If designing for globalization is a key assignment for your company, then you need a clear picture of what the future holds. And clear pictures are hard to find because of the economy and the way it is impacting companies and nations. But if the overall picture is murky right now, it’s possible to frame some of the issues to be confronted. Think of these as snapshots, quick pictures that illuminate various aspects of the globalization issue.
Globalization or localization?
First, a definition. Internationalization can be defined as adapting products or systems to be used worldwide in different countries or cultures, with varying languages or regional differences. And localization is the process of adapting such products or systems so they can be used in specific regions or areas. Some very large international firms, notably IBM and Microsoft, use the term globalization for the combination of internationalism and localization.
It’s worth noting that these terms are viewed differently by certain groups, and that globalization is seen as a negative force by some of them. For example, groups that support CAGE (Case Against the Global Economy) are devoted to examining what they see as damaging effects of globalization. These groups often define localization in terms more akin to a “keep it small, keep it local” viewpoint. And they extol localization as a counterweight or antidote for what they see as the ills accompanying globalization.
This anti-globalization movement received an enormous boost last summer when a major Canadian bank reported that the then-rising costs of energy would impede or even reverse globalization trends. In its study “Will Soaring Transport Costs Reverse Globalization?,” the Canadian Imperial Bank of Commerce (CIBC) said soaring oil prices were driving transport costs to such levels that businesses would be forced to seek supplies locally, rather than importing at huge costs from overseas. Yes, oil prices today have dropped sharply from last summer’s highs. But economists expect them to climb again as the current recession ends, probably to levels higher than previously experienced.
“Globalization is reversible. Higher energy prices are impacting transport costs at an unprecedented rate. So much so, that the cost of moving goods, not the cost of tariffs, is the largest barrier to global trade today,” CIBC chief economist Jeff Rubin and co-author Benjamin Tal said in their report. In fact, the report pointed out, soaring global transport costs have already offset all the trade liberalization efforts of the past three decades. If major cuts in tariffs and non-tariff barriers had earlier led to explosion of world trade, including the rapid industrialization of India and China during the past three decades, “triple-digit oil prices, soaring transport costs, not tariff barriers, pose the greatest challenge to trade.”
Tal and Rubin went on to compute that the impact of high oil prices on transport costs acted like tariffs to restrain globalization. “At $150 per barrel, the tariff-equivalent rate is 11%, going back to the average tariff rates of the 1970s. And at $200 per barrel, we (will be) back at tariff rates not seen since prior to the Kennedy Round GATT negotiations of the mid-1960s.” Giving an example, the report said that while it cost only $3,000 to ship a normal (40-foot) container from China to the US in 2000, last summer it cost $8,000. And at $200 per barrel, it will cost $15,000.
Referring to two past oil shocks which led the US to cut imports from Europe and Asia and raise regional trade with Caribbean and Latin American nations, the report said the current oil crisis also points to similar trends, as China’s freight-intensive steel exports to the US are falling by more than 20% on a year-over-year basis, while US domestic steel production has risen by almost 10% during the same period.
But that was last summer, when oil prices approached $150/bbl. Yesterday, they fell below $41. Does than mean the CIBC report is wrong? Or is it a reasonable warning of what could happen to oil prices — and thus to globalization — as soon as the economy bounces back?
Expert advice on China
Much as turbulent economies have affected the USA, they have also taken a toll on other countries. An example of this is glimpsed in the advice that Jack Daniels, CEO of Eastbridge Partners LLC provides to clients about doing business in China.
The Boston-based firm suggests that, “In these challenging economic times, it’s even more difficult to make every penny count. The terrain in the Asia-Pacific region is changing rapidly – paying terms to vendors are being tightened up, freight rates are dropping, weak players are leaving the market and inventories of components and raw materials are thinner than ever. Our team in North America and Greater China can help you accomplish your sourcing goals by producing major cost savings and a significant productivity boost.”
Daniels continues, “It’s even more important now to partner with vendors and suppliers that are financially healthy. The conventional route of pulling a D&B report won’t work for most manufacturers in Greater China. You can obtain reliable financial information through the vendors’ bank. We routinely request the bank’s credit ratings for the vendors in question. This report, coupled with the vendor’s most recent balance sheet, provides a useful snapshot of their financial health. While not a guarantee of their ability to endure, it complements site visits and customer references and is worth the $150.00 investment.
“When you’re working with contract manufacturers in Greater China, it’s worth remembering that many don’t have the latest releases of CAD and CAM software to read and manipulate your files. (So) to expedite the review and quotation process, it’s useful to use conventional file formats and include PDF versions for quick review,” Daniels concludes.
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How Parker handles global design collaboration
Parker Hannifin turned to Autodesk for one of the main product-design tool-sets it uses throughout its global enterprise. Parker divisions share their Inventor designs globally so that other divisions can reuse them in their own projects.
A series of acquisitions helped Parker Hannifin grow from its inception in 1918 to become a key supplier of components and systems for aerospace, automotive, climate and industrial controls. One result was a broad, diversified base of groups designing complementary products, offering Parker the potential to collaborate globally to provide faster deliveries. But another result was a profusion of disparate CAD technologies, making it difficult to communicate design data among these engineering centers. Without a global standard for communicating design data, Parker was unable to collaborate efficiently. Now, Parker uses Inventor to create the design data fundamental to these growth efforts and shares the results among its eight business groups and 107 operating divisions around the world.
Inventor software allows creation of complex surfaces that Parker requires.
Parker knew that standardizing globally on a 3D virtual product-development environment was key to overcoming its design-data communication barriers. By speaking the same digital language, any Parker location would be able to leverage data and reuse designs from any other location–accelerating development and cutting costs. Inventor is the primary 3D environment Parker has adopted to support new products.
Powerful 3D parametric modeling capabilities in Inventor allow Parker’s designers to create models with the complex surfaces and shapes their concepts require. The company’s electrical, mechanical and controls engineers work together to create designs for complex electro-mechanical products, sharing a common model among all design disciplines. The finite-element analysis that Inventor performs helps assure that the final part works as intended under stress. For more complex analysis, Parker uses DesignSpace from Ansys Inc.
Once a design is completed, Parker can photo-realistically render it for immediate presentation to customers, or within hours perform rapid prototyping using in-house machines to turn it into a physical model.
Globalization forces changes in musical instrument production
United Musical Instruments, Inc., USA, manufactures a complete line of band and orchestra instruments from student to professional models. The product line includes flutes, piccolos, clarinets, saxophones, oboes, bassoons, trumpets, trombones, and violins. Despite a tradition of fine craftsmanship and demand for handcrafted instruments by master artisans, the musical instrument industry is responding to many of the same pressures facing other industries, including mass production, competition, and globalization. United Musical had previously used 2D CAD, and needed 3D modeling to meet these challenges.
Musical instrument industry is facing challenges from globalization and mass production, forcing them to use modern CAD modeling.
They chose SolidWorks CAD software, primarily for its ease-of-use. The powerful 3D modeling capabilities of SolidWorks CAD software give United a way to better manage the development process, visualize the product design, and more effectively judge aesthetics prior to manufacturing. SolidWorks CAD software helps them communicate more effectively with customers and vendors, and they can animate product designs for presentations using IPA.
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