Production Technology: Adapting to Maximize Local Advantage

Abstract

Selecting production technology for global manufacturing sites means balancing the advantages of standardization against those of local adaptation. Tailoring production technology to different locations can be highly beneficial. It enables manufacturers to leverage factor cost differentials more effectively, adjust production complexity to employee skill levels, and match plant and machinery to the unit volumes required at that site. Production technology may also need adapting to allow changes to the workpiece design, such as to suit local taste or customs regulations.

The downside is that local adaptation broadens the portfolio of production technologies and product variants that a company has to maintain. Variability creates complexity. And complexity drives costs. Companies therefore need to carefully control the number of design and production technology variants they have.

Companies basically have three options. Manufacturing technology that is complex and involves high development costs should remain largely unchanged across locations. If there is greater scope for reconfiguration, companies should first consider adapting a proven process technology without altering the workpiece design. Modifications to workpiece handling and transport are possible levers. Process changes that directly affect product characteristics such as automating metal cutting or using a different welding technology should also be considered, but with greater caution. The next step may include a change to the workpiece design, which often allows the use of completely different manufacturing methods and machinery.

When considering adaptation, alternatives need examining within the context of the overall production network. It is vital to consider the one-off expenses required to change the product design and manufacturing method in addition to the operations costs. Technology that cannot be leveraged globally is often too costly to develop and maintain.