2015 Top Plant Winner: Making connections locally, globally
Phoenix Contact: From cordsets and terminal blocks to industrial wireless, process infrastructure, and PC products, the company has evolved from a value-add assembly facility to a growing world-wide manufacturing hub.
The year was 1981. Phoenix Contact GmbH & Co. KG in Blomberg, Germany, had just created a U.S. subsidiary in Harrisburg, Pa. Its charter was to add value to products manufactured in Germany and distribute them to customers in the U.S. From there, vision, commitment, teamwork, and highly focused best practices transformed Phoenix Contact USA from a value-add assembly subsidiary into a global design and manufacturing enterprise—and the 2015 Plant Engineering Top Plant.
Phoenix Contact develops and manufactures industrial electrical and electronic technology products that power, protect, connect, and automate systems and equipment throughout many discrete, hybrid, and process industries.
Putting down roots in the U.S.
Phoenix Contact has evolved from a value-add assembly facility to a growing manufacturing hub to serve its U.S. and North American customer base. As a U.S. subsidiary of a German company, Phoenix Contact's main product starting out was terminal blocks. "Going back 30 or 40 years, many companies started internationalizing," said Jack Nehlig, president, Phoenix Contact USA (see Figure 1). "One way to internationalize is to start a subsidiary, incorporate it, and put down roots. The first task of our new subsidiary was to sell German products to U.S. customers. From around 1982 to about 1990, that's what we did."
During that time, Phoenix Contact in Harrisburg became more than just a distributor for its German-based headquarters. Driven by customers' needs and ideas, the U.S.-based subsidiary began enhancing its products. "Customers asked us to put terminal blocks on Deutsches Institut für Normung (DIN) rails, add numbering labels, and perform some preassembly," Nehlig said. "We started doing those value-added services, light assembly, and marking."
Nehlig divided Phoenix Contact's 33-year history in the U.S. into three decades of growth. "We spent the first decade selling products," he said. "The second decade, we added services to those products. And the third decade has been about becoming much more than just a value-add company. In 2005, we added actual new-product design and manufacturing here in Harrisburg." While Phoenix Contact successfully added design and manufacturing capabilities to its charter, it still performs the value-added services for its customers.
Designed locally, distributed globally
In addition to growing from a value-add assembly company to a design and manufacturing center, Phoenix Contact in Harrisburg has become an exporter to its German-based corporate team. The company went from no exports a decade ago to exporting around 30% of its manufacturing dollar volume in 2015. "From where we started to today, we've grown close to 400%," said Dave Skelton, vice president and general manager, Phoenix Contact, Harrisburg. "Even though we started with small numbers, we're a significant business today. I really believe that impact is because of developing those products here."
A large part of the U.S. subsidiary's mission is to be the manufacturing location for locally designed global products. "Today, we are recognized as a global leader in unmanaged Ethernet switches," Skelton said. "We started out with Ethernet products in 2005 because, in the U.S., the industry had already been deploying Ethernet in the manufacturing environment-much more than in Europe. At the time, it was being deployed with commercial-grade equipment because people wanted to get it done. We started industrializing Ethernet switches. The key to industrializing is designing products that can withstand shock, vibration, and temperature. Industrializing also includes mitigating the unwanted effects of electromagnetic interference."
Another example of locally designed, globally distributed products includes 900 MHz radios and WirelessHART. "We're on our second generation of 900 MHz and this one was fully developed and is manufactured here now," said Skelton. "We developed the WirelessHART products here. And the adapters and the gateway products are also manufactured here."
Skelton said that the company's process infrastructure products, such as FOUNDATION fieldbus and PROFIBUS PA components, were developed in Harrisburg. "We have a good customer base using those technologies, and the headquarters for those technologies are located in the U.S.," he said. "That made it very easy for us to develop and make those products here."
