Jun 26, 2012
As part of the industry analyst trip I wrote about previously, Canon brought us to a manufacturing plant in Suzhou, China (in Jiangsu province near Shanghai). The site produces all of the imageRUNNER Advance units sold worldwide as well as the feeding and finishing devices associated with the series. Founded in September of 2001, this site produced its first imageRUNNER in 2002. It now has around 8,600 employees, of which 6,000 or so work on its massive production floor. The site is jointly controlled by Canon, Inc. (66.5%), Canon Finetech, Inc. (23.5%), and Canon (China) Co. Ltd. (10%). It cost approximately $67 million to build and in 2011 accounted for $1.44 billion in sales (this figure represents an internal transfer).
Why Suzhou? Canon chose to build its plant in Suzhou for two reasons: (1) easy access to component manufacturers and (2) the region’s large base of technology-savvy workers. Canon’s goal was to create an environmentally-friendly and technologically-advanced plant capable of top-level quality production using a quality control philosophy based in part on upstream parts management.
To manage component parts, Canon leverages the more than 10,000 component makers in the greater Suzhou/Shanghai area. These companies served existing industries prior to Canon’s arrival and had experience providing components to copier/printer manufacturers. Canon stated that 97% of parts for the factory are delivered within eight hours of production and that 25% are delivered every two hours. Extending this concept, Canon is now introducing a just-in-time component supply process that will accelerate delivery even further. Even with this rate of supply, Canon has very low tolerance for defective parts (six in one million at the most).
In addition to working with outside suppliers, Canon also has an on-site parts manufacturing center. It sees three benefits to having a parts center on the grounds of the factory: (1) service is good and any component failures are communicated immediately to the site; (2) inventory is reduced; and (3) there are fewer parts to discard. Given that there are a huge number of parts in an imageRUNNER Advance 8000 (about 25,000, which is equivalent to the number of parts in a car) you can see why parts management is such an important aspect of the plant’s management strategy.
The parts that are made on-site tend to be the bigger, expensive, and more technologically-complex components. Canon also admits that there are some proprietary components that they want to keep confidential and can do so more effectively with an internal parts manufacturing center. Some components such as imaging drums and toner cartridges are provided from Japan by Canon, Inc. This is one reason for the manufacturing delays in China that followed the Great East Japan Earthquake in March of 2011.
For competitive reasons Canon would not allow us to take photographs on the production floor, so a written description will have to suffice. In a word, it’s huge. The assembly lines go on as far as you can see with dozens of assembly lines and thousands of employees in blue, pink, and yellow hats at work. There are about 6,000 factory floor workers in all. New employees are identified by pink hats. Experienced ones get blue hats. The quality control staff wears yellow. The color scheme is repeated on their shirt collars: dark blue in production, red in production administration, and light blue in management (to mention a few of the rainbow of colors used).
A remarkable fact about the site is that the average employee age is 21.5 years. This is stunning until you take into account that employees can be as young as sixteen and that many of the older managers are Japanese and employed by Canon Inc. (and therefore are not factored into the average).
Canon described employee turnover as 5% per month. Turnover on the lesser skilled assembly line jobs accounts for much of this. While this seems high, they note that turnover rates in the 15% to 20% range are not uncommon for the area. Though there is concentrated turnover in some jobs, Canon said that 70% to 80% of employees remain at the end of the year.
The factory is capable of producing 750,000 units or more per year. It takes between 200 and 1,000 minutes to produce a machine, depending on the complexity of the design. Unmanned carts carrying parts (or removing unused components and packaging) follow a painted track on the floor (a black line with a white stripe down the middle). Canon notes that it could expand on the site if necessary, via more shifts, efficiency improvements, and/or physical expansion of the plant.
After the Great East Japan Earthquake the factory had to discontinue production for two months during March and April of 2011. To catch up and fulfill the annual production requirement the site produced 150% of typical volumes in September and October. Though this factory is currently the only one is producing imageRUNNER Advance units that will change next year as a part of Canon’s business contingency plan initiative. In September of 2011 Canon established a factory in Prachinburi, Thailand. It will have 5,000 employees and will start production in April of 2013.
Asked about the biggest difficulty of running a factory in China, the site’s president identified increasing labor costs. For China, which has long held a wage edge over other countries, advantages like component manufacturing expertise are becoming more important. Skilled employees also allow companies like Canon to raise efficiency through the introduction of advanced automation techniques.
I have been to a number of sites that produce production digital printers but I have never seen a site as immense as this one. The amount of automation is also very impressive, particularly when you consider that Canon believes that even greater levels of production are possible. It was a long way to go to see a factory, but the trip was well worth the effort.
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