delphi electronics and safety 1 outsourcing and globalizing: simplifying or complicating logistics...
TRANSCRIPT
Delphi Electronics and Safety 1
Outsourcing and Globalizing: Simplifying or
Complicating Logistics
Michael G. Coady
21st Century
Transportation Distribution Logistics Summit
September 14, 2004
Delphi Electronics and Safety 2
Delphi Electronics and SafetyGlobal Manufacturing Sites
MilwaukeeFlint
Kokomo
Reynosa MatamorosDeltronicosRimirCMM2Ashimori
Rio Grande
Singapore
Suzhou
Liverpool BadSaltzDetfurthSzombathely
St. Aubin Osberghousen
Tucson MunmakBraga
Ponte de Sor
Delphi Electronics and Safety 3
Market Environment
Cost + Profit = Price
Price – Profit = Cost
How you would like it to be:Seller’s Market
Limited Competition
How it is:Buyer’s Market
Unlimited Competition
Delphi Electronics and Safety 4
Why China?
Price – Cost = Profit
What happens when prices steadily decline and costs don’t decline at the same rate?
Delphi Electronics and Safety 5
Cost Breakdown
Delphi Electronics and Safety 6
Component Value Streamfor Products Manufactured in Mexico
Mexico7%
JapanMalaysia
Singapore
USA5%
China
Europe2%
Philippines
Mexico Plant Customer Plants
Asia*86%
Delphi Electronics and Safety 7
Component Value Streamfor Products Manufactured in China
Shanghai
Suzhou
XiaMeng
GuangZhou
Asia (outside China)26%
China74%
Customer PlantsChina Plant
Delphi Electronics and Safety 8
Cost Breakdown
Delphi Electronics and Safety 9
Thoughts on using China as a PML
Wages + Benefits are ½ of Mexico’s and 1/30 of U.S. Sites– High touch labor products benefit more than low touch labor products
Material cost reductions (BOM purchased in China )– Range from 5 to 10% depending on the commodity
4% VAT added 1-Jan-04 for exported value add from China Currency Exchange Rates
– Today the value of the RMB is locked to the $U.S.– In the future the RMB will float with a portfolio of currencies
Logistics– From China to the U.S.A. or Europe is quite high– 1 month of additional inventory is required to fill the logistics pipeline (reduced velocity)
Duty– Duty from China into Europe is quite high on certain commodities
China domestic sales always make good sense to build in China Export sales from China are less attractive today than one year ago, but still
make sense for high touch labor products
Delphi Electronics and Safety 10
Back Up Slides
Delphi Electronics and Safety 11
IndianaJobs
Low CostManufacturing Jobs
1970s
Low CostEngineering Jobs
1990s
Pushing Jobs Out
CompositeWage Rates forManufacturing
and Engineering
Pulling Jobs Out
Global Local Content
Value ChainDis-Integration
Value ChainVertical
Dis-Integration1980s
Local ContentLegislation
1990s
Highly Competitive Global Market Place
Delphi Electronics and Safety 12
Americans Claim Most Patents
3,472
3,925
4,090
4,173
5,806
10,822
32,924
97,016
- 20,000 40,000 60,000 80,000 100,000
South Korea
Canada
United Kingdom
France
Taiwan
Germany
Japan
USAInnovationNew MaterialsNew ProcessesNew EquipmentNew Products
Source: U.S. Patent and Trademark Office’s Technology Assessment and Forecast Report
Delphi Electronics and Safety 13
Applied InnovationLaunch Center
Future Vision forAdvanced Manufacturing