Innovation and Manufacturing in the US 
(Importance of the connection to innovation and how you can ‘afford’ to produce in the US)
Hans Peter Schaefer
Retired VP of Product Supply P&G/Gillette
Introduction
 German, Married, 2 Teenage Kids
 Hobbies: driving fast cars fast (on the track!), family
travel, ski and dinners
 31 years with Gillette/P&G in Germany, UK and US,
mainly Supply Chain, Global Operations
 Design and implementation of 3 tier manufacturing
concept
 Design, implementation and operation of single
supply chain across 200 countries and 5 BU’s
 Integration of the the Gillette Company’s Technical
Organizations into the P&G structure
Key Message
 Manufacturing is a key factor in every economy
 There are ways to produce successfully in the US
 Connection between manufacturing & innovation
 Pack center concept
 Lead factory concept
 Reputation of manufacturing and education are as
much a key ingredient as is cost
Importance of Manufacturing in the US

Every economy needs manufacturing since I believe that one has
to either grow, mine or produce products to create a profit –
redistributing the profits (money) alone is not sufficient.

Manufacturing jobs support a solid middle class in the US

Manufacturing jobs provide higher skilled service jobs like
design, process engineering, accountants, lawyers, etc.

Each direct job in the car manufacturing industry provides 8.6
indirect jobs!!!!

The danger is that in order to keep the close link between
manufacturing and higher level service jobs, these higher level
jobs might eventually “follow” manufacturing to ??
Importance of Manufacturing in the US

Every economy needs manufacturing since I believe that one
has to either grow, mine or produce products to create a profit –
redistributing the profits (money) alone is not sufficient.

Manufacturing jobs support a solid middle class in the US

Manufacturing jobs provide higher skilled service jobs like
design, process engineering, accountants, lawyers, etc.

Each direct job in the car manufacturing industry provides 8.6
indirect jobs!!!!

The danger is that in order to keep the close link between
manufacturing and higher level service jobs, these higher level
jobs might eventually “follow” manufacturing to ??
Gillette Examples
Connection between Innovation & Manufacturing

Importance of Connection between
Innovation and Manufacturing at Gillette
 The high tech products (e.g. Sensor, Mach3, Fusion
and Fusion Pro Glide) could only be cost effectively
produced (or produced at all) by designing our own
manufacturing process and equipment
 To support this, we had a single technical
organization which included R&D, Procurement,
Engineering, Manufacturing and Supply Chain
 This was enabled by a Program Management
Organization to “manage” the process across the
functions
Example One
Pack Center Concept (or Basic Operation Concept)

Example One - Background

In the mid 90’s a new product was coming - (Mach3)

Due to the technical requirement, and the need to be close to
the R&D and Engineering teams, the ideal startup location
was Boston,…… however

Producing in Boston required the addition of space to the
factory (more capital into an already high cost factory)

Salaries in Boston even for lower level tasks were high

Besides Cost and Capital, Flexibility was a concern – number
of people fluctuating
(some issue not different today, but will get to this with the
second example)
Example One - Facts

Proprietary Technology and Innovation is in the product

Capital requirements for a new product were 95% product
related

Product is identical around the world

Global product level forecast error was +/- 5% on an annual
basis

Capital is only 5 % packaging related

Packaging is different in almost every Geography

SKU forecast error regionally, weekly +/- 50%
Basic Operation Concept
MANUFACTURING
(unpacked product)
UT 95 100%
Done in house (Boston)
with highly skilled and
(paid) labor
PACKAGING
FWIP
Inventory
UT Avg
60 - 70%
Outsourced (Devens) to
Packaging Company
with lower skilled temp
(low cost) labor
Basic Operation Concept
MANUFACTURING
(unpacked product)
UT 95 100%
PACKAGING
FWIP
Inventory
UT Avg
60 - 70%
Major Benefits of B/O Concept:
Lower Cost and Capital - High asset UT in B/O,
Lower Cost in packaging - outsourced
Better Customer Service - Built-in flexibility in Packaging/Buffer
Focus - different tasks on both sides
Better Innovation connection
Gillette R&D connected to product (manufacturing)
Packaging knowledge and innovation connected to packing operation
3 Tier Production Concept
Produce
to Global Demand
Raw
Mat’l
Inv
LOCAL MARKET
REGION
GLOBAL
WIP
Inv
Pack to
Replenishment
WIP
Inv
FG
Inv
Configure to
Order and Ship
FG
Inv
AS
Very High Volume
Very Few SKUs
Few Locations
Highly Automated
High Volume
Medium No. of SKUs
Several Locations
Partially Automated
Low Volume
High No. of SKUs
Many Locations
Manual
BO MANUFACTURING
Global Factory
PACKAGING
Regional Pack Center
ORDER FULFILLMENT
In Market DC
Example Two
Lead (Startup) Factory

Example Two – Background
 As mentioned before, our Factory is located in South
Boston
 High Labor Cost (compared to other locations/countries)
 Land worth a LOT of money (bean counter interest high)
Example Two – Background
 As mentioned before, our Factory is located in South
Boston
 High Labor Cost (compared to other locations/countries)
 Land worth a LOT of money (bean counter interest high)


However
All R&D and Engineering staff, plus trained workers are
in South Boston!!
Example Two – Solution
Creating a High Tech “LEAD” Factory

Assessed the size (output, number of employees) of the
“smallest” viable factory

Designed the factory as a high tech lead factory

Lead means they start up the production of the latest technology
products (currently Fusion Pro Glide, Fusion, some Mach 3)
(Packaging of these products still in outsourced Pack Centers)

When the next generation of technology is ready for deployment
Boston will again start up the new product, BUT as they ramp up,
they also ramp down the older product, which includes training
the receiving factory of the older version and supports the
transfer of the older version to the receiving factor.
Example Two – Result
 Cost overall are down
 R&D, Engineering and Manufacturing are
integrated under one roof
 Very interesting jobs even in the factory –
new technology, training others, etc.
 Huge portion of the land not needed
anymore and can be sold
Reputation and Education
 Education:
 There is a lag of Engineers, quality and quantity
 To offset the quality aspect, we created what
we called the “Tech Op Program”. Three year
formal and on the job training in technology,
leadership and operations!
 Very successful in terms of capability building,
but also in terms retention.
Reputation and Education
 Reputation:
 We (Gillette) treated (level, pay, etc.) the MFG leaders
like the engineering, supply chain and R&D leaders.
 Result was that every young engineer’s dream was to
run his/her factory some day - highly qualified plant
managers.
 P&G plant managers were mostly a level below a supply
chain, engineering and R&D leader.
 Result, it was tough to find a plant manager, let alone a
top notch person, or one in ‘less desired’ locations.
Key Message

Manufacturing is a key factor in every economy

There are ways to produce in the US


Connection between manufacturing & innovation

Pack center concept

Lead factory concept
Reputation of manufacturing and education are as much a key
ingredient as is cost
 Different view of things deliver different solutions!!