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Check out this spiffy graphic from Automotive News on the evolution of auto assembly in Mexico (Japanese automakers march into Mexico, set up export base, Mar 10).

0310-MEXICO-MAP

That expansion has to a large extent come at the expense of the rest of the North American industry as this graph from the Chicago Federal Reserve demonstrates.

AOS-Chart-1

Note that overall assembly capacity has declined. That’s not too surprising. The industry was generally seen as being overcapacitated, and the Big Three took the never-let-a-crisis-go-to-waste route to reduce the number of factories and resize their business. But Mexico clearly gained and it is forecasted to gain even more. Here’s another graph from the Chicago Fed.

AOS-Chart-2

It should be noted that this growth is driven by Japanese brands. GM is the only US or European firm to open a new plant following NAFTA. All the action lately has been due to the likes of Honda, Mazda and Nissan. Given this growth in capacity, it is not too surprising that Mexico is expected to pass Japan this year and Canada next year to become the top source of imported cars in the US. But why has there been such a rush invest there? (more…)

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Three weeks ago, I had the pleasure to visit one branch of my extended family and BMW Welt (BMW World), the “multi-functional customer experience and exhibition facility of the BMW AG, located in Munich, Germany.” Supposedly, BMW Welt is the second most popular tourist destination around Munich, after Neuschwanstein Castle which inspired Disneylands’ Sleeping Beauty Castle. If you like architecture or cars, you should visit BMW Welt.

OK, but this is the Operations Room, so what else is worth knowing? It turns out that this month, BMW starts selling in Germany its long-awaited i3 (the USA will have to wait until 2014) and here’s some personal pictures to highlight three aspects:

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How do you grow a service business when growing means adding locations? That’s always been one of my favorite topics in service operations. It poses interesting challenges on what must be standardized and where flexibility should be maintained. The Globe and Mail has an interesting profile of  Toronto entrepreneur who has had to grapple with these issues as he has expanded his takeout restaurant from one location to four (Restaurateur creates winning recipe to manage multiple locations, Mar 8). They’ve gone the emphasize-standardization route.

Over the next seven years, Mr. Ross opened up three more Veda locations, two in buildings on the main University of Toronto campus, in 2007 and 2009, and one this past summer at University and Dundas, close to a group of hospitals. To manage across these locations, he pays close attention to as much standardizing as possible.

Since Mr. Ross believes food consistency to be critical, all the cooking is done in a central location. This means not only that food in all of Veda restaurants is cooked using the same recipes, but that it all comes from the same batch. The cooking takes place in the original, flagship Yorkville location and is distributed to the other locations each morning.

To ensure that the right food is at the right place at the right time, Mr. Ross needs to be able to estimate demand at each location on each day of the week. He has systems in place that allow him to predict that, and to tweak the prediction if there are events, such as large conferences, in the area. As well, he has a driver on call at all times who can deliver food to a location within 10 minutes if there is unexpected demand and something is running out.

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It’s been a long time since we’ve posted about illicit drugs, so we’re due! The drug in question is methamphetamine. The Wall Street Journal reports that the gangs making the drug have shifted their operations strategy from having small, US-based labs that produce meth from start to finish to having “conversion labs” in the US that turn meth from a liquid or powder form into crystals that have higher value (Business Plan Remakes Meth Market, Sept 14).

What’s behind the change in production networks? Logistics!

In California’s Central Valley, local labs couldn’t produce as cheaply as Mexican counterparts, in part because they had trouble disposing of toxic byproducts, said Manuel Rocha, who heads a multiagency meth task force in Merced County.

Mexican groups that took over the California market tried different strategies, law-enforcement officials said. They sometimes imported crystallized meth, but transportation often crushed the crystals. They sold meth powder in the U.S., but it fetched a lower price than crystals.

Conversion labs were the answer. Producing powder or liquid meth in Mexico creates the toxic waste there. Converting the imported powder to crystal in the U.S. creates little waste but adds maximum value.

Moving final processing close to the consumer meant drug groups could smuggle large quantities of easy-to-conceal meth powder or liquid, often disguised as products such as antifreeze. Once the product arrived in the U.S., organizations could decide whether to sell it raw for wholesale or add value by converting it.

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How could I pass on blogging about the Wall Street Journal reporting on May 21 that 100 U.S. engineers and managers were flown across the Atlantic and told: “Do as the Belgians do!”?

The article, titled “Indiana Steel Mill Revived With Lessons From Abroad ,“ is part of their series on how globalization can improve local organizations and may be one reason why American manufacturing is growing again.  “Some steel mills are destroyed by globalization, others reborn.

Left for dead a decade ago, this 50-year-old facility on the shores of Lake Michigan has been rejuvenated thanks to an unusual experiment by its owner, Luxembourg-based ArcelorMittal.

In 2008, Burns Harbor was “twinned” with a hypermodern mill in Gent, Belgium. Over 100 U.S. engineers and managers, who were flown across the Atlantic, were told: Do as the Belgians do.

Burns Harbor now enjoys record output. Its furnaces, where steel is made out of iron ore, coal and limestone, are run with software developed in Belgium. Robots are in. Pencils are out. Workers are learning to make the same amount of steel with nearly half the people it employed three decades ago. Productivity is nearing Belgian levels.

Burns Harbor, according to the WSJ, is a case in point of the “upsides of globalization: … it puts pressure on U.S. factories to become more efficient to keep up with global competition, making it possible for them to survive.”  There are a few observations to be made: (more…)

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Here’s an interesting supply chain story in one graphic:

This comes courtesy of a Wall Street Journal story on how 3M has worked to simplify their supply chains (3M Begins Untangling Its ‘Hairballs’, May 17). The product in question here is a simple plastic hook that once logged over a thousand miles crisscrossing the Midwest in the process of being made. (more…)

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When you think of manufacturing in Mexico, planes might not be the first thing that comes to mind, but the Wall Street Journal reports that Mexican planes are coming courtesy of the Canadian aerospace firm Bombardier (The New Learjet…Now Mexican Made, Jul 29).

Vodpod videos no longer available.

Here’s some eye candy showing just what Bombardier is doing where on this plane.

(more…)

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