MBAC-6500 Global Management Assignment Help
Synthesize material from all the chapters and your personal research to analyze the organization.
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GE Moves Manufacturing from China to the United States
For decades, General Electric has been at the forefront of the move to shift production offshore from high-cost locations inside the United States to cheaper locations, such as China. But there are now some signs that the relentless flow of production offshore may be slowing down and, in some cases, starting to reverse. There are several reasons for this. Wage rates in China and some other developing nations have been rising fast, closing the differential between costs in the United States and overseas. In dollar terms, wage rates in China were some five times higher in 2012 than they were in 2000, and they are still rising fast. Labor productivity has also increased significantly in the United States, further closing the gap in labor costs. Meanwhile, high oil prices have raised the cost of shipping products across oceans, while the abundance of cheap natural gas in the United States is helping to lower production costs. If this were not enough, there are signs that there are benefits to having product design and manufacturing co-located, and in some cases, this is driving a shift in production back to the United States.
A case in point is GE's GeoSpring water heater. This was originally designed in the United States and manufactured in China. The finished product was then shipped back across the ocean for sale in the United States. In 2010, given the macro trends in labor productivity and energy prices, GE decided to see what would happen if it brought some of its appliance products back to the United States. The GeoSpring was one of its first attempts at this. GE established a team of engineers and production workers at its appliance plant in Louisville, Kentucky, to see what they could do with the GeoSpring. The team quickly concluded that the GeoSpring was not easy to manufacture due to poor design. They redesigned the product for ease of assembly, eliminating one out of every five parts and cutting material costs by 25 percent. As a result, GE cut the time required to assemble the product from 10 hours in China to 2 hours in Louisville.
The end result: Material costs went down, labor requirement went down, and product quality went up. Indeed, the cost savings were so big that GE was able to reduce the price of the GeoSpring 20 percent below that of the Chinese-manufactured product and still maintain a decent profit margin. Time to market also improved greatly. It used to take five weeks to get a GeoSpring from China into a U.S. retail store-now GE can do that in a matter of days, which improves inventory management.
Having learned from experiences like this, GE is now planning to ramp up production of other appliance products at Louisville. It has recently doubled the workforce there to 3,700, and has also hired 500 new designers and engineers to redesign many of its products for ease of manufacture. A few years ago, less than half of the revenues of the appliance business came from products made in the United States. By mid-decade, GE plans to have 75 percent of the revenue of the appliance business to come from American-made products.
Expectations:
• Synthesize material from all the chapters and your personal research to analyze the organization above.
• The Portfolio assignment must be 7 to 9 pages in length.
• Use a minimum of 4 references (there should be at least four in text citations to correspond to the references) to defend your position.
• Use 6thedition APA form and style and the provided writing template.
• Be imaginative and creative in your submission.
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Introduction
General electric is an American multinational company operating in diverse fields such as aviation, healthcare, power, electronics, gas etc. The company was founded in 1892 at New York. It is a public limited company. In 2018, the company ranked the 18th largest company in US. The essay is based on the case study where the company is shifting its manufacturing units from China to Louisville, Kentucky. The essay deals with the various issues which the company has started facing after manufacturing the products offshore. The General Electric Company finds that the shipping and the labour charges are increasing excessively day by day and it is impacting on the production costs. High production costs results in increasing the prices of the products which results in creating a serious competitive disadvantage for the organization. The essay aims to understand the various challenges which the company faced while shifting their entire manufacturing process to another country. The essay also discusses the various positive impact of the process, the impact of the employees in the smooth working of the company.
Manufacturing issues in China
The General Electric Company is famous for implementing their offshore production technique. After the development of the first design of the GEO Spring water heater, the company ventured to China to manufacture their products there. Back in 2000s, China was a hub of cheap labour, which led many countries to create their manufacturing units in China. Although in the recent years, the labour wages in China has gone strikingly high up. Apparently, the labour wages has increased by 5 times between 2000 and 2012 (Rodríguez & Nieto, 2017). Increase in Shipment charges is another issue faced by the General Electric Company. Increase in oil prices across the Globe has significantly impacted the shipping services availed by the organization. In this scenario, the company found the United States a perfect place to shift their manufacturing equipments. The labour industry in USA was making some serious developments in favour of the company as cheap labour was available and they have been reported to be very productive. In USA, natural gas is very cheap which can also help the company in decreasing their production costs (Vandenberghe, 2017).
Outsourcing the products from China
The general Electric has adopted the strategy of off shoring the products in several occasions. In case of manufacturing the company's water heater, the company developed the designs of the water heater model in US, although they chose to outsource the materials and manufacture the product in China and ship it back to US. The company found this strategy quite profitable and continued with it for a long time. In the year 2012, the General Electric Company analyzed their cost of production and found that the strategy was not working and due to the increase in labour wages and high shipping charges for the shipment of the products to USA. The company found that statistically, the labour wages in China have comparatively risen by 5 times by dollar rates from 2000 to 2012. Another factor affecting the production cost is the increasing oil prices all over the world. The company calculated that the increase in oil prices is directly affecting the company's shipment costs. The high production cost and logistics cost was undermining the profits of the company. Outsourcing the products did not provide any competitive advantage to the company.
The company could not make any innovations in the designs of the water heater due to the scattered system of production. Lack of innovation affected the customer base of the product as well.
Collaboration with the worker's union
The General Electric Company has to collaborate with the worker's union leader to ensure the smooth flow in work. In US, the working conditions are quite different than china, which requires clever supervision. The labour costs in US are cheaper than China. The latest manufacturing team in US consists of some engineers and the production labourers. The first manufacturing plant was set up in Louisville, Kentucky. The production and the quality control departments in US had to redesign the product to increase any further sales (Kalpakjian et al., 2014). The manufacturing process was designed in an effective way to understand the productivity of the labourers of the organisation. The production team of the GE Company includes engineers who were responsible for minimizing the steps of assembling the product in US in the shortest of 2 hours.
