The Hard Data on Manufacturing Globalization

Vivek Maladkar June 10, 2015

manufacturing_globalizationThroughout our database of articles on engineering and manufacturing solutions, we’ve tackled many of the most effective practices for optimization that companies are currently using, and will use, in the future. 

Among the most profitable is global product development - the practice of developing products from across the globe, via remote development centers, and attaining the competitive edge that lower back-end spending provides.

In certain industries, global agreements have become major components of commerce. Take, for instance the aircraft production and printing machinery industries, which export 54% and 45%, respectively, of their total output to overseas markets. This number is only expected to grow as the world becomes more connected via online tools and the systems available to support global product development.

This article goes head-first into ways globalization is changing the industry landscape with every passing day, with the raw data to support it.

Cost Benefits

One of the big questions today’s manufacturers about globalization comes down to the bottom line; how do initiatives and engagements like these drive productivity and keep development costs low?

Along with practices like value engineering and part/technology standardization, globalization is identified as an approach to product cost optimization (PCO). 

  • Collaborative engineering efforts have, in numerous detailed cases, been able to provide over 50% of their ROI in a short period of six months.
  • As reported by Forbes, globalization facilitates a competitive environment for multinational companies, as well as economic growth between the nations involved; in 2009, U.S. companies brought in over $6 trillion in international commerce, as a result of their offshore facilities.
  • IIoT device and cloud-based systems, which complement the growth of international manufacturing, help multinational companies increase operating efficiency by over 80%, largely by reducing product error and boosting customer satisfaction via more reliable output.
  • It’s estimated that roughly 95% of the world’s entire consumer base resides outside of the U.S., as reported by the U.S. National Foreign Trade Council; reaching that population through offshore development/labor has become essential for global manufacturers.

The Future of Globalization

Offshore engagement models and globalization is more than just a manufacturing trend, it’s the future norm for all manufacturers that hope to sustain - and grow - their share of the market for decades to come.

  • Business Insider anticipates the manufacturing investment in smart technologies (those that make the IIoT and globalized development possible) to exponentially grow, from today’s annual $46 billion to well over $250 billion by 2019.
  • By 2025, Plunkett Research estimates that globalization will help millions upon millions of workers in developing countries escape the grip of poverty for the first time. 600 million Chinese workers have done so since the early 1980s, and this trend is expanding throughout neighboring Asia-Pacific nations.
  • Smart technologies and blooming online presence have pushed more companies to engagement in offshore business models. in 2010, IBM employed roughly 80,000 offshore workers in their research facility; by 2012, that number spiked to over 112,000.

Globalization does more than just expand costs, it gives companies the flexibility to scale their operations as needed, with minimal downtime and profit loss. Additionally, offshore engagements allow manufacturers to develop products in regions or geographies where doing so is far cheaper than back home - essentially cutting labor costs and material costs in one game-changing move.

As reported in B-WI’s 2014 Survey on Key Objectives, Challenges and Strategic Initiatives of Global Manufacturers,” it was found that only 25% of today’s manufacturing professionals identify global continuity as a business objective. What this means is that the benefits of pursuing globalization are being understated within manufacturing, and are ripe for the taking for companies that choose to embrace ongoing industry developments.

Survey: Global Manufacturer

Topics Globalization Product Development Solutions