dr. chris van egeraat dublin city university business school cisc seminar, july 2003
DESCRIPTION
Geography of Production Linkages in the Irish and Scottish Microcomputer Hardware Industry: The Role of Logistics. Dr. Chris van Egeraat Dublin City University Business School CISC Seminar, July 2003. Structure of Presentation. New High Volume Production Approaches - PowerPoint PPT PresentationTRANSCRIPT
Geography of Production Linkages in the Irish and Scottish Microcomputer
Hardware Industry: The Role of Logistics.
Dr. Chris van Egeraat
Dublin City University Business School
CISC Seminar, July 2003
Structure of Presentation New High Volume Production Approaches NHVP in the microcomputer industry NHVP argument for proximity - logistics Findings
Geography of production linkages Logistical arrangements (hubbing) key-logistics data
Conclusions and policy recommendations
NHVP Approaches Lean Production/Supply (Womack et al./ Lamming) Mass Customisation (Pine) Time-based Competition (Stalk and Hout)
Answer changing market needs - fast response, greater variety and customised products. All achieved with little cost penalty
Customer relations and distribution system - fast response and reduction of inventories
Assembly plant - JIT production and build-to-order Supply chain - JIT supply
NHVP in the Microcomp. Hardware Industry Great variety, customised, short order lead times Minimise inventories of finished systems BTO production strategies JIT manufacturing
Market for microcomputers characterised by strongly fluctuating and unpredictable demand. - The inventories in the supply chains could not be minimised without the risk of inefficient use of machinery and labour at the suppliers.
Agglomeration FactorsAgglomeration factors NHVP
argumentFactorsrelated tothe labourmarket
A local pool of workers maximising job-matchingopportunities
Factorsrelated toproduct flow
Efficient product flow/logistics
Efficient formal information exchange in the contextof inter-firm functional integration
Efficient formal information exchange in the contextof vertical disintegration
Factorsrelated toinformationflow
Socio-cultural and institutional factors enhancingformal and non-formal information flow betweenactors that are part of the local milieu.
NHVP Argument for Buyer-Supplier Proximity NHVP approaches involve a greater appreciation of
the costs of holding inventory. TLC = ordering/set-up costs cost + inventory holding
costs + cost of transporting the goods
i
ii Icsq
adSmQ
)(2
*
IcmSQ 2* Traditional
CLMPs - JIT
Outcomes of the CLMPs Elimination of buffer inventories; kan-ban deliveries on a
daily basis; near synchronous production; co-location - ‘True JIT’, ‘Full JIT’
At the other end of the spectrum the pipelines of components might involve less frequent shipments, substantially higher buffer inventory levels and suppliers located at great distances Labour cost differences among regions Value, bulkiness and weight of components Minimum efficient scale of component production Variety of options per component category
Material input Main geographical sources of parts and componentsEnclosures andracks
For high-volume models and portables: mainly local andto a lesser extent Far East; For less current models andracks: USA and local
Motherboards,backpanels and risercards
For most focal companies: Mainly Far East and, to alesser extent, USA; For two focal companies: mainlyScotland and England
Microprocessors Mainly South-East Asia, small amounts from Ireland;For proprietary technology: USA
Memory Mainly Korea and Japan and small amounts from USAand Europe
Hard disk drives Far East, notably SingaporeFloppy drives Far EastCD-ROM drives; CD-RW drives and DVDdrives
Far East
High capacity discand tape drives
For lower-end technology: mainly Far East;For higher-end technology: USA, Far East, and Europe
Sources of Material Inputs
Power supply Low-end: mainly China, Malaysia and Thailand;High-end: USA and, to a lesser extend, Far East, Europeand England
Heatsinks Mainly Far East, notably Taiwan; to a lesser extent USAand England
Cooling fans Mainly Far East; to a lesser extent USA; some Englandand Germany
Batteries and AC-adapter (forportables)
Far East
Modems and networkcomponents
Mainly Far East and USA, although four suppliers weremanufacturing in Ireland
Graphics, video andsound cards
Mainly Far East, notably South-East Asia; Individualsources in USA, Canada, Mexico and Germany
Cables andinterconnect
Mainly the Far East and, to a lesser extent, Ireland andScotland.
Screws, fastenersand other c-classitems
USA and, to a lesser extent, local
Sources (Continued)
Displays Mainly Far East; Wales and England for few selectedmodels.
