I highlight this McKinsey study for selected features highlighted by the study. From a planning perspective it will shed light on the massive improvements Malaysia's Ministers can do with to move from generalisations to more specific language when addressing development issues. Read this Star Online report as an example of Ministerial generalisation that lends no clues to Malaysian SMEs that are looking for opportunities.
Here's a pertinent extract of the McKinsey report:
It would be easy—but wrong—to conclude from recent events in the aerospace industry that its globalization efforts have gone too far. To be sure, both Boeing and Airbus have discovered, in developing their new aircraft, that involving suppliers from around the world creates complex management, coordination, and design integration challenges. Nonetheless, McKinsey research indicates that the industry’s globalization remains in its infancy. China, India, and Russia are likely to emerge as significant players over the next two decades, a development that will give Western companies major short-term cost-reduction opportunities that they must capture.
Over the longer term, however, these changes could promote the emergence of new players representing a novel form of competition for today’s incumbents. In addition, further specialization in design, manufacturing, and assembly is likely among both suppliers and existing original-equipment manufacturers (OEMs)—such as Airbus, Boeing, and Bombardier—in areas where they have unique value to add or a compelling cost edge. Specialization will go hand in hand with more extensive collaboration, placing a premium on an organization’s coordination and integration capabilities.
These conclusions are drawn from scenario-based modeling of the industry’s future. The modeling was rooted in an analysis of the current capabilities of about 120 suppliers in China, India, and Russia—as well as from interviews with senior executives at OEMs and suppliers in developed countries and from a historical perspective on the circumstances in which nascent aerospace industries thrive or struggle. The result is a road map for aerospace OEMs and suppliers, in both developed and emerging markets, that seek to navigate the changes ahead.
---Currently, the chief attraction of these nations, especially China and India, as suppliers is lower labor costs. Our work with OEMs and suppliers indicates that even after accounting for transportation, the complexity associated with coordinating management and supply chains, and the expense of mitigating supply disruption risks, the cost of manufacturing typical aircraft structures (such as body panels or fuselage sections) can still be roughly 20 to 25 percent lower in these emerging markets than in more developed ones (Although Brazil also affords significant savings, this article doesn’t focus on it, because it already has a significant aerospace OEM—Embraer—in the regional-jet market.) The cost of labor, which on average is three to five times lower in these countries than it is in the developed world, also makes emerging markets attractive for labor-intensive maintenance and repair services.
Bear in mind, that lower labour cost in the context of the aerospace industry is very high cost labour in places like Malaysia!
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Several distinctive attributes of the aerospace industry have caused Western OEMs in this sector to limit their involvement in emerging markets—for starters, the complexity of the industry’s technology; its extraordinarily high regulatory, quality, and safety requirements; the critical importance of protecting intellectual property in areas such as aircraft engine design or avionics; and the sometimes intimate relationship between military and civilian technology.
Furthermore, aerospace manufacturing volumes are typically lower than those in other industries, and the level of design and production customization is higher than it is in many types of manufacturing.
As significant as these barriers have been in slowing the growth of emerging aerospace-manufacturing markets, counterbalancing forces have recently begun to turn the tide.
These include offset requirements, particularly in India; significant government investments in China and projected investments in Russia; and sourcing and engineering partnerships (with Western OEMs) that have begun to accelerate the development of the capabilities of emerging markets.
Chinese suppliers, for instance, now manufacture structural components for Airbus and Boeing and fuselage sections for Bombardier. Soon, they also plan to begin handling the final assembly of the Airbus A320.
Indian suppliers provide engineering services for many industry players and also produce wing exit doors for the Boeing 757, landing gear boxes for the Boeing 777, and passenger doors for the Airbus A320. Russian and other Eastern European suppliers, too, work with Airbus and Boeing. Honeywell, GE Aircraft Engines, and Pratt & Whitney have been building plants and engineering centers in these countries as well.
I highlight this McKinsey report because of the opportunities incredibly high-technology industries like the aerospace industry can present to countries like Malaysia if it can position itself with the correct skilled workers to produce a few components in the supply chain. I am aware that there is a company in Australia that just produces the wing tips for the A320. Think about it. Just the wing tips. Lots of money already.
But, we need planning and skills. We've got plenty of corridors. But we need to generate the content for those corridors. And, Malaysia has to choose its best and brightest minds to be involved in these planning matters.
More importantly, Malaysia needs a high-quality education system starting from the primary and secondary levels to create a value-chain pipeline that can supply young Malaysians to tertiary skills training. This, in turn, will connect a further value-chain pipeline for higher technology SMEs and large industrial corporations, both local and foreign, situated in Malaysia. That's how Malaysia can become competitive.
The dictates of commerce and industry is such that whether one is Malay, Chinese or Indian or Kelabit is not a relevant success factor. Instead, the skills, proper training and brains are the critical success factor.
3 comments:
Oh, that article:
http://tinyurl.com/5dbubt
and, BRICs:
http://tinyurl.com/6qxqre
and, education?
http://tinyurl.com/64u2af
and, the day before:
http://tinyurl.com/6hy49u
And on the Miti release, take for example this statement:
"Of this figure, he said foreign investments totalled RM36.8bil or 73.9% of the total investments approved."
Upon reading this, one can be excused for thinking matters are really rosier than portrayed by those infernal blogging maniacs..until you see the word 'approved'.
What is approved and what finally lands are two different things. If, for instance, the koreans applied and were approved for say a USD1 Billion plant and then they move to Subic Bay instead, obviously you can't add that sum to the list of landed investments.
We have learnt a lesson from all those press statements on Valuec(r)ap. They were just spin. Now with things like this, can the rakyat be faulted for taking all such statements with more than a pinch of salt? Say, MSG instead?
Back to the blogger's heartrending focus on education. We know there are at least two modules. The first is what the blogger has said. The second is what that infernal fella called walla had written yesterday (vernacular education). Yet there is a third module. It pertains to changing mindsets to see the perils before us if we continue to embrace just the cozy feelgood policies of yesteryear. But life can also be fair. If you have peril, you will also have promise (after Tapscott, http://tinyurl.com/29wojy).
Seriously, what is it we want Malaysia to be? How to get there? What to do? Why isn't it done?
"The President has spoken. Do it."
(Glenn Close, Air Force One)
Malaysia race based education is a complete failure.
JPA scholarship which is awarded to mostly the malays led to brain drain from malaysia.
NEP which are said to help the malays, in fact drives away investors becos of the 30% quota reserved for the bumis.
All of the above are a threat to growing emerging markets whether be the aerospace or others.
that neil is not the same neil i know but never mind, the more the merrier.
;P
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