation to the wrong party. You look at 3.5% and say, “Wow, things are really, really good.”

But then you get below the surface and say, “Well, the third quarter was influenced by some fairly important stimulus activity here in the U.S., just as it has been elsewhere.” So you’re hearing some economists saying the 3.5% was maybe closer to 1% to 1.5% on a real basis.

Just as we misread how deeply things went down, you want to be very careful on the upside not to misread these things.

WSJ: What else keeps you awake at night?

Mr. Cutler: We’re very concerned about this accumulation of U.S. debt. There are very good reasons for stimulus bills around the world to try to help economies get through these kinds of calamitous times.

But the longer term implication of very low interest rates and the accumulation of debt is the pressure we’re seeing manifested in the value of the dollar. The real challenge for our economy right now is: Can we still attract foreign capital at the rate that we did over the last 15 years?

Or will we have to start to pay a significantly higher interest rate than the rest of the world to attract capital because our debt is increasing so fast?

If we do have to start to pay higher interest rates than the rest of the world, obviously that means our growth rate will be below the rest of the world.

WSJ: What’s Eaton’s response to that?

Mr. Cutler: Our response is that we’re 55% outside of the U.S. and we’re 45% in the U.S.

Twenty-two percent of our revenue now comes from developing nations.

Seventy-six percent of the world GDP is outside the U.S. So if you’re really going to sell into all the regions of the world and take full advantage of the economic growth there, you’ve got to have an increasingly global balance. You take this fragile economy — these interest rates well below long-term interest rates of 3% to 3.5%, and the need to attract capital at a competitive interest rate. That is a very tough equation. It would be very difficult to say you’re being prudent to put all your eggs in the U.S. basket right now.

WSJ: So have you put the kibosh on new projects and other expansions in the U.S. because of this?

Mr. Cutler: It’s not my job to make individual project decisions. What I have decided is that I don’t buy that [3.5%] growth rate for the U.S.