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3 Trends to Watch: Location, Location, Location

US_Manufacturing_ReshoringArena regularly publishes insights and analysis on important trends impacting manufacturing. Is there an emerging business technology development you deem important or want us to cover? Comment on our blog.

United States to Match China’s Manufacturing Attractiveness by 2015

According to AlixPartners, the United States and Mexico are now considered equally attractive options for US-based manufacturers designing products for the North American market. Thirty-seven percent of the 137 respondents would choose the US as their preferred location. An equal percentage would choose Mexico as their preferred nearshoring location.

But surprisingly the United States’ appeal has intensified recently. In 2011, 63 percent of manufacturers said they would locate nearshoring operations in Mexico and only 19 percent said they would choose the United States. In 2012, those numbers had shifted dramatically, with 49 percent preferring Mexico and 36 percent the United States.

“By 2015 the cost of importing manufactured products from China will be about the same as manufacturing them in the United States,” the report noted, adding that “other key low-cost countries, such as Mexico and India, will remain highly competitive…Mexico and India have maintained cost advantages vis-à-vis China of 15 percent to 20 percent, similar to the advantage levels China enjoyed over other low-cost countries in the early 2000s.”

Points to Ponder:

Changes in the economic environment are making either keeping it in-country or nearshoring more attractive. Expect more US manufacturers in the next few years to move their offshore operations back home.

Panasonic and Tesla Sign Agreement for the Gigafactory

In July, Panasonic Corporation and Tesla Motors, Inc. signed an agreement to construct a large-scale battery manufacturing plant in the United States, known as the Gigafactory.

According to the agreement, Tesla will prepare, provide, and manage the land, buildings, and utilities. Panasonic will manufacture and supply cylindrical lithium-ion cells and invest in the associated equipment, machinery and tools based upon their mutual approval. A network of supplier partners is planned to produce the required precursor materials.

Tesla will take cells and other components to assemble the battery modules and packs. To meet the projected demand for cells, Tesla will continue to purchase those produced in Panasonic’s factories in Japan today. Tesla and Panasonic will continue to discuss the details of implementation including sales, operations, and investment.

The Gigafactory will enable a continuous reduction in the cost of long-range battery packs. In concert with that, they’ll manufacture at the volumes required to enable Tesla to meet its goal of advancing mass-market electric vehicles. The Gigafactory will be managed by Tesla with Panasonic joining as the principal partner responsible for lithium-ion battery cells.  Each will occupy approximately half of the planned manufacturing space.  Key suppliers combined with Tesla’s module and pack assembly will comprise the other half of this fully integrated industrial complex.

Points to Ponder:

The Gigafactory represents a fundamental change in the way large-scale battery production occurs. Not only does the Gigafactory enable capacity needed for Tesla’s Model 3, but it sets the path for a dramatic reduction in the cost of energy storage across a broad range of applications. The manufacturing of lithium-ion battery cells at the Gigafactory will accelerate the expansion of the electric vehicle market.

Manufacturing Operations Management On the Upswing

Studies have found that more manufacturers are adopting Manufacturing Operations Management (MOM) software that supports the methodology for viewing an end-to-end manufacturing process to optimize efficiency.

There are many different definitions of MOM and MOM software, including those for production management, performance analysis, quality and compliance, and human-machine interface (HMI).

MESA and ISA are two standards organizations that have been instrumental in the development and adoption of industry standards in the area of Manufacturing Operations Management.

One of the most important standards is ISA-95. Essentially, the ISA-95 standard includes models, terminology, and the markup language for integrating business systems and manufacturing systems. At the highest level, these activities are broken down into Layers 4-0. Layer 4 is business operations, Layer 3 is manufacturing operations, and Layer 2, 1, 0 is control.

The reason for the upswing in adoption by manufacturers of MOM software may be due to several factors, including the beginnings of an economic recovery in developed regions of the world.

This pickup is also attributable to shifts in manufacturing locations with re-shoring activities, a global environment of stable energy prices, and new technology advancements delivering benefits that are compelling.

Points to Ponder:

Empowering knowledgeable workers and effectively capturing their long-held knowledge and experience is a key opportunity area for higher manufacturing productivity and performance in 2014. Software solutions that help to better organize work processes and manage large amounts of data into actionable information will succeed.