Helsinki (25.10.1998 - Maarit Huhtaniemi**) Anja Lamberg is a mechanic who assembles frequency transformers. She earns much more than a mechanic in Asia. However, her weekly working hours at the ABB factory in Helsinki are shorter than those in Far-East industrial plants.
Since the Asian devaluation spiral one might think that transferring production from Finland to cheap labour countries would be more profitable than ever. Finnish companies disagree.
It is the production model that makes the difference between a cheap labour country and Finland. On an Asian assembly line women sit side by side performing work divided into short stages. In Finland there are often production cells made up of multi-skilled employees. The cell assembles the product from beginning to end according to the customer's order.
"Here a worker knows the production process for 10 to 20 different products", explains ABB health and safety manager Taisto Flinkman.
According to Juhani Pylkkänen, a technology director in the same company, independent work teams function poorly in low-income countries because of differing educational levels and working culture.
"In China a young woman who comes from the provinces to work, for instance, knows only one work stage after a year in an electronics factory", notes Rami Raulas, head of the Finnish subsidiary of Japanese computer producer Fujitsu.
Nowadays customers mainly make complementary purchases so the employee must know how to make only a few components of a certain model at any one time. While an Asian assembly line factory churns out huge amounts of a single product, Fujitsu's plant in Espoo, near Helsinki, produces more than 7,000 different models.
The Nordic countries have been pioneers in cell production methods.
The Chief Executive of Fujitsu was shocked when visiting the computer factory in Espoo in the early 1990s. "Microcomputers are not made this way", he said, horrified by the absence of an assembly line. "But the customer wants it done in this way", was the answer which the Finns used to calm down the indignant Japanese.
Nowadays, the Chief Executive himself lectures on the advantages of customer oriented production. Factories are also closing their assembly lines in Japan in order to pay closer attention to the needs of customers.
Raulas has no worries that Fujitsu's computer factory will be transferred from Espoo to a lower wage country. On the contrary, since the mid 1980s European production has been transferred into Finland and Germany.
Eero Eloranta, Professor of Industrial Economics at Helsinki University of Technology, is also ready to debunk the persistent myth of the inevitable transfer of production to cheap labour countries.
"In such countries the labour force is cheap, but the level of skills is not very high", he says. "The key criterion nowadays is no longer labour cost but overall productivity and quality."
Factory managers now swear by customer oriented production. There is no point in moving capital and goods and in having work done before there is a paying customer.
Labour costs are not significant if most of the overall production cost depends on other expenses such as the use of machinery and raw materials. It would likewise make no sense to move the factory to a developing country unless there was a skilled labour force there.
"Here labour costs account for only a few per cent of the price of a finished product. Problems in material flows or unnecessary maintenance can easily become more expensive than the payroll", Raulas notes.
Savings also mean needing fewer supervisors and quality controllers than there are in an assembly line factory. Employees get a share of the savings in the form of idea bonuses. "Many improvements in products and in production processes come from the factory floor", says Raulas, expressing his gratitude to his skilled staff.
The cell production model has also improved job satisfaction. An ordinary working day can look very convivial. A few employees just sit and the work seems to advance slowly. According to Pylkkänen effective production at ABB does not demand an especially tight rhythm of work.
"Here there is more democracy than, for instance, in the United States, where work is more conditioned by the machinery", Pylkkänen says.
Seeking maximum benefit from an expensive machine often means shift work. Cell factories also operate in shifts, but the greater degree of independence allows more flexibility in working hours. Both ABB and Fujitsu have employees who prefer 12 hour shifts compensated by extra days off.
The division of production models cannot be made solely in terms of geography as Europe still has a variety of factories. Moreover, cell factories in Nordic countries have not been an overnight success. The idea of independent cells was enthusiastically received in car factories as long ago as the 1970s, but at the start of that decade Saab had to close down its new cell factory in Malmö in Southern Sweden.
At ABB we don't talk about self-regulating but rather independently operating cells and teams. "Workers do not regulate themselves. The origins of both product and production lie in the needs of the customer", explains Taisto Flinkman at the frequency transformer factory.
Fujitsu also experiments with forms of work organisation differing from pure cell production. Some of the employees assemble computer circuit boards and mechanical parts in advance, but hard disks, memory and processor chips - the parts which most rapidly fall in price - are installed only after the order has been placed.
Professor Eloranta thinks that the most effective way to improve western factory efficiency in recent years has been by refining their logistics. This means rationalising the flow of capital and materials. After delivery the invoice is quickly despatched, but processing incoming invoices is not so urgent.
In Eloranta's opinion there is no need to fear the countries of the Far East as it is rational to serve Europe with products produced in Europe. Local networks are playing a more important role than ever. Mother factories often concentrate on assembling while everything else is shared between subcontractors. Thus, a local subcontractor may become cheaper.
"It seems to me that the proportion of local subcontractors is growing", Raulas notes.
The actual mother factories generally either employ fewer or the same number of workers as before, even though there are more end products. At the same time in Finland a huge army of subcontractors has come into being over a short period of time.
While the ABB frequency transformer factory employs over 500 workers, its subcontractors already have 3,000 employees. When transferring production, ABB has endeavoured to avoid redundancies by redeploying workers to other jobs.
This is not possible in all companies. Sometimes work which is divided into short stages goes to other companies or other localities. Work stays in Finland, but those who do it may change.
* The article was originally published in Helsingin Sanomat, the leading newspaper in Finland.
** Maarit Huhtaniemi is a Finnish journalist working for Helsingin Sanomat