Global Manufacturing Strategic Options

1. Global Manufacturing: Myth, Reality & Strategic Options Offshore Group - 12th Annual Manufacturing in Mexico Summit Michael L. Hetzel, VP/Americas Pro QC International www.proqc.com As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

2. “We can’t compete from the U.S.”© 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

3. Who says?© 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

4. Don’t Trust Your Business to Media • Very little accurate and objective information coming from media any more – even trade media • Lack of context is nearly universal • Head counts trumpeted, actual output ignored • Plant closings highlighted, plant openings ignored – “If it bleeds it leads” • Politicization of global trade issues resulting from general domestic political polarization © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

5. Why Listen to Me? • Over 20 years of manufacturing experience in SMMs, from the shop floor to 9 ½ years as CEO • Case study information from producing and moderating 2 years of the ITCC Global Manufacturing Series • Direct research – no second hand statistics • Current visibility of the global supply chains of over 300 companies, large and small • Daily contact with Asian operations • Regular consulting engagements with SMMs © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

6. Do Your Own Research • Don’t believe me - or anyone else • All competitive and market information must be customized and dynamic – there’s no canned solution • Go direct to data sources – statistics can distort • Always account for the context of information and data • Research global conditions even if your market is domestic only – don’t miss opportunities or threats • Use government market research resources such as USEAC © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

7. Amplified Costs & Risks of International Procurement • Supply chain length, inventories and queues • Quality disruptions & replacement product delivery delays • Logistical risks & market tolerance for delays • Political risks • Currency risks © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

8. Culture & Language • Mexico & China • Greater Asia • Central & Eastern Europe • Regions of the U.S. © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

9. Time Zones • Communications • Travel • Dateline Effect © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

10. Product Life Cycle Phases • Innovative & unique introductory phase • Popularity & competition arrive • Commodity phase • Mature phase & proximity to market © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

11. Common Myths vs. Reality • China’s growth and size • U.S. current account deficit • U.S. Import sources • U.S. manufacturing output • U.S. export levels • India’s growth and size • What about Canada & Mexico? © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

12. Marketing The number one cause of failure for U.S. manufacturers is a lack of marketing and market research Number two is failing to adapt the company once market conditions are known © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

13. Common Traits Identified in Successful U.S. Manufacturers • They open their minds to global trade even if they choose not to participate in global markets or sourcing. No one benefits from anger and fear • All have a “can do” attitude embedded from the top down in their corporate cultures, with high levels of employee development and commitment to executing global strategies • Most of the companies engage in international activities of some type (Sourcing, Alliances, JVs, WOFEs), and all are creating growth and success in the U.S. as a result © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

14. Common Traits Identified in Successful U.S. Manufacturers • All of these companies are committed to excellence across the enterprise, not just as a buzzword but as a functional, deliberate and measurable business practice. • Whether operating internationally or not all of these companies are exercising a strong commitment to good, old-fashioned operational excellence as a key foundation of their success. • These companies directly engage in marketing and market research – the benevolent U.S. market anomaly of the last 50 years is over © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

15. Example Strategies from Case Studies • Attitude of positive outlook rather than anger about global business conditions. “Daily attitude ‘adjustments’ shared with staff to keep the organization from falling prey to the discouraging headlines our industry and the global economy creates” • Evolution in the recognition that “The world will not wait for your company. Take a ‘reasonable risk’ and help the company to evolve into something better (and typically different) than it used to be” © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

16. Example Strategies from Case Studies • Sharing all of their metric tracking with their clients and engaging in “value engineering redesign” to create new opportunities for their products through the conversion of designs from other production methods • Harnessing offshore inputs for local competitive advantage, using global experience to conduct a successful “U.S.-China balancing act” © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

17. Example Strategies from Case Studies • Build a business network of alliances and partnerships to remain in alignment with the global movements of their clients. • Remember that trade flows both ways, not just inbound, and pursue more exports • Recognize thatresistance to change and globalization is not unique to people in the U.S. • Look for and capture crossover opportunities to other sectors and categories © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

18. Four Fundamental Changes • Attitude • Marketing • Collaboration • Products & Processes © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

19. Strategic Overshoot The tendency to decide to operate in another country, often China these days, before careful analysis of the actual business and market conditions rationalizes the decision The real solution is often much closer to home © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

20. The U.S. Doesn’t Import Too Much… …We Export Too Little © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com

21. Global Manufacturing: Myth, Reality & Strategic Options Offshore Group - 12th Annual Manufacturing in Mexico Summit October 20, 2006 Michael L. Hetzel, VP/Americas Pro QC International www.proqc.com © 2006 M.L. Hetzel As presented at The Offshore Group’s Manufacturing in Mexico Summit. www.offshoregroup.com