Global Marketplace: A World of Opportunity and Obstacles

Globalization Influences Demand for Customization in Different Markets

By Joe Feeley

1 of 2 < 1 | 2 View on one page

15th year anniversaryAs Control Design celebrates its 15th anniversary, we bring you a look back at some of the topics we have covered and that have generated the most discussion among our machine builder and integrator audience. This article is part of our June 2012 cover story, "We Celebrate 15 Years."

The second issue of Control Design in 1997 featured a cover story about CE Mark and what that meant for U.S. machine builders. It was clear that the global marketplace would have growing importance. The Europeans were pushing a more advanced machine safety agenda. The Asians, particularly the Chinese, were pushing a low-cost model. U.S. builders were getting squeezed, but many of them also saw opportunity. We've been reporting on this all along.

Our "Leap of Faith?" August 2004 cover story on automation trends discussed globalization at length. Its words still ring true: "As the world globalizes, machine builders are selling more to customers outside of North America. These customers often demand compliance with their own regional standards, and industrial OEMs must comply."

In "Confluence of Influences," August 2008, we noted, "Geographically speaking, the level of machine control intelligence is driven by varying demand for customization in different markets. Generally, North America is highly innovative and entrepreneurial; Europe is R&D-intensive and more likely to use a consortium approach to manufacturing complex products; and Asia remains more volume-oriented and price-driven."

Factors Out of Their Control
At the time, we saw that strategies existed for machine builders to overcome barriers to exporting that were otherwise out of their control. A couple of the major barriers then, and now, are currency valuation and third-party quality standards.

We learned from that 2004 article that, increasingly, the valuation of international currencies impacted a global business environment in which many other barriers have been lowered by factors such as technology.

"We want to have the flexibility to adjust our businesses to stay competitive, and if we have to move from one site to another to accomplish that, we have the flexibility to do that," said Richard Curless, CTO in the MAG Americas division of MAG Industrial Automation Systems, Sterling Heights, Mich. "When a customer looks at a MAG product, it wasn't necessarily built at one site; it means it could be built at multiple sites and built to standards."

For U.S. manufacturers, a potential downside definitely exists in offshoring production because of communications and logistics issues, Curless argued. As a result, he said, many MAG customers had begun producing domestically again.

Mike Harrington, director of R&D for Alliance Machine Systems International, Spokane, Wash., said price is the dominant competitive factor for his company's foreign operations in the paperboard packaging industry. "Our European operation faces intense competition from OEMs in Europe as well as Southeast Asia," he said. "The primary competitive force is price. In some cases, we can obtain slightly higher prices because of location, service and machine quality. However, the quality aspects are becoming harder to distinguish between competitors."

China Not the Answer
In June 2009, we noted growing evidence that sourcing and manufacturing in China could be risky business. AMR Research (now part of Gartner) analyzed the global supply chain. "Concerns with China's product quality and safety record continue to rise from quarter to quarter," reported Noha Tohamy, AMR's vice president of research and author of the report. "This will ultimately limit China's play in high-value, labor-intensive manufacturing outsourcing."

China earned most-risky honors in 12 of the 15 risk categories identified in the report. Respondents cited China the most about intellectual property infringement (59% of all respondents), product quality failure (55%) and regulatory compliance (34%). Some 49% of these U.S. companies sourced from and manufactured in the U.S., and 14% sourced from and manufactured in China. In addition, companies continued to look near-shore for sourcing and manufacturing, with three times as many respondents planning to increase that activity.

Maybe so, but our InDiscrete news section in December 2009 included a report from IMS Research that China would become the world's leading producer of industrial machinery in 2011.

1 of 2 < 1 | 2 View on one page
Show Comments
Hide Comments

Join the discussion

We welcome your thoughtful comments.
All comments will display your user name.

Want to participate in the discussion?

Register for free

Log in for complete access.

Comments

No one has commented on this page yet.

RSS feed for comments on this page | RSS feed for all comments