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Get Ready for Vertical Disintegration

When Ford's Rouge automotive plant opened its doors in 1921, producing about 1 million Model Ts that year, it was the paragon of vertical integration. "It took iron ore and cotton in one side and sent cars out the other," said Timothy Sturgeon, Executive Director of the Globalization Project at the Massachusetts Institute of Technology's Industrial Performance Center. Since then, the vertically integrated plant has disintegrated into a network of suppliers. Now, driven by new information networks and flexible manufacturing technologies, those relationships are becoming even more diffused. "That there are specialized sectors of the economy is nothing new," said Sturgeon. "The thing that's new is that what is being outsourced are not only standardized things like steel and pencils, but the manufacturing of specialized items and even entire products that are the competitive lifeblood of the firms that are sending them out. The amount of information that needs to be shared is huge."

These shifting networks could lead to a variety of changes in manufacturing:

  • Reshaping Supply Chains: Manufacturers and suppliers have oscillated between arms-length "exit" relationships and collaborative "voice" relationships based on long-term partnerships with suppliers. In theory, a "voice" relationship might allow for closer collaboration between manufacturers and suppliers on many issues, including addressing environmental issues. How are these relationships changing and what impact might these changes have?

  • Bringing Manufacturing Home: Manufacturing has traditionally been concentrated in well-known urban centers and corporations. Automotive manufacturing has already started to sprawl out of these centers, but other industries are undergoing more rapid and dramatic diffusion. In electronics, with more standardized products, contract manufacturing is increasing at a rate of more than 25 percent per year. But the advent of smaller scale factories and smaller, more efficient equipment could lead to an even greater dispersion of manufacturing. This new geography of manufacturing reshapes how pollution is created, where it occurs and who is responsible for environmental compliance.

  • Customer Design: Customers might someday be able to go to a web site, put together their own car from a single manufacturer or even mix and match components from different manufacturers. Given the challenges of fit and feel in complex products such as autos, is this scenario likely to happen at all? How quickly might this happen? What factors will influence how it evolves? And what impact will it have on the design and production of commodities with environmental attributes?

The following sections explore these trends in more detail. It should be stressed that the manufacturing industry is in flux, and the way the trends described here play out--and which new ones emerge--is still uncertain. But all of these trends are already beginning to reshape manufacturing, and all have implications that the environmental community needs to pay attention to.


Next section: Reshaping the Supply Chains

Sections
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Sections
Manufacturing Anywhere: Front Page
Introduction
Reshaping the Supply Chains
Think Globally, Manufacture Locally
buildyourowncar.com
Audio
Morris Cohen
Morris Cohen
Matsushita Professor of Manufacturing and Logistics at the Wharton Business School talks about the "napsterization" of the manufacturing supply chain.
Audio: Napsterization
Audio: Second Industrial Revolution
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Timothy Sturgeon
Timothy Sturgeon
Project Executive Director, Globalization Study, Massachusetts Institute of Technology's Industrial Preformance Center talks about the globalization of manufacturing.
Audio
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External Links
Technology Diffusion
A New Factory For a New Age
Print Your Next PC

Global Diffusion
MIT Globalization Study

Contract Manufacturing
The Low-Tech King of High-Tech
Who really makes PCs?
Turnkey Production Networks: A New American Model of Industrial Organization?
Bulls or Bears? Outlook in Contract Manufacturing
Buildyourowncar.com: Where E-Business is Driving the Auto Industry
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