Transcript Competing in the 21st Century

Competing in the 21st Century
David Kazmer, P.E., Ph.D.
Univ. Mass. Lowell
Agenda
• Current Trends
– Globalization
– Politicization
• Strategies
– Consolidation
– Specialization
• Products
• Processes
Globalization
Concepts
– Labor
– Materials
– Regulations
• Environmental
• Intellectual property
• Trend Escalating
– Infrastructure
– Market access
Hourly
Cost
ofof
Research
Hourly
Cost
Labor
• Efficient Resourcing
50
10
459
408
357
306
255
204
153
102
51
00
US
US
Taiwan
Thailand
Canada
Australia
India
China
China
Globalization:
Typical Case Studies (India)
• Flextronics: printed circuit board assembly, plastics
manufacturing, box builds, and testing services.
• Solectron: manufacturing unit and design center in
Bangalore and a post manufacturing center in
Mumbai.
• Samsung: home appliances, cell phones, PC
monitors and disk drives, laser printers, fax
machines and televisions.
• LG Electronics: home appliances, computer
peripherals and televisions.
• General Electric: major R&D center in Bangalore.
Globalization:
Long Term Consequences
• Lack of supply chain flexibility
– Raw materials availability, political fall-out,
shipping, demand fluctuations…
– Reduction of internal capabilities (NPD)
• Sharing of know-how leads to new
competitors
– Outright theft of designs
– Access to common components
Politicization:
Concepts
• Political lobbying & legislation has
extraordinary effects on manufacturing
– Cost (value of dollar, interest rates)
– Infrastructure (OSHA, health care)
– Tax incentives (research, depreciation)
– Technology initiatives (nano, bio, energy, …)
– Anti-plastics campaign (PVC, diseases, …)
• Very dynamic (election year vs. not)
Politicization:
Case Study
• In 2003, US imported more than 100bn plastic bags
• A coalition (Intelplast Group, PCL Packaging and
Sonoco Products) claimed that Asian countries
were flooding the US market with below-cost PE
bags and demanded an anti-dumping duty
• In September, the US Inter’l Trade Commission
determined that "there is a reasonable indication
that a US industry is threatened with material injury
by reason of imports of polyethylene retail carrier
bags from China, Malaysia and Thailand that are
allegedly sold in the United States at less than fair
value".
Politicization:
Case Study
• US Plastics industry went from surplus of $894
million in 2000 to a deficit of $1,387 million in 2002
– A swing of $2,281 million.
• In 2001, China exported $6bn of fabricated plastic
products last year.
– China also exports plastics in many other forms…
– In 2002 China doubled the volume of its exports
• China is world's largest petrochemical importer
– Chinese petrochemical demand is doubling every 8
years.
Agenda
• Current Trends
– Globalization
– Politicization
• Strategies
– Consolidation
– Specialization
• Products
• Processes
Consolidation
Concepts
• Mergers & acquisitions have changed
nature of the industry
– Fewer, bigger producers
• Motivation
– Focus on large multi-million $$ customers
– Global footprints near points of assembly
– Provide more of the supply chain, start to end
– Enable new business & technology strategies
Consolidation
Case Study
• Nypro
– Not very significant until 1990
– Currently $800MM in sales
• Strategy
– Globalization
– Outsourcing (manufacturing, design, inventory)
– Bankruptcies and consolidations
– More value added in and out of press
• Investment in global business & technology
Product Specialization
Concepts
• Processors can focus on products
– Vertical integration allows tight integration
between market, design, and processing
• Research indicates plastic parts are
10-40% of product value
– Value is retained if vertically integrated
– Outsourced suppliers typically recoup 5-10%
• Product technology & IP raises barriers to
competition
Product Specialization
Case Study
• Head up display
maker
– Internal molder
– $15 reflector
• 0.25” Thick
• 100 sec cycle
– Possible cost: ?
– Is it OK?
• Other example: Visteon & HVAC Units
• Other example: Nypro & cell phones
Process Specialization
Concepts
• Focus on advanced processes
– Technology allows new capabilities
– Investment, know how, and IP provides
barriers for competition
• Similarly, process focus can lead to a
market focus
– Market focus allows greater recognition with
better, more confident service
Process Specialization
Case Study
• Proto-mold
– Automated quote,
design, build, mold
• $=f(Q,t)
• Suggested changes
– Parts in 5 days
• 100-10,000 qty
• $7.00 - $3.00 vs. ~$0.40 in commodity market
• Other example: NAL & Stanley in auto lighting
– Use of multi-shot molding
Conclusions
• It isn’t all about labor rates
– Automation & localization can largely offset
• True commodities (bags) in jeopardy?
• It is about differentiation
– Market understanding, penetration, &
recognition
– Product & process specialization
– Cost & time performance
Final Thoughts
• Mid-Term: Oil Supply
– Increasing Asian demand
– Weakening dollar
• Government debt
• Trade deficit
• Euro as preferred currency
• Long-Term: Labor Demand
– Global supply of all labor
– Improving supply chains