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      - page 17 / 47

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Many aspects of U.S. public policy support Boeing’s production of aircraft. These arguably include procurement by the Department of Defense, the financing of exports through the Export- Import Bank, subsidies for research and development, subsidies for the education and training of engineers and other skilled workers, subsidies for airport construction, and official trade complaints aimed at European government subsidies of Airbus.19 Boeing is a major U.S. exporter and generates job opportunities for thousands of Americans despite its supply chain that reaches overseas. These imports of parts and components, however, tend to be offset by exports of final product.

The iPod supply chain in Figure 2 represents a corporate network that is a net importer. The production of iPods or similar consumer electronics also may benefit from U.S. government policies. These may include government procurement, the financing of trade transactions, subsidies for research and development, subsidies for aerospace activities (including satellite launches) and the Internet, various government market-opening initiatives, and efforts at strengthening the protection of intellectual property.

Critics of globalization tend to focus on lower costs (because of lower wages or less stringent environmental or other regulations) of manufacturing abroad. For supply chains, however, production decisions can not rest solely on calculations of cost. Cost calculations are combined with estimates of risk to produce expected values for future operations. For example, in deciding whether to assemble a product in China, the risk of currency appreciation, shipping disruptions, political turmoil, changes in Chinese government policy, differential rates of inflation, miscommunication, accidents, terrorist incidents, and other such factors also enter into the calculations. In addition, measures for long-distance quality control and product safety come into play.

For example, the pharmaceutical company Pfizer is undergoing a massive overhaul of its manufacturing and supply network worldwide. Pfizer Global Manufacturing currently supplies more than 500 products with 100 manufacturing plants that it is whittling down to 43. Some plants have been closed, some sold outright, and others sold with trailing supply agreements. Now the company manufactures internally when that makes sense, and it buys the rest from outside sources. The company says that their decisions are not based entirely on cost but on creating value for its customers. This includes cost, quality, reliability, and the speed of product development as well as supply chain security. 20

19

Reuters, “U.S. to continue challenging Airbus subsidies," International Herald Tribune, March 6, 2008.

20 Jill Jusko, “Reworking the Pharma Supply Chain," Industry Week, December 2008, pp. 47-49. Note that in 2008, Pfizer employed about 85,000 people in more than 150 countries. Of its $48.4 billion in revenues in 2007, $8.1 billion was spent on research and development mostly in the United States, the U.K., and in Singapore. See Pfizer, “Pfizer Company Fact Sheet,” Updated February 21, 2008; Pfizer Asia Pacific Pte Ltd., “Who We Are;” and Pfizer UK, “Pfizer at a Glance,” 2008.

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