Light Manufacturing

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Background

Light manufacturing is defined as a light industrial business where all processing, fabricating, assembly or disassembly of items takes place wholly within an enclosed building. The extent of light manufacturing activities varies significantly between developing countries, although its importance is universally recognized. Light manufacturing, because of the vast number of products manufactured, provide important jobs requiring higher education levels and therefore higher pay. Those skilled jobs help raise the standard of living and lead to higher economic growth than countries based in agriculture. It is, therefore, important to see that this industry keeps abreast of current world developments in technology, marketing, and management.

CEI has operated economic development missions for food processing equipment and agricultural machinery.

How can the CEI program help?

A CEI mission provides key industry leaders with a realistic understanding of applicable methods and procedures that can make the firms significantly more productive, better utilize manpower and facilities, and improve environmental safeguards. The firms become more competitive and the regions they represent rely less on imports to sustain economic growth. All the participating business leaders have a chance to get hands-on experience from some of the most successful and most productive manufacturers (companies their own size) in the United States.

Topics to be covered

Current manufacturing methods
Customer Relations Management (CRM)
Inventory management
Quality control and international standards
Lean manufacturing and lean machining practices
Customer support services
Marketing and distribution methods
Identifying areas and opportunities for market expansion.

Where will the program travel?

The mission will visit small to medium sized enterprises predominantly located in the US Midwest region. It will tour plant facilities, production lines, and office locations to learn economical processes and procedures. It will visit board rooms to meet with executives to discuss and learn successful strategies and tactics for planning growth, access to capital, and managing costs.

Benefits of the program (Ukraine experiences)

CEI has conducted group training programs for household appliances, food processing, and agricultural equipment manufacturing. Examples of a few of the program benefits are listed below.

Subcontracting

Prior to a CEI economic development mission, most manufacturers in Ukraine followed the Soviet era mandate of making everything themselves. This led to ineffective utilization of manpower and capital. It artificially supported higher prices due to costs and allowed foreign competitors to take over many Ukraine light manufacturing markets.

Piranha, a multi-product manufacturer of display cabinets, shelving, and refrigerators, visited the U.S. on a CEI Household Goods economic development mission. Upon return to Ukraine, using the knowledge gained from American manufacturers, they sought out companies that could make components cheaper than themselves and integrated the new components into their product process. They also began subcontracting their under-utilized proprietary paint process to other local manufacturers, and implemented an American style marketing plan. Piranha has since established themselves as the regional leader in their product lines, they and their suppliers have increased employment and wages, and all are now looking at export.

Job Growth and Increased Production

Mayak is a manufacturer of heating systems in Ukraine. After the mission they reorganized their operation and gave employees more specific job responsibilities. They also reorganized and expanded their marketing activities, increasing the number of Ukrainian dealers from 17 to 24. In the year since the mission took place, production is up 48% and sales are up 35%. They have added 40 new high-paying jobs and they are now the second largest employer in the area.

The 16 participants on each economic development mission make valuable contacts with others in their industry. One reason Mayak has been able to handle the growth is that they are making greater use of subcontracting. One of the large companies represented on the program was Kommunar, a well known Ukraine manufacturer. Mayak now subcontracts $218,000 of production to Kommunar annually.

Management Training

Most of Ukraine’s current managers grew up under the communist command and control system. Although most have advanced degrees, they had no chance to learn about more successful western business management practices.

With the transition to a market economy, enterprise managers had to rely on their instincts and native abilities in order to cope with the changes going on around them. None of them had any experience making decisions under these conditions and were understandably fearful of making mistakes.

Participating in a economic development mission provided every manager and business leader with knowledge of increasing employee productivity, improving morale, and training employees to perform a job correctly with significant quality improvements. All of this has allowed them to become stronger competitors for local, and in some cases international markets.

Work Flow and Productivity

Similar to the US, the light manufacturing industry in Ukraine was under increasing pressure from foreign competition. Implementing work flow improvements, production line changes, and facility improvements, all the companies that have participated in a CEI economic development mission have been successful in not only beating back foreign competitors, they have also expanded their domestic markets into neighboring states. Small dairies have increased production more than 80% while reducing equipment by more than half, small appliance manufacturers now sell their products throughout Ukraine because they have a cost advantage over other domestic and foreign competitors, and the agricultural equipment manufacturers have put quality back into their product and now effectively compete with American and European companies for agricultural orders.

Tripled Sales – Sales to NATO

Lyubov Volokita, Director of Energosberezheniye reported that in the year 2000 after the mission they were able to triple their profits. On the technical side they have developed voltage regulators for use on railroad cars and frequency regulators for use on NATO ships. The latter have been built, tested and installed on ships in the Mediterranean.

Market Expansion – Sales up 250%

Frunze is a manufacturer specializing in items and products that contain elaborate stampings. As a result of the information learned on the CEI economic development mission, Iryna Pesina, Sales Manager, reported that in the year after the tour they nearly doubled their product lines and their sales were up 250%. Much of this was due to her work as Sales Manager. They now have two dealers and have received several orders from them. They will attend the Hanover show and are currently negotiating with two Western European companies who will possibly be selling their products after the show. The company has prepared a Marketing Plan that really is being used. They have set up a purchasing department, renovated production facilities, and conducted market research studies. They are also looking to purchase new production equipment. They also have a joint venture marketing operation in Russia and have already supplied some equipment.