Localization of Manufacturing in the Automotive Marketplace
Today’s global marketplace presents new challenges for manufacturers throughout the automotive supply chain. Achieving and sustaining a strong market position in multiple regions, simultaneously, requires companies to identify operational solutions that allow for greater adaptability. Establishing localized engineering and manufacturing facilities, and creating strong connections between them, can be an effective approach for companies to increase their organizational flexibility and efficiency in adapting to ever-changing market requirements and customer needs.
At the launch of a new or technologically improved product, a single manufacturing facility may be sufficient to handle global production demands. However, as overall demand grows, along with the number of regional supply markets and varied requirements, there is a point at which a single plant can no longer efficiently meet all supply demands. This presents a crossroads for manufacturers, and one for which the window of time for decision-making is shortened greatly by the speeds at which different regional economies are growing around the world.
One solution to this challenge that has been successfully demonstrated by companies such as Dana Holding Corp. is localization of manufacturing. Employing approximately 23,000 people in 25 countries on six continents, the company provides the world's original-equipment manufacturers (OEMs) and the automotive aftermarket with regional product and service support through a network of nearly 100 engineering, manufacturing, and distribution facilities.
The decision to invest in localized production capabilities requires careful analysis. Benefits of localization can include enhanced delivery speed to regional customers; reduced importing and shipping costs; flexibility to satisfy specific customer and market requirements, including local-content requirements; the optimization of processes; and the incorporation of new practices and technologies. There are risks to consider, too. Regional market dynamics, labor demographics, government and cultural stability, local regulations, capital commitments, customer requirements, regional competition, and technological opportunities are among the factors that must be weighed in. When the analysis is executed correctly, success will follow.
In 2015, the Dana Spicer Thailand Gear Plant opened in Rayong and almost immediately proved instrumental in optimizing Dana’s supply for the Asia-Pacific automotive market. The facility produces Dana’s best-in-class Spicer® AdvanTEK® gear sets and supplies them throughout the region, allowing for more efficient delivery to customers. It also utilizes state-of-the-art production capabilities, such as near-net-form ring gear forgings, which creates a customizable production platform. Perhaps as important as any other factor, the facility’s proximity to its customers throughout the region allows Dana to work more closely with them—providing engineering solutions and advanced manufacturing technology that help Dana’s customers to grow, continue expansion of the regional automotive market, and have a positive impact on the local economy.
The success of Dana’s Thailand facility mirrors the company’s experiences in other countries within the region. Dana’s technology center in Wuxi, Jiangsu Province, China, is an advanced research and development center that provides product and applications engineering for drivetrain, sealing, and thermal-management products for China and the Asia-Pacific region. The company also recently launched a technology center in Pune, India, that is devoted to the research, design, development, and testing of driveline products for the OEMs in the light-vehicle, commercial-vehicle, and off-highway markets.
These facilities are closely connected with each other, optimizing Dana’s customer focus in the region. They are also closely connected with Dana’s other technology centers, where information is quickly shared between engineers and production facilities, minimizing the time from design to production. Connections between manufacturing facilities also help to optimize global production.
As emerging economies continue accelerating the growth of regional automotive markets, companies will need to be nimble and flexible to gain or maintain their competitive footing. Based on these recent examples, sometimes it is the best policy to focus locally in order to grow globally.
We’d like to hear you thoughts.
- How are you addressing the need to connect your manufacturing globally?
- Is there a particular region of the world where you think automotive companies should be more heavily established?