No matter what you manufacture a lot can be learned from other production industries. Linked below is a fascinating and informative ABC Radio National program on the history of car manufacture in many countries and the drive for over a century to increase efficiency in car production and distribution.
PODCAST TRANSCRIPT is here.
Listen carefully to Dr Paul Nieuwenhuis, Co-Director, Centre for Automotive Industry Research, Cardiff University, and one of the editors of The Global Automotive Industry:
“If a [car] company has a 10% return on profit they are doing very well. The supermarket sector wouldn’t be happy with that sort of return on profit. So to that extent it is a marginal business, a very high cost business because of these economies of scale, which means that new products are very expensive to develop. You’re talking about AU$1 billion to develop a new product. So it’s very expensive. And you need those very high volumes to operate.”
The program tells the story of the origins and changes in manufacturing in the USA, Japan, South Korea, Australia and China. How did Asian nations develop their manufacturing capacity?
- Japan learned a great deal by licensing US technology and went on to pioneer lean manufacturing.
- South Korea by producing vehicles during the Korean war.
- China has legally required joint ventures in car manufacturing
Which country manufactures the most cars? The scale of manufacturing in China is remarkable and due to this volume of production it is positioned well for electric car manufacture:
“Today China produces more cars than any other country in the world, in fact more than US, EU and Japan combined. It has been the biggest in the world since 2008.”
Who will succeed in electric car manufacture may be less about technology and more about cost and volume production.
Manufacturing is a contracts-intensive business function. As with many other types of business contracts, drafting good purchase, licensing, and joint venture agreements for the manufacture of products requires knowledge of ways to reduce client production, distribution, marketing and other costs.
As is the case in car manufacturing, achieving higher productivity requires review and improvement of supply chains (see below), value chains and lean methodology. Taking this cross-disciplinary approach to contract drafting for manufacturers beats hands down a myopic purely legal approach focused only on technical contract law considerations such as warranty, indemnity and restraint of trade clauses.
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