Managing Automation - June 2008 - (Page 24)

[ COVER STORY ] everybody’s living up to the same quality That can vary because each country may have different criteria. In the United States, we don’t accept lead in paint. Not a lot of other countries do, but in some countries they do. Once we distribute our manufacturing around the world to dif ferent countries with different kinds of people with different kinds of capabilities, it becomes ver y important to make sure that the product quality is there. I think one of the issues we’ve seen of late is that manufacturers are outsourcing things, but they should never outsource their quality control. In other words, they’re responsible for the quality of the product. I think that’s a big issue. Another is the issue of where you outsource. Again, with the energy prices rising, I think people are star ting to think about whether Asia is the right place to outsource to. They might still outsource, but it might be outsourcing from the United States down to Latin America or to Mexico. So you’ve got to keep track of that whole trade-off between outsourcing pretty far away versus energy costs and when to move it to another place. Do you have a sense that some organizations in the past have tended to, as you put it, “outsource quality control” or not pay as much attention as they might have to this issue? herent knowledge of the employee workforce. So I think those companies that are very innovative in their quality systems and proactive, that have taken responsibility to be very strong manufacturers on this side of the water and then taken their processes and outsource[d them], are successful. I think it’s the ones that really are just looking to find something cheaper, cheaper, cheaper, without having a good, stable process internally to manage, that are running into issues globally. “There’s an awful lot of money in the freight transportation business that needs to be analyzed because it’s one of the key costs today,” says Tom Dadmun at AdTran. HANLEY: I couldn’t agree more But even if you have the great spec’d product, it’s so important to do strong diligence on your supplier partner. It’s more than just cost. Going to the lowest-cost producer, in many cases, does not get you the lowest total cost of ownership because you’ve got redo, defect issues, and so forth. A few of the companies I’m working with now have gone to a “developed countries versus a developing country’s” business model because the products that you often need that are affordable in developing countries are much different. So the product design for a product that is open to the market in an emerging market — say, China — is, in fact, in some cases much different — maybe less sophisticated — than a [product designed for a] developed market. So we’re seeing companies change the business model to focus on the product demands of the market. LAPIDE: It’s actually a sizable issue from a strategic perspective. In other words, generally, if you just ask yourself the question as a manufacturer, “Why do I outsource?” well, there are at least two reasons for it. One is, I want to outsource to a country to keep my manufacturing costs low. The second is that it very well may be a future consumer market for you in terms of your selling there. A lot of people are complaining about China getting to the point where it’s getting expensive. They have to step back and ask why they go to China. If they just went to China to save costs, sure, then now that it gets expensive, it’s not a good thing. However, with it being expensive, it also means that there’s now a consumer that can buy your product. You have to think about that whole concept of why do we outsource and then pick the countries or the places to go that satisfy that. If you’re looking for low cost, most people are saying now go to Vietnam or someplace like that. But if you’re looking for a billion or KUKOR: There is a bulk of companies out there that will take the worst performing product in a plant, that they have nothing but issues with — because of high labor content, lots of rework, etc. — and that’s the product they’ll ship out to a Chinese manufacturer or a low-cost country, ultimately expecting to get results. Unfortunately, the results will be much worse than what you’re producing [domestically] because you’re losing all the in- ma June 24 2008 Photo courtesy: AdTran

Table of Contents Feed for the Digital Edition of Managing Automation - June 2008

Managing Automation - June 2008 Contents Take 1 SAP Cites Functionality, Cost Structure in Modified On-Demand Product Rollout Dassault Exec Predicts More PLM Consolidation The Blackberry Goes Native with SAP CRM QAD Brings MDM In-House with FullTilt Buy Power Experts Look to End Voltage Sags The Progressive Manufacturers Notes Cover Story: Playing the Globalization Game to Win Special Report Integration Transformation Industries Product Scan Advertiser Index Next

Managing Automation - June 2008

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