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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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