Author: spr1324mszewc

Imported from Detroit

Posted on by spr1324mszewc

8446515678_08867c39f9_z

In the last year Chrysler launched TV ads that featured the tagline, “Imported from Detroit.”  These ads immediately helped Chrysler’s image, as they were praised for breathing new life into the company and many people were left believing that they were actually producing cars in the US.  The ads weren’t too far off, but in fact most Chrysler’s are built just over the border in Canada, with engines coming from Mexico.  Although Chrysler may not have actually moved its manufacturing plants to the US it benefited greatly in public relations.

In the last few months we’ve also seen a “Back to U.S.” trend from technology manufacturers.  But unlike Chrysler, three technological giants have actually been slowly moving production back into the United States.  Apple, Lenovo, and Google’s Motorola have been opening brand new plants within US borders, the latest being Motorola’s brand new smartphone factory in Texas.  These decisions come after almost a decade in which the flow was almost exclusively in the other direction – with millions of jobs going to East Asian factories known for low wages and minimal labor protections.

Manufacturing has moved into a highly technical and highly automated environment.  This reduces the need for manual labor, which in turn reduces cost.  These associated costs are still cheaper in China than they are in the US, but for larger companies, like those mentioned in the technology sector, the costs to produce are far more even between countries.  And when we factor in shipping costs and timing, moving manufacturing back to the United States begins to look more appealing, and cost efficient.

But, in fact there are many cost unrelated benefits to relocating production back into the US:

  • High quality materials are more readily available
  • A highly skilled and educated workforce
  • Fast and efficient turnaround
  • Management is closer to customers, as well as factories and suppliers.
  • Quicker reaction time

Motorola Mobility was a division that was bought out by Google last year for $12.5 billion.  The new smartphone, the Moto X, will be the first designed entirely under Google ownership.  It will also be the first smartphone assembled in significant numbers in the United States since the launch of the iPhone.

However, many say that these shifts are motivated less by long-term manufacturing needs than by public-relations strategy.  Recently tech firms have been under fire from Washington, D.C. for their tax strategies, privacy policies and, in the case of Motorola parent company Google, allegations of monopolistic behavior.  But governors and members of Congress typically are avid protectors of major manufacturing employers, and even more so when they create jobs in lawmakers’ home districts.

…

Do you think that the recent push by technology companies to brings manufacturing jobs back into the United States for positive publicity is underhanded in its intent?

Benefits that can’t be measured in dollars are also really important when considering where to produce products.  How can companies justify higher costs to investors who might not be aware of these benefits?

…

Sources:

http://seattletimes.com/html/businesstechnology/2021098211_googlemotorolatexasplantxml.html

http://www.telegraph.co.uk/technology/news/10092271/Forget-China-technology-manufacturing-is-coming-home.html

 

American Security and the Supply Chain

Posted on by spr1324mszewc

A recent report for the Alliance for American Manufacturing claims that the U.S. is risking its national security with its growing reliance on raw materials, parts and finished products purchased from sometimes unreliable foreign sources.  It concludes that the Pentagon relies too heavily on imports to keep the armed forces equipped and ready.

Examples:

  • The U.S. solely relies on a single Chinese company for the chemical Butanetriol, needed to produce the solid rocket fuel used in HELLFIRE missiles.
  • The U.S. imports 91 percent of the rare earth element lanthanum, needed to make night-vision devices, from China.
  • Production of Neodymium-Iron-Boron magnets has migrated offshore, where China now fabricates 75 percent of these high-tech magnets.
  • The U.S. share of semiconductor fabrication has decreased from 50 percent to 15 percent in the last 30 years.

The disappearance of a U.S. industry for many of these products has eroded U.S. leadership in patents and our ability to design new applications.  The reliance on foreign suppliers for critical defense materials undermines the ability to develop capabilities needed for the future.  The risk here is that a vulnerable supply chain will cause us to lose our technological advantage over time.

It also raises quality concerns as it puts commercial and military products at risk for counterfeiting and higher rates of defects.  These could very well be intentional depending on which suppliers we pick as well as the current and future conflicts we choose to involve ourselves in.  Suppliers in other countries may be unsympathetic the causes of the United States.  The U.S. must also be prepared for the future if there ever comes a time when we must rapidly equip our armies.  Foreign suppliers may not be ready or willing to provide for our increased needs.

We talked in class about the recent push to globalize in operations management.  There are many good reasons for globalizing.  The most important being reduced costs since foreign locations with lower wage rates can lower direct and indirect costs.  Globalization should also, in theory, improve the supply chain as facilities are closer to unique resources.  Because of objective characteristics of goods, we could also expect better quality goods.

The United States spends more on defense than any other country on the planet; about $690 Billion dollars per year.  U.S. defense spending accounts for 40% of the world, and is greater than the European Union, China, Russia, United Kingdom, Japan, India, and Saudi Arabia combined.

—

It also needs to be noted that China and Chinese corporations are in fact our largest suppliers of raw materials, parts and finished products used in U.S. Defense.  Is there a reason for us to be concerned about China having so much power and influence in supplying for U.S. Defense?

Is it worth risking American Security to save a billion dollars?  How about 100 billion dollars?

Is it important that this report was prepared for the Alliance for American Manufacturing?

—

Sources:

http://www.computerworld.com/s/article/9239030/The_U.S._military_s_supply_chain_risk_called_frightening_

http://blog.al.com/breaking/2013/05/rep_mo_brooks_among_critics_of.html

http://www.packagingdigest.com/article/523319-Report_identifies_risks_to_U_S_defense_supply_chain.php

http://en.wikipedia.org/wiki/List_of_countries_by_military_expenditures