Skelton also pointed out that the reasons to develop and manufacture these products in the U.S. include being based on an American standard, access to technologies, early adopters, and the customers that can help Phoenix Contact USA bring those products into the market.
Evolving manufacturing capabilities
Phoenix Contact has experienced many changes in its manufacturing capabilities over the years. "We have gone from a value-add center-where we were buying a lot of components and putting them together-to a true development center for a global market here in the U.S.," said Todd Madden, manufacturing operations manager for industrial electronics products at the Harrisburg plant. "For example, we did the wave-soldering process on printed circuit boards with resistors, diodes, and Phoenix Contact terminal blocks. It was done for the North American market because we wanted to be close to the customers."
Cheryl Boyd, manufacturing operations manager for device-connection products, agrees. "We've gone from custom to a lot of standard serial production," she said (see Figure 2). "And we've gone from mostly manual to high-volume automated processes."
Skelton said that employing automation is a necessity for doing manufacturing in the U.S. "You can do selective manual work, but you have to have automation," he said. "It's critical. And as soon as you add automation, you need skilled personnel."
"In our electronics assembly, there has been a big shift in the way our solder systems are designed to be more efficient," said Mike Correll, engineering manager for interface, I/O, and networks, mechanical product development (formerly manufacturing and development engineering manager). "Before, they were highly manual and batch processes. We migrated to newly installed automated pallet-transfer systems (see Figure 3). In this arrangement, our solder pallets are conveyed from an array of assembly flow lines. The pallets are bar-coded so the oven knows which thermal recipe to use. This system is fully conveyed, eliminating the manual transfers associated with our previous batch processes."
Correll explained that industrial electronics products used to have a single wave-soldering machine that would run one job at a time. "Now, we can run anywhere from 8 to 10 different jobs because we have a fully conveyed system that feeds the wave-solder machines," he said. "We also have a separate, fully conveyed surface-mount line with automated inspection capability.
People make the difference
Emphasizing employee empowerment, development, and happiness is the basis for the employee-focused culture in Harrisburg. "I've learned that, by far, people are our greatest resource," Boyd said (see Figure 5). "On a daily basis, we strive to find ways to improve our processes without sacrificing product quality or compromising our vision. When given the opportunity, people are willing to pull together to achieve what needs to be done. You just need to provide them with the support and the chance to achieve those targets. This success could only have been achieved by all levels of our staff working together."
"The skill and knowledge of our workforce and our ability to learn are really what sets us apart," added Correll. "Our people are constantly called on to create manufacturing processes for new products. And often when we do that, we're getting well outside of our comfort zone. In these cases, our workforce has always shown a real can-do attitude, and the ability to learn whatever is required to realize the new product. Whether it's some kind of intricate soldering, a new test system, potting, or a complex automated assembly process, there's really an attitude of, 'We're not certain how we're going to do this, but we're going to figure it out'."
"We are the real deal," said Boyd. "We are extremely focused on our customers and our employees at the same time. And that's hard to manage. Phoenix Contact realizes that without its employees, there's no way we can serve our customers. The company puts a lot of emphasis on employee empowerment, development, and happiness."
Employee empowerment and job ownership are evident at Phoenix Contact in Harrisburg, especially in how much emphasis the manufacturing team puts on teamwork (see Figure 6). "I can't stress team building enough," Boyd said. "When people learn to work together-regardless of their differences, background, or training-amazing things happen. Working as a team at all levels allows you to gain understanding of the actual problem and real solution. Most of our solutions have come from everybody pulling together, talking about it, and creating solutions."
"Teams are extremely important in electronics assembly," said Correll. "A large part of our mission is to be the manufacturing location for locally designed global products. The production and manufacturing teams are integral to ensuring design for manufacturability (DFM). The product development engineers work directly with the production teams when conducting pilot runs and when building customer beta samples."
Madden said that teamwork also creates employee ownership. "Getting employee buy-in is very important," he said. "That's what we've learned."
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Read more: 2015 Salary Survey