by Sandeep Duggal under
Last Mile Manufacturing (LMM) is a new Supply Chain Archtecture and Philosphy that takes into account major macro-economic changes, geo-political shifts and new business thinking to manage supply chains differently.
In a nutshell, today's technology supply chains are based on assumptions and economics that were true in the 1980s and 1990s. Many of these assumptions have been turned on their head:
- steadily increasing US wages (actually real US manufacturing wages are falling)
- infinitely cheaper foreign labor costs (actually, adjusted for exchange rates, foreign skilled wage rates are rising rapidly when compared to US wages, which are falling)
- steady exchange rates (actually the US dollar has fallen against many Asian currencies)
- cheap transportation is here to stay (actually transportation costs have increased dramatically)
- US companies would always have an IP lead on the competition and anyway, outsourcing manufacturing didn't really result in IP loss..(actually, major competition has emerged from the very countries that US OEMs outsourced manufactuing and then design to)
I could go on.....
LMM matters because it addresses these discontinuities and makes economic sense for OEMs that used to (or currently do) manufacture in Asia. LMM matters because it saves OEMs money, because it reduces the asset intensity of their business, because it protects their IP, because it reduces their risk and because it enhances customer satisfaction. Additionally, LMM addresses inherent US economic weakness (on the jobs and training front), which is why government (and many large outsourcers that sell into the US) should care about LMM.
More in my next post on how LMM works and why it is crtical for US tech companies.
Posted by Sandeep Duggal at 2:43 PM