Manufacturing Executive - November 2008 - (Page 19) 800,000 Volkswagen p.a. [per annum] in the USA Analysts at rival research firm AMR Research by 2018, and this new site will play a key role.” agree. “Globalization is reaching its adolescence, Airbus China President Laurence Barron was as companies think more strategically about equally effusive. “The arrival of these aircraft how and where to source and manufacture prodsub-assemblies marks another important step uct,” analyst Randy Weston says. for ward for our assembly line in Tianjin,” he In Weston’s words, manufacturers have said. “Airbus will closely work with the Chinese reached a new era in which “globalization comes aviation enterprises and continue to deepen and home.” But whether he means it or not, his point expand our cooperation.” carries a double entendre: While some manuCall it 10 days that shook the mavericks. Neifacturers are indeed returning some production ther Barron nor Winterkorn sounded like a manto home countries, they are at the same time ufacturing executive who misses home cooking. almost redefining “home” to include distant But look closer, and something else is under way. places near lively markets. Like VW going for a With the global economy now a fact of life, the noU.S image, they are essentially building homes tions of “home” and “nearshoring” are changing. away from home. As markets such as China open up and beIndeed, China remains squarely in the manucome buyers as well as exporters, as business facturing picture, because, as AMR analysts Noha realities dictate partnerships there, and as comTohamy and Kevin O’Marah note in a report, panies like VW decide to grow market share in “despite significant risks like product quality isthe dollar region, “home” to a manufacturer is sues and political unrest, China still makes sense where the market is. The meaning of “nearshoring” is shifting to connote manufactur- While some manufacturers are returning ing in or near the market served. production to home countries, they are at As VW noted in a prepared statement when it announced its Chattanooga opera- the same time almost redefining “home” to tion, success in the United States “appar- include distant places near lively markets. ently includes having customers in the U.S. come to perceive the company as a domestic because of cost advantages and the reach to vast manufacturer.” consumer markets.” So, China will continue to For Airbus, the Tianjin plant is directly serving draw manufacturers for proximity to its markets customer Sichuan Airlines, in partnership with a alone. It will also continue to have low-cost appeal, Chinese consortium — the sort of partnership although other countries, such as Vietnam, are that the realpolitik of Chinese business requires starting to challenge it on that front. Whether for market access. it’s China, Vietnam, or elsewhere—- perhaps Africa — there will still be a low-cost element. ‘PROFITABLE PROXIMITY’ “That’s not going to reverse itself,” says Douglas IDC Manufacturing Insights has even come up Kent, director and founder of supply chain conwith a name for this mutation of nearshoring: sultancy eKNOWtion in London. “profitable proximity.” The research firm says Never theless, Kent says, “There will be a that the same factors that were going to drive resurgence in Eastern Europe, in places like manufacturing back home — transportation and Romania and, I think, Russia.” Clearly, those green costs — will actually cause some manucountries are vying to attract European producfacturing to head out, while at the same time tion. At the Hannover Fair in April, representabringing other manufacturing back. Though low tives from Belar us, the Ukraine, Romania, labour costs will play a role and continue to atKazakhstan, Turkey, and many other Eastern tract manufacturing, plants will also pop up near European countries were pitching European the markets they serve to help cut down transmanufacturers with various lures, such as tax portation costs, among other reasons. incentives and special economic zones. “Companies need to look at all options, inBut if European manufacturers are neverthecluding low-cost country outsourcing, near-sourcless set on shifting production to more distant ing, or even moving operations to locations of places, they’ll have to consider possible backgrowing customer segments,” IDC Manufacturlashes against offshoring, no matter how near or ing Insights analysts Kimberly Knickle and Sifar they move it. Finnish mobile phone giant mon Ellis said in a recent report. “Skyrocketing Nokia learned that lesson earlier this year, as energy costs and the implications for transGermany revolted after Nokia announced it was portation/logistics costs may change the dyshifting production from a plant in Bochum, namic for many categories.” Germany, to EU member country Romania. Top November 2008 19
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