Global Manufacturing Strategic Options

Global Manufacturing: Myth, Global Manufacturing: Myth, Reality & Strategic OptionsReality & Strategic Options

Offshore Group - 12th Annual Manufacturing in Mexico SummitOffshore Group - 12th Annual Manufacturing in Mexico SummitMichael L. Hetzel, VP/AmericasMichael L. Hetzel, VP/Americas

Pro QC InternationalPro QC Internationalwww.proqc.comwww.proqc.com

As presented at The Offshore As presented at The Offshore Group’s Manufacturing in Mexico Group’s Manufacturing in Mexico Summit. www.offshoregroup.comSummit. www.offshoregroup.com

““We can’t compete from the U.S.”We can’t compete from the U.S.”

© 2006 M.L. Hetzel© 2006 M.L. Hetzel


Who says?Who says?

© 2006 M.L. Hetzel© 2006 M.L. Hetzel As presented at The Offshore As presented at The Offshore Group’s Manufacturing in Mexico Group’s Manufacturing in Mexico Summit. www.offshoregroup.comSummit. www.offshoregroup.com

Don’t Trust Your Business to MediaDon’t Trust Your Business to Media

• Very little accurate and objective information coming Very little accurate and objective information coming from media any more – even trade mediafrom media any more – even trade media

• Lack of context is nearly universalLack of context is nearly universal• Head counts trumpeted, actual output ignoredHead counts trumpeted, actual output ignored• Plant closings highlighted, plant openings ignored – “If it Plant closings highlighted, plant openings ignored – “If it

bleeds it leads”bleeds it leads”• Politicization of global trade issues resulting from general Politicization of global trade issues resulting from general

domestic political polarizationdomestic political polarization


Why Listen to Me?Why Listen to Me?

• Over 20 years of manufacturing experience in SMMs, Over 20 years of manufacturing experience in SMMs, from the shop floor to 9 ½ years as CEOfrom the shop floor to 9 ½ years as CEO

• Case study information from producing and moderating 2 Case study information from producing and moderating 2 years of the ITCC Global Manufacturing Seriesyears of the ITCC Global Manufacturing Series

• Direct research – no second hand statisticsDirect research – no second hand statistics• Current visibility of the global supply chains of over 300 Current visibility of the global supply chains of over 300

companies, large and smallcompanies, large and small• Daily contact with Asian operationsDaily contact with Asian operations• Regular consulting engagements with SMMsRegular consulting engagements with SMMs

© 2006 M.L. Hetzel© 2006 M.L. HetzelAs presented at The Offshore As presented at The Offshore

Group’s Manufacturing in Mexico Group’s Manufacturing in Mexico Summit. www.offshoregroup.comSummit. www.offshoregroup.com

Do Your Own ResearchDo Your Own Research

• Don’t believe me - or anyone elseDon’t believe me - or anyone else• All competitive and market information must be All competitive and market information must be

customized and dynamic – there’s no canned solutioncustomized and dynamic – there’s no canned solution• Go direct to data sources – statistics can distortGo direct to data sources – statistics can distort• Always account for the Always account for the contextcontext of information and data of information and data• Research global conditions even if your market is Research global conditions even if your market is

domestic only – don’t miss opportunities or threatsdomestic only – don’t miss opportunities or threats• Use government market research resources such as Use government market research resources such as

USEACUSEAC


Amplified Costs & Risks Amplified Costs & Risks of International Procurementof International Procurement

• Supply chain length, inventories and queuesSupply chain length, inventories and queues

• Quality disruptions & replacement product Quality disruptions & replacement product delivery delaysdelivery delays

• Logistical risks & market tolerance for delaysLogistical risks & market tolerance for delays

• Political risksPolitical risks

• Currency risksCurrency risks



Culture & LanguageCulture & Language

• Mexico & ChinaMexico & China• Greater AsiaGreater Asia• Central & Eastern EuropeCentral & Eastern Europe• Regions of the U.S.Regions of the U.S.



Time ZonesTime Zones

• CommunicationsCommunications• TravelTravel• Dateline EffectDateline Effect



Product Life Cycle PhasesProduct Life Cycle Phases

• Innovative & unique introductory phaseInnovative & unique introductory phase

• Popularity & competition arrivePopularity & competition arrive

• Commodity phaseCommodity phase

• Mature phase & proximity to marketMature phase & proximity to market



Common Myths vs. RealityCommon Myths vs. Reality

• China’s growth and sizeChina’s growth and size• U.S. current account deficitU.S. current account deficit• U.S. Import sourcesU.S. Import sources• U.S. manufacturing outputU.S. manufacturing output• U.S. export levelsU.S. export levels• India’s growth and sizeIndia’s growth and size• What about Canada & Mexico?What about Canada & Mexico?



