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Google Part of US Manufacturing Trend

by APICS Staff | N/A 2012 | 12 | 13

Google’s newly released Nexus Q, a device for streaming digital media to home televisions, is “designed and manufactured in the USA,” an etching in its hardware boasts. The media player’s construction is somewhat of an experiment in American manufacturing, the New York Times reports. However, Google is not forthcoming about many details surrounding the device’s manufacture, including the location of its production facility or where its parts are sourced. 

Most electronics production has not occurred within the United States in recent years. “We decided, ‘Why don’t we try it and see what happens?’” says Andy Rubin, head of Google’s mobile division. Since the 1990s, a large number of technology manufacturers, including Hewlett-Packard, Dell, and Apple, have shifted the majority of production to contract manufacturers in Shenzhen and other parts of China. Analysts indicate this trend may be reversing. Manufacturers both large and small have moved assembly operations to the United States in the past year, including General Electric and Caterpillar.

Reasons behind the shift include rising labor, transportation, and energy costs; risks of intellectual property theft; and the increasing importance of time to market. “You need a collaboration that is real time,” says Pat McIntyre, chief executive of ET Water Systems, a small irrigation systems manufacturer. “We prefer local, frankly, because sending one of our people to China for two weeks at a time is challenging.”

At $299, the Nexus Q is more expensive than similar products made by competitors Apple and Roku. According to Google, this is in part due to higher US manufacturing costs; however, the company expects the price to come down as it increases volume. 

Survey: UK Manufacturers Overly Optimistic on Innovation

A recent survey conducted by German conglomerate Siemens says that the perspective of UK manufacturers, who are “over-optimistic” in their belief they are the most innovative in the developed world, can prove harmful. The 

Financial Times reports these manufacturers are largely optimistic about the next 12 months, but a lack of investment may slow the manufacturing renaissance. 

While UK manufacturers place themselves third behind China and India in innovation, the INSEAD global innovation index, an indicator of innovation outputs, places the United Kingdom 10th, behind the Netherlands, Sweden, and the United States. “It’s good that we are positive but the evidence points out that we are not as innovative as we think we are,” says Jürgen Maier, managing director at Siemens Industry UK. Manufacturing will require sustained investments in development and equipment in order to claim a greater desired share of national output, he says. 

Of the survey’s 527 respondents--which span sectors including engineering, automotive, pharmaceuticals, and oil and gas--only 51 percent say they have investment plans for the coming year. Respondents also say their factories are not as automated as they could be. 

Maier says German manufacturers invest about one-third more annually than their British counterparts. “If we had that same level of investment we could be world beaters,” he adds. 

Greek Yogurt Craze Not a Boon to Some Milk Suppliers 

The rise in popularity of Greek-style yogurt, a thicker version of yogurt produced by straining to remove excess whey, is creating an unlikely problem for one manufacturer in a dairy state: the inability to source enough milk to continue increasing production. The Wall Street Journal reports that Chobani, a Greek yogurt maker formed in 2005 in New Berlin, New York, is continually challenged by the availability of milk. New York’s dairy farmers aren’t seeing any boosts to their bottom lines from the popularity of Greek yogurt and have not grown their herds to meet demand.

Hamdi Ulukaya, Chobani’s CEO, says he will build a facility in Idaho instead of expanding production in New York, in part because he is certain of the supply of milk there. Milk production has surged in many states, including Idaho. Land is cheaper, property taxes are lower, and dairy farms are larger compared to New York. 

“You’d think that a growing business can go to their supplier, whether you’re talking about rolled steel or paper products or chip makers, and the supplier would say ‘Great, I’d be glad to help you,’” says Andrew Novakovic, a Cornell University professor and author of a paper called “The Chobani Paradox” about the difficulty of New York dairy farmers to capitalize on the Greek yogurt craze. The situation is more complex than that because milk is significantly different from rolled steel. Complex structures are in place to protect dairy farmers from price swings and ensure milk always has buyers. Cows cannot be idled like machinery once they begin milking.

While Chobani’s facility helped alleviate a severe milk glut in 2009, many New York farmers are still having a hard time making money. “In the past many of our farmers have struggled with an oversupply and that’s why many of them haven’t made it,” says Charles Schumer, a New York state senator in favor of legislation to support farmers. “It’s not that easy for them to expand.”

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