Supply and Demand Scenario
In the global economical scenario the factors governing the supply, demand and even manufacturing location are driven by global factors. The opportunity cost is governed by customer demand in global locations. Proximity to the end user is a key factor in selecting the location of manufacturing facilities or distribution network. This is more important in products where the transportation cost is significant and business is serving a specific customer base.
In case of one my previous employers; we are serving a specific electronic segment of manufacturing printed circuit board assemblies [PCBs]. We were manufacturing reflow ovens to solder components for semiconductor industries. The company’s brand name was recognized for their thermal control capabilities and had long term contract for supplying products to leading manufacturers.
After September 11, 2000 the semiconductor industry was hard hit by economical down turn. Most major manufacturer moved their manufacturing to Asian countries. All PCB manufacturers started cutting cost and wanted capital equipment suppliers to chip in to meet their financial goals for survival.
My company was no exceptions to this market trend. In order to sustain the existence and reduce the cost of manufacturing, we were forced to move manufacturing to China. This was with two major reasons.
To reduce the cost of manufacturing to meet customer expectations of lower cost products. •
To be closer to end user to reduce shipping cost and provide better customer support. To reduce manufacturing cost we had already moved our major manufacturing in Canada but that move did not help in the new business situation. The company set up a manufacturing facility in China to support major end user market. The company down sized the work force and continues to produce similar products in USA to support European and small US market using partially build assemblies from China.
This decision of moving...
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