LOCAL CANON PLANT SETTING OWN COURSE

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Local Canon plant setting own course
The Newport News operation is testing a variety of ideas that could mean hundreds of new jobs.
October  2007 A few years ago, the top corporate managers at electronics giant Canon quietly set a plan in motion to allow their subsidiaries in the Americas, Asia and Europe to chart their own futures.While the corporate functions for Canon Americas are in New York and the research is in two other states, all the heavy lifting is done by 1,400 workers on the Peninsula. Canon’s only manufacturing facility and a separate distribution center are in Newport News, and a major printer toner cartridge recycling plant is in Gloucester.Many of the manufacturing functions have shifted from here to overseas as electronics manufacturers increasingly compete on price. That left a lot of space at the Newport News plant, where every employee from CEO Takayoshi Hanagata on down wears a blue uniform shirt with red pinstripes, to use for whatever workers could dream up. And that has spurred the development of a variety of unique new business models that are now getting tested.A plant once used for manufacturing core products for Canon is being literally converted in every corner into new service-based manufacturing and troubleshooting business lines. The changes could result in hundreds of new hires.”Now we’re allowed — actually requested — to go in other directions too,” said Brian Strangways, director of the business development division for Canon Virginia.The local managers are re-making the Canon business around a model of advanced support services for Canon products and manufacturing for companies that need to outsource to a sophisticated operation with tight quality control.

Servicing Canon products — called insourcing — is part of a corporate wide shift to vertical integration for Canon, which is known for its printer, copier and fax machines and cameras. Instead of sending them to be fixed by an outside company or a landfill when there is a defect, Canon is bringing such services in-house for better quality control.While many other electronics manufacturers have outsourced to countries such as China, Canon’s own Asia operations are maintaining control, albeit in low-cost regions. The Newport News operation is now targeting a void left in domestic advanced manufacturing that emerged when U.S. production shifted overseas.”The mature, high-volume products went to low-cost countries,” said Strangways.Canon Virginia was hired this year by 3-D Systems to mass-produce a desktop 3-D modeling machine. With an appearance similar to a commercial printer, the machine can sit on a desktop and a 3-D drawing is actually turned into a small physical model inside the machine.While Canon wants to win more business like this, contract manufacturing is not new there. Canon has long produced laser printer cartridges for competitor Hewlett-Packard. The companies are rivals for ink printer cartridges, but not for laser cartridges.”We’ve been doing it for 20 years, and it’s been successful for both companies,” said Strangways.

The cartridges, not the printers, yield the profits. The cartridges are the heart of the machine, and require the most care to manufacture. That is why the production stayed in Newport News. One of the plant’s first outside manufacturing clients moved production from China to Newport News because the necessary quality control and constant communication with engineers didn’t work overseas.”Manufacturing in China is great if the product is simple,” said Strangways.The Newport News plant has developed expertise in making expensive molds used for mass-production plastic parts. While once used for its own printer and copier manufacturing operations, the plant is now making molds for outside customers.Canon has invested $6 million in the Newport News capabilities in recent years and wants to annually double sales to become one of the top-10 toolmakers in the country. This was another business line that evolved as manufacturing moved overseas and put smaller machine shops out of business.Yet another outgrowth of the American outsourcing phenomenon has been a new problem when it comes to repairing expensive equipment with defects.”Logistically, it doesn’t make sense to send that back overseas,” said Strangways.Canon sees a huge potential business in reverse logistics, which is troubleshooting problems in returned or warranty products.Canon is mostly starting by doing this work for its own products, but it has also started working for other manufacturers and wants to expand its work for outside firms in the future.Besides the problem of not being able to send returns back overseas, shrinking electronics profit margins and environmental concerns make it more costly than ever to follow the old practice of often disposing of returned products. Canon sees a future in salvaging some parts and recycling others.”Because of that, there’s really a whole new industry starting up,” said Strangways.Canon’s Industrial Resource Technologies facility in Gloucester salvages metal and plastic for all the black and white toner cartridges in the Americas. The materials — about 10,000 tons a year — are reused or sold. The plant may expand into color cartridges soon.But goal one is to fix the returned products. Already, rows of Hewlett-Packard laser printers inside the plant await diagnosis from Canon technicians. Of course, Canon is applying that expertise to its own printers.

The dealers that sell Canon copy, print and fax machines often would have third-parties service the machines. That could lead to quality problems with both the service and inferior substitute parts. The ensuing repeat problems could sour dealers’ relationships with their corporate clientsTo improve the service and cost and make Canon more appealing to dealers — who could choose to sell a competing brand — Canon brought the repairs back in-house in Newport News. The move is part of the vertical strategy of improving quality, cost and speed by controlling the process internally.Canon’s digital camera sales are still growing at a strong clip. That also means the demand for repairs is growing.The new camera repair shop has about 23 employees now and hopes to grow to about 300 workers over the next few years. A large new space in the plant is getting overhauled right now to accommodate the expansion.Canon still has 160 acres of land near its Newport News campus that are being held in reserve to grow the business. The company hopes its successful transformation will mean more buildings and high-paying jobs there in the future.The changes already mean Canon is becoming more technically-oriented and searching for engineers, supervisors, toolmakers and machinists. Some of the lost manufacturing jobs of old at the plant are being replaced by more challenging, advanced positions with bright futures.”It’s exciting for our employees because we’re going through the changes,” said Rick Hammond, Senior Director of Human Resources.Perhaps most tellingly, Canon is even hiring its first marketing employees to help win outside business. As an internal cog for Canon, the local plant never needed to market itself to new clients now it does.

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November 6, 2007 at 10:58 AM