Dispelling the Manufacturing Myth American Factories Can Compete in the Global Marketplace (1992) / Chapter Skim
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1 INTRODUCTION
1 INTRODUCTION
Pages 9-20
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From page 9... ...
The corresponding gains in market share by foreign companies have often been attributed to production cost advantages that cannot be matched in the United States (see Figures I-1 to 1-31. · American manufacturers have been steadily locating manufacturing capacity offshore over the past two decacles to serve both foreign and domestic markets.
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From page 10... ...
SOURCES: National Advisory Committee on Semiconductors Report 1991 and Dataquest. The quick conclusion often drawn from these trends is that the United States can no longer host competitive manufacturing: the cost of wages and benefits is too high and U.S.
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From page 11... ...
Changes in technology, the dynamics of international trade and investment, and continued advances in manufacturing efficiency have altered the cost structures faced by manufacturers and the priorities given to various investment criteria. Although all the activities that comprise the product realization process- design, engineering, purchasing, production, marketing, distribution, and sales determine the full costs of bringing a product to market, manufacturing costs incurred in the factory are typically what affect decisions to shift production offshore.
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From page 12... ...
For the sake of simplicity, the model starts with the premise that firms seeking to maximize total business potential have two strategic options: they can reduce costs (and so, potentially, increase margins) or expand the business.
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A firm may find it needs to expand the business to reduce costs because of minimum scale requirements. For instance, Digital Equipment Corporation has built external sales of magnetic heads for disk drives because its internal requirements were insufficient to justify the cost of plant and equipment.
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From page 14... ...
provides a useful tool for analysis of the factors affecting factory location decisions. Because of the charge to the committee to examine the effects of costs on site selection, the analysis focuses on the decision chain that emerges under "reduce costs," rather than decisions neecled to "expand business." One way to reduce costs is to reduce expenses the costs of doing business that are not directly associated with production.
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From page 15... ...
Because standard accounting practices allocate indirect costs on the basis of labor content, labor costs tend to be greatTy exaggerated as a component of COGS. Consequently, in practice, minimizing input costs has meant minimizing labor costs.
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From page 16... ...
Their understanding of the drivers of COGS expands dramatically, multiple opportunities to improve existing facilities are recognized in fact, continuous improvement of the existing manufacturing system becomes the driving force of the total enterprise and site location decisions for greenfield factories are based on many criteria besides input costs. Firms taking such a broad view of manufacturing recognize the costs associated with poor design, an inflexible development cycle, or a poorly managed production floor.
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From page 17... ...
indeed, the high quality, low cost, and responsiveness associated with advanced manufacturing practices have actually reshaped the demands and expectations of the market. When traclitional mass producers try to compete simply by further compartmentalizing the manufacturing process and maximizing volume, they are responding to new challenges with old tactics.
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From page 18... ...
To the extent that moving offshore is less of an option for small firms, the incentive to get their processes in control and to maximize value to their customers should be all the more apparent. In this context the committee's findings regarding what is necessary for competitive production in the United States applies equally to small and large firms.
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From page 19... ...
From these observations the committee offers several conclusions about the attractiveness of the United States as a future location for different kinds of competitive manufacturing. Recommendations for appropriate government and industry action also are macle.
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