Here’s a mid-year prediction from Technology Forecasters: Due to the growing desire to reduce their carbon footprints and their costs, OEMs will swing from centralized manufacturing outsourcing (e.g., in Asia for global customers, anytime, all the time) to more balanced regional strategies than we’ve seen in the past five years.
We believe the lean and green movement will be one of the drivers of a massive swing to regional manufacturing. Rising costs in Asia and improving quality elsewhere will also drive this shift, but the big push will come from green demands. As OEMs seek to reduce their carbon footprints, they’re going to want to manufacture closer to end markets. Air, ocean, and land transportation are gross contributors to exhaustion of non-renewable resources and the ill health and environmental effects of burning hydrocarbons.
We’ll go so far as to say it is not a matter of “if” this happens, but when. That is, we predict consumers and business customers will demand a reduction in the carbon footprint of the products they buy, and OEMs and their partners will respond by aligning manufacturing to serve regional customers. Some major electronics OEM executives to whom TFI has spoken expect a rapid shift in consumer sentiment regarding carbon footprints in the next 12 to 24 months and are preparing their stategies now.
The most nimble and courageous contract manufacturers will lead the way. This represents an opportunity for mid-sized and smaller regional CMs, who will find themselves on more equal footing with the largest CMs, and thus able to win new business.
In the months ahead, our OEM, CM, and component supplier members will hear more from us about what they can do to competitively and intelligently use manufacturing and logistics strategies to reduce costs and meet carbon-reduction goals.
We’d like to hear from OEMs and CMs on this: How soon will we see the swing to more regional manufacturing?
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It’s interesting to read this comment because we’re steering a client in the direction of a regional CM vs. the overseas route right now. Our client has a strong pro-environment track record and doing things that are environmentally friendly is part of their corporate DNA. So we have been focusing on using a CM here in the US rather than China or other offshore locations. In addition, all the recent negative news regarding lead paint and recalls from China has made our push all that more significant to the client.
Does TFI have any measure of the “carbon content” of air or sea shipments from Asia to the US ? How big a deal is this ? How much impact on the “carbon footprint” of an electonic product is shipping ?
Hi,
Interesting. Might happen if customers value c-footprint, but if not, more likely companies will move away from places with c-footprint laws, at least initially.
regards,
Michael
A very optimistic assumption. I think most manufacturers will look at total landed manufacturing cost, and carbon footprint will be used only in ads
This is an easy PR win for global firms who want to diversify away from Asia due to unsecure supply chains, rising labor costs and higher shipping costs. Note the direct relationship between carbon footprints and shipping.
As much as I want to believe that executives have gone green, I agree with Ed Goldman that it’s more likely that want a more diverse manufacturing base and lower bill for shipping costs.
To Richard Otte’s question: From 15% of an electronic product’s environmental footprint can be contributed by transportation. Here are some factors to weigh: (1) Proximity of product-life-cycle stages to one another: raw materials, fabrication, component manufacturing, component distribution, PCB assembly, encasement fabrication, final assembly, finished-product distribution, end customer, refurbishment, recycling. Designing the products’ life chain around customer locations can greatly reduce transportation costs and footprints. (2) Weight and size of products, with smaller and lighter products being more efficient. Using Design-for-Environment techniques reduces the cost and number of parts, speeds assembly (and disassembly), uses common modules for manufacturing/shipping efficiencies, and reduces product size — all good for reducing cost and footprint. (3) Forecasting, configure to order, and other inventory-planning approaches that permit slower shipping methods (e.g., avoiding air transportation whenever possible). For example, TNT–the world’s fourth largest express-delivery company (after FedEx, UPS, and DHL)–has two new Boeing 747s going from Belguim to China (rarely filled to capacity) and back again (full) 9 times weekly. These jets’ double TNT’s total CO2 emissions. CEO Peter Bakker is committed to dramatically reducing environmental footprint, company wide (factoring in even employees’ commutes, making their headquarters “CO2 positive,” and more (Ode, September 2007, p. 47-50). To “lean” your life-cycle transportation, we can arrange a conversation with our logistics, lean, and green experts.