Manufacturers are finding that playing the globalization game these days is a bit like getting involved in a high-stakes game of billiards where the rules are constantly changing. Manufacturing organizations considering establishing or expanding operations globally have to worry about rising energy and logistics costs, looming quality issues, the rising cost of labor in places like China and India, and the shortage of qualified managers in places like China. That's on top of all the regulatory, tax rate, and IP protection issues that have always been out there.
How can manufacturing companies stay on top of this very dynamic environment, minimize risk, and maximize the rewards of globalization?
Recently, Managing Automation Executive Editor Jeff Moad met with four manufacturing experts for a roundtable discussion of these pressing issues. On hand for the discussion were: Larry Lapide, director of demand management at the Center for Transportation and Logistics at MIT; Tim Hanley, vice chairman of Deloitte and the leader of its U.S. Process and Industrial Products Group; Tom Dadmun, vice president of the Program Management Office at AdTran, a global provider of networking and communications equipment; and Kreg Kukor, who until recently was director of global quality systems at Cequent Performance Products, a maker of electronic brake controls, lighting, wire harnesses, and other components. Recently, Kukor launched his own consulting company, V-Web Partners, where he is president and CEO.
Q: Manufacturing companies operating globally must stay on top of a rapidly changing environment of regulations, economics, quality issues, and other conditions. What do you see as the most important issues manufacturers need to track today?
DADMUN: We have a dashboard that looks at metrics in our foreign sites as well as our domestic manufacturing here in Huntsville [AL]. You really have to be on top of the changing environment. Things happen quickly and you really don't have that much time to respond, especially with the lead times that customers are demanding ... which are tighter supply chain cycle times. You really need to make sure you're on top of the metrics and that you understand from an event management point of view how quick something happens and how quick your response to that item is.
In looking at the global supply chains, you have to make sure that your manufacturing and distribution sites have the closest and most efficient process to get [product] to the customer from manufacturing.
Also, with the energy costs today, you have to make sure that your packaging, which may have been OK in past days to send something around the world, is much denser now. The weight cost — air versus boat versus truck versus intermodal — has to really be managed. There's an awful lot of money right now in the freight transportation business that needs to be analyzed because it's one of the key costs today.
Q: Larry, what are you seeing among the companies that you consult with and work with? Do you see the packaging and energy costs being at the top of their list of concerns right now?
LAPIDE: Yes, I really do. I've managed the launch of a project called 20-20 at MIT, where we're looking at the future of supply chain and manufacturing and logistics. We've identified a variety of factors. The one that's most prevalent on everybody's minds today is energy cost — in particular, oil. And oil is really part of a lot of [the] supply chain if you think about it. Certainly in the transportation area, because diesel fuel is what drives a lot of the trucking, but also oil is used to drive ocean, air, etc. As oil prices change — and they've been up lately and most people expect it to stay up — that means your supply chain has to change a little bit from a modal mix perspective.
Obviously, the packaging is a big issue. If you look at warehouses, there's a lot of shrink-wrap and plastic going around on pallets as they go out the door. We have to start rethinking whether that's going to be cost-effective in a [high-cost] oil situation.