A personal platform by the Group Manager of TWI's Manufacturing Support Group... Sayee Raghunathan
Is low-cost manufacturing synonymous with low quality products or services? I don't necessarily think so. The best manufacturing capabilities in countries like India and China are providing Western organisations a competitive run for their business.
They achieve this through the use of state-of-the-art facilities and processes as well as high-value manufacturing concepts. Of course, this does not mean that there are no issues with quality of manufactured products. So how can we deal with the paradox? One thing to consider is that the cost of quality control, inspection and rectification could be prohibitive for outsourced products where cost is the only driver for outsourcing.
However, current trends are that manufacturing continues to move East to the so-called low-cost economies, and Western countries are using high-value manufacturing [1] to differentiate themselves and manufacturing activities within their borders.
The combined influence of macro trends such as globalisation, and innovation trends such as open innovation, have transformed the landscape within the manufacturing arena over the last few decades. Manufacturing innovation is no longer equivalent to locally and internally focused R&Dmp;D activities restrictively dedicated to new product developments or process improvements. To compete with the 'low cost' manufacturers, western organisations are applying innovation through:
- Improving the efficiency and effectiveness of their in-house manufacturing and developing high-value activities, integrating high-value in global supply and value chains or even networks and delivering non-financial value, including Corporate Social Responsibility.
- Considering moving their own manufacturing and R&Dmp;D facilities to 'low-cost' economies, to access the markets in these economies, minimise their cost base and access the growing pool of talented engineers in these countries. An underpinning feature of off-shored manufacturing is surely the question of culture and in fact there is a tremendous opportunity to get certain aspects of human resource alignment 'right first time' in these new economies.
How is TWI preparing itself to serve Industrial Members better in this aspect? We have an established presence in many emerging economies worldwide and we are considering the development of a global pool of welding engineering resources. The idea is that by developing welding engineers who are comfortable with the local culture, as well as trained to meet the quality expected of TWI staff, Members can have a useful resource in-country to meet their immediate needs.
To set up low-cost manufacturing facilities abroad, multi-national organisations need to think carefully about the systems and processes employed by the organisations in the host country as part of their professional responsibility, as well as compliance with home country legal and regulatory requirements (e.g. the European pressure equipment directive and health and safety considerations). This is true for quality, health and safety considerations.
Some of the questions to be asked in this respect are:
Should multi-national organisations comply with the home country or the host country norms, especially if a norm or practice, not acceptable in the home country, is still acceptable in the host country?
One way to approach this would be to consider if the practice would still be acceptable in the host country if the extent of development there was equivalent to the home country.
This can be difficult to do because it is often counter-intuitive to business practice. Consider a fabrication facility in Nigeria operated by a European contractor for an American operator. Would the remuneration and benefits for the local content be in line with the European staff or American staff? In my view they cannot, as the business would then cease to compete in the international environment. The argument in this case is that local employees are better off than they would be under normal circumstances, and enjoy additional opportunities and benefits.
Another situation would be where the required standard or practice is independent of the host country's economic development. Could an organisation avoid this practice, and is the practice a violation of a fundamental human right? If the answer to both questions is no, it is then okay to continue the operations in the host country?
An example of this would be the use of Thoriated tungsten electrodes for gas tungsten arc welding or tungsten inert gas welding. In a review of air sampling measurements carried out during grinding it was concluded that during grinding, air concentrations could approach concentrations at which it would be necessary to consider designating the area as a controlled area as defined by the Ionising Radiation Regulations 1999.
However, the risk of cancer in TIG welders due to thoria exposure is very low, since the exposure times of individuals are invariably small. The Danish Welding Institute estimates that of 1200 full-time TIG welders, a cancer incidence of 0-3 may occur during a 30 year working life. While this figure is considered acceptable, it has been recommended that Thoriated tungsten be phased out since non-radioactive alternatives are available.
So should a European manufacturer with a low-cost base abroad ban Thoriated electrodes at all sites or consider allowing their use because there are no regulations there? In my opinion this risks the violation of a fundamental right and therefore should not be acceptable. Western manufacturers should apply appropriate safety principles anywhere irrespective of local rules and regulations.
How then can TWI support the aspirations of its multi-national members? Governments and industry in emerging economies consider innovation and technology as the pillars of their economic development progress. TWI actively considers strategic inputs and services to these economies which are hungry for technology and innovation in manufacturing.
There are many levels at which the interventions are possible: at national and state level through strategic input to programmes, platforms and national policy papers; at industry level through government/public sponsored technology transfer programmes and through collaboration with or setting up centres of excellence; and at individual level through customised training programmes geared to meet the regional/national needs. These initiatives are part of TWI's mission and services and over time some of these initiatives will add value to the businesses of its Members.
'Review of innovation management tools illustrated by industrial case studies'.