Keyboards, miceand joysticks
Manufacturing in Far East, notably China and South-EastAsia;Printing of non-English language key-board models local
Printers Mainly Far East; to a lesser extent USA, Canada, Europeand England
Scanners No precise data, but not in Ireland or the UKDigital cameras Far EastSpeakers andmicrophones
Mainly Far East, notably China
Docking stations Far East and on-siteMedia Printed manuals: mainly Ireland, and to a lesser extent
Scotland;CD replication: Ireland, Scotland, Wales, Germany andUSA;Wrapping of digital and printed media: local
Accessory kits LocalPackaging material Local
Sources (Continued)
compl. system assembly (subcontracting)
keyboard localisation (key-cap printing)
packaging (board, foam, plast ic)
Key
Source: company interviews
monitors
microcomputer assembly plant
metal and plastic parts, typically involvingsome sub-assemblymedia (print ing and disc reproduction)mainly ki tting of media and other languagespecific components
sub-assembly or rework service
PCBA, incl. sub-assembly in some cases
other
cables, connectors, terminators, etc.
Suppliers of the Scottish P lants
compl. system assembly (subcontracting)
keyboard localisation (key-cap printing)
packaging (board, foam, plast ic)
Key
Source: company interviews
monitors
microcomputer assembly plant
metal and plastic parts, typically involvingsome sub-assemb lymedia (print ing and disc reproduction)mainly ki tting of media and other languagespecific components
sub-assembly or rework service
PCBA, incl. sub-assembly in some cases
other
Suppliers of the Irish P lants
cables, connectors, terminators, etc.
Inbound Pipeline Structure Hubbing Turnkey supply-chain-managers Local manufacturers holding buffers
Most pipelines involved locally stored buffers of finished components on the books of the suppliers
Interpreted as a pseudo or apparent JIT system that holds little benefit for the supply chain as a whole. However, the use of hubs, in itself, does not necessarily mean that the supply system is sub-optimal.
Main Third-party Logistics Hubs - 1998
IE
WW
IE
IE
WW
IE
IE
IE NE
FW
FM
Key
Source: company interviews
Microcomputer Assembly Plant
Mayor Third Party Logistics HubIE Irish Express
WW Walsh WesternNE
FWFM Frans Maas
Nippon Express
Fyfe Warehousing
Control over Pipelines I give [the suppliers] my MRP every week for that product
and I expect them to manage the chain between them and the hub, I expect them to turn it up, down, slow it fasten it and manage it so that I always have 10 days [worth of inventory] in the hub. … We run queries here every day by part number which sends out an exception report which shows me what suppliers have less than 10 days. And the buyers call them. And it also shows us what we have too much of. And we than proactively take actions twice a week. … All the vendors are on-line to Irish Express Cargo [the 3pl hub]. All the vendors have the same kind of contact. That is a criterion that Gateway gives (Interview Flynn, Gateway, 1999)
Average targetbuffer levels
Average numberof days betweenshipments
Typicalpreferred modeof transport
Material inputs Far Eastand AmericasMicroprocessors 4 2 planeFlat panel monitors 5 5 limited dataMemory 8 3 planeLCD displays 8 4 no typical modePartly integrated portables 10 4 planeTape back-up/ autoloaders 9 5 planeAC adapter 9 5 planeHard disk drives 9 5 planeCRT monitors 9 5 shipSmall plastic metal parts 10 5 no typical modeFloppy drive 9 5 no typical modeCD ROM drive 9 5 planeCD RW drive 10 5 no typical modeCombo drive 10 5 limited dataZip drive 10 5 planeDocking stations 10 5 no typical modeJoysticks 10 5 shipScanner 10 5 shipServer racks 8 7 no typical modeSound/video/graphics cards 9 6 planePower supplies 9 6 shipDVD drive 10 6 planeModem/network cards 9 7 planeEnclosures 9 7 shipMotherboards/backpanels 9 7 planeHigh volume keyboards 10 6 shipPrinters 10 6 shipEnclosures for portables 10 7 shipHeat sinks 9 7 shipMicrophone 10 8 shipCooling fans FE 10 9 shipBattery for portable 13 6 no typical modeRiser cards 10 9 planeSpeakers 13 7 shipMice 13 9 planePower cables 14 10 shipOther cables 15 11 no typical mode
Key Logistics Data
Key Logistics Data (Cont.)
