This news article from my former employer Steelcase is an example of the larger macroeconomic change that is transforming business models in the manufacturing industry.
I’ve written previously of Tom Friedman’s new book “The World is Flat“, which gives a thorough review to to this transformation – driven by enabling technologies – in the ability of companies to manage manufacturing and the supply chain globally. I think of it as a shift in the liquidity of production resources. Companies can move factors of production globally with much greater flexibility these days. Unfortunately, but inevitably, this process can be devastating to local manufacturing economies.
In 2002, executives at Steelcase realized the key role of technology in this transformation and brought in SAP for the first installation of the SRM / SCM suite in North America. I was responsible for the Business Intelligence analytics.
Steelcase calls the implementation SupplySync. The Supplysync site contains functionality that handles all of the workflow for new supplier registration and qualification, then allows internal employees and external suppliers to share data and web services.
On the SAP BW side, I created BW web reports published to the SAP Enterprise Portal with authorization variables. This allowed external suppliers to flexibly access a variety of BW queries giving them invoice status, product line production planning data, and product specifications, automatically filtering to only thier authorized data but sharing a single query with all other suppliers.
I was a witness to the painful nature of these changes to my white- and blue-collar colleagues, as a survived the wrenching process of seven rounds of layoffs totalling over 10,000 employees in a three-year period. And, there have been two more rounds since then. Have you in your personal career, or your has your company, fully responded to the realities of a flat world?
Steelcase to close three facilities and cut 600 jobs over next two years
(Grand Rapids, March 29, 2005, 9:40 a.m.) Steelcase announced Monday that it will close three manufacturing facilities in the Grand Rapids area over the next two years. Production will shift to other Steelcase manufacturing sites, some of which are in the West Michigan area.
The losses go beyond jobs and sites. Kent County has lost 5,000 furniture manufacturing jobs in the last five years. Steelcase is the single largest taxpayer in the city, and when it quits production it will be the first time in company history it will not produce furniture in here.
“We complain about not having enough space in Grand Rapids for new plants. Well, we’ve got lots of space now,” said Mayor George Heartwell.
Grand Rapids city officials are discussing the impact these job cuts will have the city’s economy. The company’s seating plant, systems plant, and the core steel plant will close, resulting in the loss of 100 salaried and 500 hourly positions. Thirty of those jobs will go to Mexico, while the rest will be moved to a plant in Atlanta, Georgia. Employees with less than 17 years of seniority could be looking for a new job.
The company says the move will lead to annual pre-tax savings of $35 to $45 million.
The announcement comes just one year after Steelcase president and CEO James Hackett said he was optimistic about the future of Steelcase locally. “I am very optimistic…the volume will pick up, in which case we’re off the pressure of reductions of the employees,” Hackett said in April 2004.
On Monday, Steelcase spokesperson Jeanie Hill said this move was made to streamline the company’s manufacturing process, putting production facilities closer to component facilities and suppliers.
“The changes we’re making today are not reflective of economic conditions. Or as you’ll see on Wednesday when earnings come out, necessarily an impact to our company’s profitability. What this is looking at is a plan to modernize and revolutionize our industrial system,” adds Jeanine Hill.
Steelcase says that it will explore options to sell or redevelop the facilities, which are valued at approximately $30 to $35 million.
Despite the job cuts announced Monday, Hill says half of the company’s manufacturing jobs will remain in West Michigan. Behind the 600 positions, another 300 jobs will be moved to facilities in Gaines Township and Kentwood.
“It still pays the bills for at least another year or so. I guess that’s one way to look at it,” an employee who has worked for the company for 19 years told 24 Hour News 8.
“They’re going to be shutting down the chair plant, so even employees like me who are going to be staying, we don’t really know what’s going to happen to us,” said another employee.
The employees 24 Hour News 8 talked to say working at Steelcase the last couple of years has been tough, to say the least, because of layoffs, after layoffs, after layoffs. Many of them worried when the axe would fall on their position. For 600 of them, it happened Monday morning.
“Very quiet. Everybody is just real quiet…hardly any talk going on at all,” said one employee. “You can wish them well and stuff, but it’s still a matter of there’s not a lot of hope.
“I think it’s going to get a lot worse before they’re actually done with it,” said the 19-year veteran employee.
Workers have three options – they can take an early retirement, a voluntary buyout, or accept an involuntary severance package.