Category Archives: International

Outsourcing Auto Workers at Nissan

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MARCH 23, 2014

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Nissan's truck line in Tennessee

Nissan, the first of many foreign automakers to set up shop in Tennessee, is leading a trend, writesThe Washington Post (March 9, 2014).Companies from Amazon to Asurion to Dell have outsourced their warehouses and call centers to the hundreds of staffing agencies that have cropped up in the region. Tennessee went from having 51,867 temporary workers in 2009 to 80,990 in 2012, while median wages have stayed flat. Temps make up 3.1% of all jobs in the state.

Tennessee holds its low unemployment rate up as a shining example of success in the global economy — the return of American manufacturing after decades of decline, and the future of work for those left jobless by globalization and technological change. Nissan was Tennessee’s first major investment by a foreign automaker, and has since attracted a constellation of suppliers that support thousands more jobs. Since the plant opened in 1983, the town of Smyrna has grown from 8,000 to 41,000. In the plant’s first 2 decades, getting a Nissan job was like winning the lottery.

But Nissan’s brush with bankruptcy in 2001 and a turnaround plan that involved new models and much lower production costs led to using temps into front-office functions. In 2007-2008, Nissan reduced its permanent workforce by 1/3. As demand returned, it started to backfill production jobs with contractors, too — first on the “pick line,” where workers run parts up to assembly, and then throughout the plant. Now a majority of its 7,000-person workforce is supplied by staffing agencies.

Many work for Yates Services, an in-house contractor that’s hired thousands of people over the past few years to ramp up production. Yates is like a company within a company, with separate bulletin boards, rules and procedures. The bona fide Nissan employees are easily recognizable through their logoed shirts, which Yates workers don’t receive. Yates pays between $10 and $18 an hour, which is about half what Nissan employees make. The gap in benefits is equally wide.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

 

Japanese Auto Makers Drive Into Mexico

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MARCH 21, 2014

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Mazda's new Mexico plant will churn out 230,000 vehicles a year by 2016

When three-tiered car haulers packed with Mazda3s pulled out of the dusty Mexican rail yard here last month, they did more than mark Mazda’s return to North American manufacturing after pulling the plug on Michigan production in 2012. They represented the latest volley in a south-of-the-border blitz by Japanese automakers. Within four months, Nissan, Honda and Mazda have opened assembly plants in what is becoming one of the world’s hottest auto hubs. Mexico is on pace to become the world’s No. 1 auto exporting country to the U.S., thanks largely to the addition of 605,000 units of capacity by those three Japanese automakers, reports Automotive News (March 10, 2014).

Japanese manufacturers are poised for a new assault from Mexico because they can:

• Reap fatter margins from lower cost manufacturing, largely a function of cheaper labor.

• Avoid tariffs on car and truck imports into the United States.

• Mitigate exchange rate losses from yen-based Japanese exports.

• Improve product availability with a shorter pipeline to dealers.

With all this new Japanese capacity, Mexico will eclipse Canada and Japan as the No. 1 exporter to the U.S. next year. Labor and logistics savings are expected to be substantial compared with building cars in Japan and shipping them across the Pacific Ocean. Mexican labor costs are 1/9th those in the U.S. But any savings are initially offset by the upfront costs of the new factories. Honda, for example, sank $1.2 billion into its assembly plant and a new transmission line.  And successfully building an export hub in Mexico means developing a network of high-quality local suppliers.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.

 

The Humble, High-Tech Shipping Container

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MARCH 4, 2014

shipping containersAsk somebody to name the most important inventions of the second half of the 20th century, and you may hear of the silicon chip, the contraceptive pill, or the hydrogen bomb. Few would answer the shipping container. “Yet those humble, standard-sized steel boxes, invented in 1956, have changed the world,” writes The Economist (Mar. 1, 2014).  Some economists think the shipping container has done more for global trade than every trade agreement signed in the past 50 years.

Even revolutionary products can be improved, though, particularly after half a century of service. One idea just proposed at the American Association for the Advancement of Science, is to make containers out of carbon-fiber composites. Such containers would be easier to use, because they would be lighter and might be folded flat when empty, saving space. A carbon-fiber container would need to travel only 120,000km (three times around the Earth) to prove cheaper than its steel equivalent. It would also be more secure, because it would be easier to scan without being opened.

That is an important consideration. In 2006, Congress passed a law requiring all containers arriving from abroad into American ports to be scanned to make sure they do not contain drugs, illegal immigrants, or fissile material. Doing this has proved hard, though, and the deadline for compliance is constantly being pushed back. Scanning steel needs high-power X-rays, or even gamma rays. These are expensive and dangerous. Carbon-fiber could be scanned with “soft” X-rays, which are easier to generate and use.

Another way to improve containers’ security is to track them properly. At the moment, authorities in a given port are usually told only about a container’s most recent movements. Better to give each container a comprehensive history, recording every port it has visited and every ship that has carried it. Such data could be crunched to detect suspicious patterns.  Carbon-fiber containers, fitted with sensors, a travel history and the ability to talk to the authorities, may one day replace many customs officials.

This post provided courtesy of Jay and Barry’s OM Blog at www.heizerrenderom.wordpress.com. Professors Jay Heizer and Barry Render are authors of Operations Management , the world’s top selling textbook in its field, published by Pearson.