Average targetbuffer levels
Average numberof days betweenshipments
Typicalpreferred modeof transport
Screws and fasteners 35 40 plane
Material inputs EuropePower supplies 5 2 truckCRT monitors 8 2 truckTape back-up/ autoloaders 8 3 truckm' boards/ backpanels 10 1 truckMemory 8 3 truckEnclosures for portables 10 2 truckCooling fans 10 2 truckHard disk drives 8 4 truckOther cables 10 2 truckPrinters 10 5 truckSound/video/graphics cards 10 5 truck
Material Inputs Ireland andUKPackaging 2 truckLow volume keyboards 2 truckCountry kits 2 truckCD ROMs (wrapped) 4 truckPrinted media (wrapped) 4 truckHeat sinks 5 truckEnclosures 5 truckHard disk drives 6 truckServer racks 6 truckSmall plastic metal parts 9 truckModem/network cards 9 truckm' boards/ backpanels 9 truckPower supplies 10 truckCRT monitors 10 truckPrinters 10 truckFlexcircuit 10 truckPrinted labels 13 truckPower cables 13 truckOther cables 13 truckCooling fans came
integratedtruck
Conclusions Vast majority of components from the Far East and
pipelines involved inventories in hubs However, logistics systems are not sub-optimal
Policy implications One should not expect a drive in the direction of ‘true-
JIT’ and an increase in local sourcing. The strategy of building integrated vertical production
clusters around subsidiaries of MNEs is unlikely to meet with success. - ‘Local sourcing route to cluster development’
Alternative is ‘technological innovation route’ (Young et al. 1994).
Main microcomputer assemmblers - 1998
Source: Company interviews, 1998contract assembler
200-500 employees
computer company
Note: Only firms that carry out system assembly are included here.
4000-4200
1500-2100
1000-1500
500-1000
Main microcomputer assemmblers - 2003
Source: Newspaper articlescontract assembler
200-500 employees
computer company
Note: Only firms that carry out system assembly are included here.
4000-4200
1500-2100
1000-1500
500-1000
Job losses & Plant Closures IrelandWestern Digital 1992 Closure of automated circuit board facilityLogitech 1995 End of mice production activitiesKeytronics 1996 End of actual keyboard production activitiesSeagate 1997 Closure hard disk drives assembly facilityMitsumi 1998 Closure keyboard production facilityAlps 1998 End of actual keyboard production activitiesAcco 1998 Closure plastic component facilityApple 1998 Closure motherboard assembly facilityIntel 1998 Closure motherboards and system assembly facilityIntel 1999 Closed Pentium cartridge assembly facilityCTM-Southborough 1999 Job cuts at enclosure production and subassembly facilityQuantum 1999 Job cuts at tape/ hard disc configuration facilityFullarton 2000 Closure of enclosure production and subassembly facilityMKIR 2000 Closure of hard disk production facilityCTM-Southborough 2001 Job cuts at enclosure production and subassembly facilityVolex 2001 Job cuts at cable production facilityAPW Galway 2001 Job cuts at enclosure production and subassembly facilitySCI 2001 Job cuts at printed circuit board facilityModus Media 2001 Job cuts at media/kitting facilityIndustrial print 2001 Job cuts at logo manufacturing facilityFoxteq 2001 Closure enclosure production and subassembly facilityVolex 2002 Job cuts at cable production facilityFlextronics (Tullamore) 2002 Closure enclosure production and subassembly facilityFlextronics (Limerick) 2002 Closure of network component production facilityCTM-Southborough 2002 Closure enclosure production and subassembly facilityTrend Technologies 2003 Closure enclosure production and subassembly facilityMSL (Athlone) 2003 Closure printed circuit board facilityVolex 2003 Closure cable production facilityKeytech?
Job losses & Plant Closures ScotlandEcco <1995 Closure keyboard production facilityIBM <1995 Outsourcing monitor and keyboard productionRodime 1991 Closure hard disk drive production facilityConner Peripherals 1993 Closure hard disk drive production facilityDigital Equipment 1995 Sale Alpha processor fabrication plant in Livingston
Closure processor packaging line in AyrSun Microsystems 1998 Outsourcing circuit board assembly to CEMs in Scotland and
EnglandClairemont Electronics(formerly Lithgow Electr.)
1998 Closure of monitor assembly line
Lite-On 1998 Closure monitor assembly facilityCompaq 1998 Shift of motherboard assembly line to SingaporeApricot 1999 Outsourcing motherboard assembly to MSL in IrelandIBM 1999 Outsourcing server board assembly to Solectron ScotlandAMP 1999 Closure of cable assembly facilitySeagate Irvine 2000 Closure disk drive configuration facilityAmphenol 2001 Closure cable assembly facilitySolectron 2001 Closure of motherboard assembly facilityTechdyne 2001 Closure of cable assembly facilitySanmina-SCI (Irvine) 2002 Closure of circuit board assembly facility[c1]Foxteq 2002 Closure enclosure production and subassembly facilityChunghwa 2002 Closure picture tube production facility
Compaq
IBM
SUN
Apricot-MitsubishiGateway
AST-Samsung
Apple
Intel
Dell
Source: company interviews
Key
Packard Bell-NECConfiguration centre
Figure 4.1. Location of microcomputer assembly plants of focal companies world-wide - 1998
Digital