Recently I toured a John Deere production facility in Mannheim, Germany. John Deere is an excellent company – great brand, great products, good growth and profitability. They have used Lean Management techniques for years and have been able to reduce their hierarchy levels down to four (!). Production workers work in teams without supervisors and are directly responsible for improving their key metrics.

The tour was great. It started off at their new welcome center which houses a selection of their products (from small to very large), a bit of their history and a small shop. The facility was clean, full of posters with Lean Management statistics (Visual Scoreboard) and high-tech machines and robots. The Mannheim facility produces a type of transmission and assembles a range of tractors.

Our tour guide explained the John Deere philosophy towards global production. They have factories throughout the world and each facility focuses on a product or range of products. If the transmission built in Mannheim needs to be assembled into the tractor built in Brazil, it gets shipped there. Experience has shown that it is more effective to focus one plant on doing something well and ship from there than to set-up multiple plants which do more or less than the same thing.

For those companies trying to figure out Low Cost Country (LCC) production, this is good advice.

Image from weakleycountytn.gov 

Post from: EveryJoe

Global Production at John Deere

Wages have been increasing in a number of traditional Low Cost Country (LCC) locations.

Eurostat, the European Union’s statistics office, reports the following increases in industrial wages:

• Czech Republic: 6.7%
• Slovakia: 8.1%
• Poland: 11.1%
• Romania: 21.6%
• Germany: 1.5%
• France: 3%

Around Shanghai, China, wages in some industries are approaching European levels.  (Source: Automotive News Europe). My post yesterday discussed reasons for setting up global R&D operations; cost savings is no longer one of them.

So will the next Low Cost Country please step forward?

Some companies, like Renault, have plans to build manufacturing plants in Morocco and other Northern Africa countries. This could be the start of a good thing for the whole continent.  I have often wondered why the recent success of many emerging countries has seemed to by-pass Africa. I have a few pet theories of my own, but I have never read anything on this topic.

What do you think? Will the next LCC be in Africa or somewhere else? If you were in charge of a labor-intensive manufacturing facility and needed to save costs where would you move to?

Image from eia.doe.gov 

Post from: EveryJoe

Who Will Be the Next Low Cost Country?