MarketingMarketing

The number one cause of failure for The number one cause of failure for U.S. manufacturers is a lack of U.S. manufacturers is a lack of marketing and market researchmarketing and market research

Number two is failing to adapt the Number two is failing to adapt the company once market conditions are company once market conditions are

knownknown© 2006 M.L. Hetzel© 2006 M.L. Hetzel


Common Traits Identified in Common Traits Identified in Successful U.S. ManufacturersSuccessful U.S. Manufacturers

They open their minds to global trade even if they They open their minds to global trade even if they choose not to participate in global markets or sourcing. choose not to participate in global markets or sourcing. No one benefits from anger and fearNo one benefits from anger and fear

• All have a “can do” attitude embedded from the top down All have a “can do” attitude embedded from the top down in their corporate cultures, with high levels of employee in their corporate cultures, with high levels of employee development and commitment to executing global development and commitment to executing global strategiesstrategies

Most of the companies engage in international activities Most of the companies engage in international activities of some type (Sourcing, Alliances, JVs, WOFEs), and all of some type (Sourcing, Alliances, JVs, WOFEs), and all are creating growth and success in the U.S. as a resultare creating growth and success in the U.S. as a result


Common Traits Identified in Common Traits Identified in Successful U.S. ManufacturersSuccessful U.S. Manufacturers

All of these companies are committed to excellence All of these companies are committed to excellence across the enterprise, not just as a buzzword but as a across the enterprise, not just as a buzzword but as a functional, deliberate and measurable business practice.functional, deliberate and measurable business practice.

Whether operating internationally or not all of these Whether operating internationally or not all of these companies are exercising a strong commitment to good, companies are exercising a strong commitment to good, old-fashioned operational excellence as a key foundation old-fashioned operational excellence as a key foundation of their success.of their success.

These companies directly engage in marketing and These companies directly engage in marketing and market research – the benevolent U.S. market anomaly market research – the benevolent U.S. market anomaly of the last 50 years is overof the last 50 years is over



Example Strategies from Example Strategies from Case StudiesCase Studies

Attitude of positive outlook rather than anger about Attitude of positive outlook rather than anger about global business conditions. “Daily attitude global business conditions. “Daily attitude ‘adjustments’ shared with staff to keep the ‘adjustments’ shared with staff to keep the organization from falling prey to the discouraging organization from falling prey to the discouraging headlines our industry and the global economy headlines our industry and the global economy creates”creates”

Evolution in the recognition that “The world will not Evolution in the recognition that “The world will not wait for your company. Take a ‘reasonable risk’ wait for your company. Take a ‘reasonable risk’ and help the company to evolve into something and help the company to evolve into something better (and typically different) than it used to be”better (and typically different) than it used to be”




Sharing all of their metric tracking with their Sharing all of their metric tracking with their clients and engaging in “value engineering clients and engaging in “value engineering redesign” to create new opportunities for their redesign” to create new opportunities for their products through the conversion of designs from products through the conversion of designs from other production methodsother production methods

Harnessing offshore inputs for local competitive Harnessing offshore inputs for local competitive advantage, using global experience to conduct a advantage, using global experience to conduct a

successful “U.S.-China balancing act”successful “U.S.-China balancing act”




Build a business network of alliances and Build a business network of alliances and partnerships to remain in alignment with the partnerships to remain in alignment with the global movements of their clients.global movements of their clients.

Remember that trade flows both ways, not just Remember that trade flows both ways, not just inbound, and pursue more exportsinbound, and pursue more exports

• Recognize thatRecognize that resistance to change and resistance to change and globalization is not unique to people in the U.S.globalization is not unique to people in the U.S.

• Look for and capture crossover opportunities to Look for and capture crossover opportunities to other sectors and categoriesother sectors and categories



Four Fundamental ChangesFour Fundamental Changes

1.1. AttitudeAttitude

2.2. MarketingMarketing

3.3. CollaborationCollaboration

4.4. Products & ProcessesProducts & Processes



Strategic OvershootStrategic Overshoot

The tendency to decide to operate in another The tendency to decide to operate in another country, often China these days, before careful country, often China these days, before careful

analysis of the actual business and market analysis of the actual business and market conditions rationalizes the decisionconditions rationalizes the decision

The real solution is often much closer to homeThe real solution is often much closer to home



The U.S. Doesn’t Import Too The U.S. Doesn’t Import Too Much…Much…

……We Export Too LittleWe Export Too Little



Global Manufacturing: Myth, Global Manufacturing: Myth, Reality & Strategic OptionsReality & Strategic Options

Offshore Group - 12th Annual Manufacturing in Mexico SummitOffshore Group - 12th Annual Manufacturing in Mexico SummitOctober 20, 2006October 20, 2006

Michael L. Hetzel, VP/AmericasMichael L. Hetzel, VP/AmericasPro QC InternationalPro QC International

www.proqc.comwww.proqc.com

