4 ms·

To me it's almost more surprising that with that high degree of automation they are not splitting the factory up into smaller ones and building them per-contine

To me it's almost more surprising that with that high degree of automation they are not splitting the factory up into smaller ones and building them per-continent.

actuator 6y ago
They will still need to ship the parts which depending on the part might be coming from SK/Taiwan/China but I guess they can still reap the benefit of probably reduced taxes because of local assembly.
- cbmuser 6y ago
  Not necessarily. All components can be made by Japanese companies. Whether Sony uses a Japanese supplier or a company from the other countries you mentioned is a matter of the production volume and which supplier makes the best offer.
jbob2000 6y ago
Electronics are fairly light, you probably don’t save much by shipping raw/incomplete products to the consuming country for final assembly. It’s not like soft drinks, where you want to bottle them close to the point of consumption so you aren’t shipping the dead weight of water around.
- dfox 6y ago
  Also shipping the manufacturing/automation technology is not particularly cheap, not to mention the amount of on-site setup/calibration that would be required.
  - blaser-waffle 6y ago
    And on-going operations, troubleshooting, remediation, upgrades, etc. I either ship my teams out there on the regualar, or else hire locals. And that leads to questions of intellectual property leaks, security holes, fraud & waste, etc.
DavidPeiffer 6y ago
I'm an industrial engineer, so I geek out about this type of stuff. Shipping stuff is pretty cheap, but distributing the supply chain and creating multiple factories making the same product is incredibly expensive. Let's say you have a hard drive supplier. Now rather than the supplier shipping to 1 factory, there are 5. Freight rates are going to be higher because you have a lower volume. Increased demand on one continent means you need the right balance of material going to that factory rather than simply upping the order for your single factory. Incorrect sales forecasts now mean you have inventory in Europe but need it in the US. You either need to pay to move it, try to get your suppliers to reroute things (always for a fee), or build finished units and ship them to the US, potentially facing higher tariffs than shipping in components [1]. Inventory costs are higher while you figure this all out, and you have increased logistics costs. You're paying a (bigger) team of people to manage this, and expediting shipments as needed (likely at 3-10x normal cost depending on how expedited, market demand for shipping, etc). Then there's product consistency. Even if you order identical equipment and keep all the same suppliers, you'll have different issues at each facility. Sharing best practices around the world is challengings and frequently done poorly. [2] Then you have tariffs and government regulations. If you were 0.25% of GDP for a country, you can go to the government and lobby harder than if you're 0.05% of GDP in 5 different countries. [3] -- [1] https://hts.usitc.gov/current https://hts.usitc.gov/current offers some light trading if you want to find tariffs for the US. They're incredibly detailed, and the smallest difference could change from a 2% tariff to 60%. https://en.m.wikipedia.org/wiki/Chicken_tax https://en.m.wikipedia.org/wiki/Chicken_tax is also interesting. [2] I know of a distributed manufacturing setup where two "identical" factories have significantly different quality outputs. The best rationale they've come up with is a difference in altitude and climate. Corporations who have distributed manufacturing like this often have a corporate team who travel between locations checking how well locations are adhering to the company defined best practices. [3] Definitely don't discount this step! I've worked for 4 manufacturers professionally, and I know for a fact 3 of them have pushed for tariffs and exemptions from regulations. #4 likely did too, but I don't have a specific example in mind. In each case, the difference in profits were 7 or 8 digits long.
- hobofan 6y ago
  Thanks for the response! A lot of interesting points I hadn't considered! For the product consistency, I assume you are talking about non-fully-automated factories? With full automation "adherence to best practices" hopefully shouldn't be as hard to ensure, I hope. For tariffs, if we assume that a big part of the specific industries playes are distributed internationally, the size of the industry in general should be the much more significant factor, as you are not lobbying individually anyway, right? If you can even go as far as fluidly shift production between countries you should be to negotiate better lobbying deals, which I understand is how the automotive industry operates to some degree?

To me it's almost more surprising that with that high degree of automation they are not splitting the factory up into smaller ones and building them per-continent.

actuator 6y ago

They will still need to ship the parts which depending on the part might be coming from SK/Taiwan/China but I guess they can still reap the benefit of probably reduced taxes because of local assembly.

cbmuser 6y ago
Not necessarily. All components can be made by Japanese companies. Whether Sony uses a Japanese supplier or a company from the other countries you mentioned is a matter of the production volume and which supplier makes the best offer.

jbob2000 6y ago

Electronics are fairly light, you probably don’t save much by shipping raw/incomplete products to the consuming country for final assembly. It’s not like soft drinks, where you want to bottle them close to the point of consumption so you aren’t shipping the dead weight of water around.

dfox 6y ago
Also shipping the manufacturing/automation technology is not particularly cheap, not to mention the amount of on-site setup/calibration that would be required.
- blaser-waffle 6y ago
  And on-going operations, troubleshooting, remediation, upgrades, etc. I either ship my teams out there on the regualar, or else hire locals. And that leads to questions of intellectual property leaks, security holes, fraud & waste, etc.

DavidPeiffer 6y ago

I'm an industrial engineer, so I geek out about this type of stuff. Shipping stuff is pretty cheap, but distributing the supply chain and creating multiple factories making the same product is incredibly expensive. Let's say you have a hard drive supplier. Now rather than the supplier shipping to 1 factory, there are 5. Freight rates are going to be higher because you have a lower volume. Increased demand on one continent means you need the right balance of material going to that factory rather than simply upping the order for your single factory. Incorrect sales forecasts now mean you have inventory in Europe but need it in the US. You either need to pay to move it, try to get your suppliers to reroute things (always for a fee), or build finished units and ship them to the US, potentially facing higher tariffs than shipping in components [1]. Inventory costs are higher while you figure this all out, and you have increased logistics costs. You're paying a (bigger) team of people to manage this, and expediting shipments as needed (likely at 3-10x normal cost depending on how expedited, market demand for shipping, etc). Then there's product consistency. Even if you order identical equipment and keep all the same suppliers, you'll have different issues at each facility. Sharing best practices around the world is challengings and frequently done poorly. [2] Then you have tariffs and government regulations. If you were 0.25% of GDP for a country, you can go to the government and lobby harder than if you're 0.05% of GDP in 5 different countries. [3] -- [1] https://hts.usitc.gov/current https://hts.usitc.gov/current offers some light trading if you want to find tariffs for the US. They're incredibly detailed, and the smallest difference could change from a 2% tariff to 60%. https://en.m.wikipedia.org/wiki/Chicken_tax https://en.m.wikipedia.org/wiki/Chicken_tax is also interesting. [2] I know of a distributed manufacturing setup where two "identical" factories have significantly different quality outputs. The best rationale they've come up with is a difference in altitude and climate. Corporations who have distributed manufacturing like this often have a corporate team who travel between locations checking how well locations are adhering to the company defined best practices. [3] Definitely don't discount this step! I've worked for 4 manufacturers professionally, and I know for a fact 3 of them have pushed for tariffs and exemptions from regulations. #4 likely did too, but I don't have a specific example in mind. In each case, the difference in profits were 7 or 8 digits long.

hobofan 6y ago
Thanks for the response! A lot of interesting points I hadn't considered! For the product consistency, I assume you are talking about non-fully-automated factories? With full automation "adherence to best practices" hopefully shouldn't be as hard to ensure, I hope. For tariffs, if we assume that a big part of the specific industries playes are distributed internationally, the size of the industry in general should be the much more significant factor, as you are not lobbying individually anyway, right? If you can even go as far as fluidly shift production between countries you should be to negotiate better lobbying deals, which I understand is how the automotive industry operates to some degree?