This is the third in a series concerning manufacturing and the increasing probability that we will continue to see products being made domestically. (Search for manufacturing to read the other posts). Currently, the vast majority of products are either imported directly, or the parts are imported and assembled here. But there are problems with either approach and they can disrupt the sale and distribution of those products.
The most obvious drawback of offshore manufacturing is the distance factor. The time between ordering and receiving products from another country can cripple an otherwise successful company. Quality issues, time to delivery, import costs and delays, and unintended problems that the supplier has can all lead to a failure.
The second concern is that of communication. There are language barriers, time to resolve issues, and simple engineering mistakes. There is the case of a start- up company that sent engineering drawings to the Chinese manufacturer with all of the measurements in fractional inches assuming that they would understand the product. But, the first 100 prototype parts came back in metric measurements and nothing could be assembled.
But perhaps the most important aspect is the ability for a company to be nimble and flexible in their manufacturing processes. For example, what happens if a competitive product appears and the need for a reduction in number of products assembled decreases? How fast can the supply pipeline be stopped? Or conversely, what happens when your product sells really well and you need more? Can the demand be met in a timely fashion? All of the above mentioned problems can be encountered in this horizontal integration model. This simply means that the individual processes are detached from a controlled source. The design, production, and distribution are not centrally located or under the company’s ability to react efficiently. One of the best answers is in the vertical integration paradigm.
Vertical integration can be considered “Back to the Future” as it was a mainstay of the early 20th century. Andrew Carnegie realized that centralized and controlled manufacturing would strengthen his steel business. So, he owned the mines that provided the ore, the coke that fueled the furnaces to melt the ore, trains to transport the steel, and the factories to provide the finished product. The same was true for the oil companies. So, what would the current start-up electronics company look like if it was vertically integrated?
The design engineers, printed circuit board manufacture, component selection, assembly, quality control, and distribution would all be located in the same facility. If not all literally in the same building they would be close enough to respond to problems, changes in production numbers, and customer response. Add advertising and marketing and we have a true latchkey business. No offshore parts, no call centers with non-English support, and fast turnaround.
There are already good examples of this vertical integration. Tesla Motors in Fremont, California has its design team, engineers, and production in one facility. And, the concept is catching on again. It would be great to see American products not only succeed but to thrive. And, vertical integration can make the difference between success and failure…
The most obvious drawback of offshore manufacturing is the distance factor. The time between ordering and receiving products from another country can cripple an otherwise successful company. Quality issues, time to delivery, import costs and delays, and unintended problems that the supplier has can all lead to a failure.
The second concern is that of communication. There are language barriers, time to resolve issues, and simple engineering mistakes. There is the case of a start- up company that sent engineering drawings to the Chinese manufacturer with all of the measurements in fractional inches assuming that they would understand the product. But, the first 100 prototype parts came back in metric measurements and nothing could be assembled.
But perhaps the most important aspect is the ability for a company to be nimble and flexible in their manufacturing processes. For example, what happens if a competitive product appears and the need for a reduction in number of products assembled decreases? How fast can the supply pipeline be stopped? Or conversely, what happens when your product sells really well and you need more? Can the demand be met in a timely fashion? All of the above mentioned problems can be encountered in this horizontal integration model. This simply means that the individual processes are detached from a controlled source. The design, production, and distribution are not centrally located or under the company’s ability to react efficiently. One of the best answers is in the vertical integration paradigm.
Vertical integration can be considered “Back to the Future” as it was a mainstay of the early 20th century. Andrew Carnegie realized that centralized and controlled manufacturing would strengthen his steel business. So, he owned the mines that provided the ore, the coke that fueled the furnaces to melt the ore, trains to transport the steel, and the factories to provide the finished product. The same was true for the oil companies. So, what would the current start-up electronics company look like if it was vertically integrated?
The design engineers, printed circuit board manufacture, component selection, assembly, quality control, and distribution would all be located in the same facility. If not all literally in the same building they would be close enough to respond to problems, changes in production numbers, and customer response. Add advertising and marketing and we have a true latchkey business. No offshore parts, no call centers with non-English support, and fast turnaround.
There are already good examples of this vertical integration. Tesla Motors in Fremont, California has its design team, engineers, and production in one facility. And, the concept is catching on again. It would be great to see American products not only succeed but to thrive. And, vertical integration can make the difference between success and failure…
RSS Feed
