Manufacturing & Production: Global Regions, Theories, and Trends

Manufacturing

To make things-to transform raw materials into goods that satisfy needs & wants.

Importance of Manufacturing

It produces goods that sustain human life, provides employment, & generates economic growth.

Industrial Revolution

A period that began in Britain in the late eighteenth century, when manufacturing generated the working classes of Europe, North America, & Japan.

Manufacturing Definition

Transforming inputs (materials, labor, capital) into finished goods at scale.

Production Definition

A broader term including services, assembly, & value-adding processes.

Value-added

Process that adds value to raw materials and components to create a final product that consumers want and are willing to pay for.

MVA

Market Value Added; low in an industry engaged in the initial processing of a raw material.

Importance of Manufacturing and Production

Drives growth: nation's GDP, job creation, fosters innovation, strengthens national security & competitive global standing.

Germany's Trade Position (2024)

Germany is the third-largest exporter and third-largest importer in the world, producing the second-largest trade surplus after China.

Agglomeration

Spatial clustering of people & economic activities, especially industries that are related or interdependent in a place.

Site

Physical characteristics of a location, including land and natural resources.

Situation

External relationships to other places, such as markets and transportation networks.

Motor Vehicle Production & Sales

Around 80% of vehicles sold in North America are produced in North America.

Theory of Comparative Advantage

Specializing in the production of goods or services that can be produced at the lowest opportunity cost & then trading with others.

Opportunity Cost

Value of the next-best alternative that must be given up to produce a particular good or service.

Absolute Advantage

Ability to produce more of a good or service than a competitor with the same resources.

Specialization

Focusing production on goods & services where one has a comparative advantage.

Free Trade

Voluntary exchange of goods & services without barriers like tariffs, which enhances mutual benefits.

Comparative Advantage Example

A country that is more efficient at producing textiles but less efficient at producing electronics should specialize in textiles.

Comparative Advantage Example 2

A country that is better at producing electronics but less efficient at textiles should focus on electronics.

Comparative Advantage

The ability of a country to produce a good at a lower opportunity cost than another country.

International Trade

The exchange of goods and services between countries.

Aggregate Output

The total production of goods and services in an economy.

East Asia Manufacturing

Region known for electronics and semiconductors, including countries like China, South Korea, Taiwan, and Japan.

European Manufacturing

Region known for advanced manufacturing, autos, and machinery, particularly in Germany and France.

North American Manufacturing

Region known for aerospace, autos, and chemicals, particularly in the U.S. and Canada.

US-Mexico-Canada Trade Agreement

A trade agreement that facilitates trade between the U.S., Mexico, and Canada.

Bangladesh Manufacturing

The country's rapid industrialization has halved poverty and significantly boosted GDP through textiles and garments.

Audi's Smart Factory

An investment in San Jose Chiapa focusing on robotics, automation, and digital networks.

Fordism

A system of industrial production designed for mass production, characterized by assembly lines.

Fordist Production

Production method that cut the time to produce one car by half.

Challenges in Manufacturing Growth

Includes trade barriers, need for innovation, policy matters, and education & skill development.

Tanzania Industry Breakdown

Focus on resources including agricultural and minerals to serve domestic and regional markets.

Key Drivers of Growth in Tanzania

Lower production costs, government policies, focus on labor-intensive exports, and investment in key sectors.

Weaknesses of Fordist Production

Issues include reliance on mass market, monotonous work, and potential breakdowns in the assembly line.

Solutions to Fordist Production Weaknesses

Strategies to ensure that everything produced has already been sold.

Global Slowdown

A trend affecting manufacturing and economic growth worldwide.

Shifting Comparative Advantage

Changes in which countries have a comparative advantage in producing certain goods.

Regional Heterogeneity

Variations in economic and industrial development across different regions.

Rise of Services

An increasing importance of the service sector in the economy compared to manufacturing.

China's Dominance

China's significant role and influence in global manufacturing and trade.

Vertical Integration

Company controls two or more stages in the production or distribution of a commodity either directly or through contractual arrangements.

Ford's River Rouge Plant

Self-sustained factory complex located in Dearborn, MI, consisting of 93 buildings, 100 miles of rail tracks, 120 miles of conveyor belts, and covering 2,000 acres.

Crisis of Fordism

The decline of the Big 3 (Ford, Chrysler, GM) due to the 1970s energy crisis and inability to adjust quickly to technological changes.

Big 3

Refers to the three major American automobile manufacturers: Ford, Chrysler, and GM.

Flexible Production

Also known as lean production, where consumer demand shapes the amount and kind of products produced.

Just-in-time (JIT) delivery

Shipment of parts and materials to arrive at a factory moments before they are needed.

Just-in-time system

Parts and materials arrive at a factory frequently, daily or even hourly.

Supplier of parts and materials

Must locate factories near its customers to reduce the money that a manufacturer must tie up in wasteful inventory.

Just in Time by Toyota

The first company to implement the just-in-time production system in 1970.

JIT: Three successful companies

Toyota, Apple, and McDonald's are noted for successfully implementing just-in-time delivery.

Just-in-time delivery disruptions

Issues such as weather, traffic, and labor unrest can disrupt just-in-time delivery.

Positive impacts of Technology & Automation

Includes increased efficiency and productivity, improved quality and consistency, reduced costs, enhanced safety, greater agility and customization, and better decision-making.

Manufacturing and industrial automation

Involves systems of integrated equipment following a program or other sequence to accomplish a task without direct human action.

Challenges & negative impacts of Automation

Higher upfront costs, workforce disruption, jobs lost, displacement of workers, increase in income inequality, and lower wages.

Labor conditions

Include rigid hours, noisy environments, inadequate safety regulations, hazardous tasks, harassment, exploitation, inadequate wages, child labor, and discrimination.

Environmental issues

Include pollution, soil degradation, climate change, resource depletion, waste generation, and habitat destruction.

Supply chain vulnerabilities

Include risks such as geopolitical threats, cybersecurity threats, natural disasters, supplier dependency, and pandemics.

Reshoring

Relocation of a business's supply chain and manufacturing operations back to its home country.

Nearshoring

Relocation of operations to a nearby foreign country, not the home country.