Here’s another interesting ops strategy story. This one is about making guitars, specifically Taylor Guitars. The LA Times had a feature about the company which started in LA and still has much of their manufacturing in Southern California (Taylor Guitars has thrived by being different, Jun 12). As you can see from this video, their production is an interesting blend of labor intensive detail work (e.g., tricking out the front of the guitar) with some capital-intensive bits (e.g., automated wood shaping and robotic painting).Vodpod videos no longer available.
The interesting part of this to me is how they use their California and Mexico plants. Here is what the article says:
Taylor’s least expensive guitars — those costing around $300 to $1,300 — are made in a 300-worker factory in Tecate, Mexico. But the bulk of the company’s revenue comes from guitars that range from $1,900 to $10,000, and to as much as $20,000 for specialty jobs. Those are made by the 400 employees in El Cajon.
During a recent interview, Bob Taylor looked surprised when asked why so little of the product line is manufactured in Mexico, where there are fewer environmental regulations, cheaper labor and lower taxes.
“We’re not tempted by that. We live here,” Taylor said. “This is home for us.”
I find this curious. On the one hand, if Mexico is capable of producing $1,300 guitars, I gotta think that they can move up market. On the other hand, if the sweet spot is the $2,500 guitar (OK, I may be a little dubious of that), why make $300 guitars? If the big part of the market is not at the low end, do you jeopardize the premium brand name by sapping “Taylor” on a discount kid’s guitar? Alternatively, it may be that you can draw a relative premium in the kid’s market because you are so strong in the professional market but not enough to cover the added cost of producing in California.