The GE Company has to maintain their policy of providing quality services at low salary. The company should provide proper salary packages and incentive style to win the loyalties of the labourers. The company is looking for increasing the productivity of their labourers by motivating them by using monetary and non-monetary methods.
Description of the product
The Geo Spring Water Heater stands apart in the market due to its distinctive feature of absorbing the atmospheric heat to heat up the water. The model generates 60% less electric bill than the other contemporary models available in the market (Kalpakjian et al., 2014). The original design of the product was made in US, although its production took place in China for years. The company enjoyed the fruits of outsourcing the products from a long time until the excessive increase in the labour wages in China. Presently, the company has moved the production unit of the geo spring water heater to Louisville, Kentucky.
Challenges in the production process in US
The General Electric Company had to undergo and solve certain issues with the water heater before they could completely shift the production unit to Kentucky. The water heater was lacking in any design up gradation in the last few years. Thus the company has to set up a proper team of engineers and researchers to bring in some innovation within the product to please their customers. In China, the company did not have their own research and development department. While hiring any staff for the R&D department, the company needs to pay special attention to the qualifications of the employees. It is important to create a team of skilled employees to meet the requirements of the team. Innovation is the key to survive in the tough competitive electronics market. The General Electric Company will have to continuously bring in innovation in their products and create new ideas to please the customers.
The second issue which the General Electric Company faced was the introduction of latest wage structures and responsibilities to the labourers. The company's primary aim behind the shifting process was to decrease the production costs so that they can reduce the prices of their products for the customers. In this case, the company has to provide low wages to the labourers and increase their productivity. To achieve this goal, the managers of the company will have to have good relations with the manager of the worker's union. The manager of the worker's union will be responsible for motivating the workers and increasing their productivity. The company may also implement performance management methods in the organisation for effective outcomes.
Changes in the original design of the water heater
The original design of the geo spring water heater contains five complex steps to manufacture it. Although the engineering team in Kentucky was able to compress the process and take out one of the steps out of the entire process. The second version of the Geo Spring water heater became cost effective as it uses 25% less raw materials in its design. The improvement in the design decreased the time consumed in manufacturing each unit. The complete time required to assemble the latest designed water heater took only 2 hours of time instead of 10 hours (Fink et al., 2017). The decrease in time- consumption will enable the workers to complete more units in the same time. Moreover, the redesigning of the water heater made the job of the workers much easier as they could easily understand the design and make the fittings easily.
Economic impact of the shift on Geo Spring water heater
The price of the Geo Spring water heater was $1599 which has gone down to $1299 after the shift. The number of labourers working in the General Electric company is 3700 which is almost double than the previous headcount (Fink et al., 2017). Thus, it helped in creating more jobs for the people in USA. The company has also recruited more 500 engineers to work in the research and development department. Innovation in the water heater model changed the market statistics of the product and has increased the demand. On the other hand the company has been able to supply according to the demands of the customers, which has improved their market presence. The entire supply chain has become less time consuming and more productive.
Contribution of the employees in the shifting process
The General Electric Company adopted the lean approach to deal with the degrading condition of the company (Vandenberghe, 2017). None of the employees lost their jobs due to this process rather they were relocated in different departments. The employees of the General Electric Company were very cooperative and they gave their best performance even in such worse conditions. The employees were not demotivated due to the shifting process instead they pushed themselves to learn from the situation and come up with innovative ideas to decrease the production costs of the company. The managers of the company implemented several proven models and frameworks to boost the performance of the employees.
Future of the General Electric Company
The General Electric Company has certain significant competitors in the market such as Samsung, LG etc. The company has to been depended on the foreign markets for the procurement of the raw materials required for the production of new technology, as most of the technology in the United States is imported. In the year 2009, General Electric has created around 13,500 jobs in US (Vandenberghe, 2017). For the proper survival of the company, the company has to keep developing their research and development programmes. The General Electric Company has hired 500 qualified engineers and designers to develop new items for manufacturing. The company can also start training sessions within the organisation so enhance their skill set and increase their productivity. In 2011 the company has been ranked as the 14th largest company in the United States and the 18th largest company in 2018 (Vandenberghe, 2017). The company has recently witnessed a bit downslide due to recession and certain policies of the company. The General Electric Company has moved on to manufacturing a number of electrical items such as refrigerator, washing machine etc. The company has been a steady progress in the US market although it has not yet made quite a mark in the Asian markets. The company has also turned towards the sustainable development and working out of the organisation to ensure the best outcomes (Fink et al., 2017). Proper management of the financial standing of the company ensures proper tax information and capital. The company should concentrate on their profitable counterparts more such as electronics, healthcare, oil, gas etc. These counter parts are valuable for the company as they are the main source of revenue. The company should collaborate more with offshore suppliers to import cheaper resources although without comprising on the quality.
Conclusion
After outsourcing the water heaters from China for a long time, the company found that the strategy to outsource the products was not working. The design of the product was first developed in US. The company sent those designs to China for a large scale production. After the production process is completed, the finished units are shipped back to US. The company has started facing issues with the rising labour costs in China. Other than that, the increase in oil process would result in higher shipping costs. The company decided to solve this issue and thus they moved the entire manufacturing process to Louisville, Kentucky. After the shift, the company has made certain very important developments in case of the Geo Spring water heater. The company set up a research and development team in Louisville, to make innovations with the product. The engineers were able to decrease the raw material cost by 25% and the manufacturing time of one unit from 10 hours to 2 hours.
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