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  Manufacturing Focus: Our Weekly Feature Article on Topics Related to Manufacturing Management  
 
 
  -July 6, 2009 -  


Supply Chain News: Chinese Light Bulb Manufacturer Coming to US



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20-30 Cents Increase per Bulb Versus China Can be Managed, TCP CEO Says; from Private Label to Branded Products; GE Lighting went Offshore

 
 


SCDigest Editorial Staff

SCDigest Says:

The move was made possible by the increased level of automation that TCP uses to produce the bulbs, drastically reducing labor costs as percent of the total.


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In a move that in some ways may be illustrative of a potential trend, TCP Inc., a manufacturer of a variety of advanced light bulbs that currently manufactures exclusively in China, is now planning to build bulbs in the US and develop a branded product line.

 

TCP is currently the largest producer of compact fluorescent light bulbs (CFLs) in the US, until now exclusively as a supplier for other brands such as GE, Osram Sylvania and Philips (though it has branded product in China already). It makes other advanced light bulbs as well, such as LEDs.

 

The products were also exclusively made in China, but the company now says it is planning a factory near Cleveland.

 

The move, in a sense, is a double shot at industry leader GE Lighting. Not only does it appear that TCP will soon compete at the retail level with GE, its current customer, but GE also recently closed most of its existing lighting manufacturing capacity in the region near its own Cleveland headquarters. The company shut down a number of traditional incandescent lighting factories in the northern Ohio area, saying demand for those products was falling versus more energy efficient bulbs. However, it nixed the idea of revamping those factories to make CFLs, saying the upgrade costs were too expensive, and that all its CFLs would be manufactured in China.

 

Now, TCP has announced plans for a new CFL factory near Cleveland that will employ 50-60 to start. Likely, Cleveland was picked to tap into a labor pull with lighting experience from GE.

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The move was made possible by the increased level of automation that TCP uses to produce the bulbs, drastically reducing labor costs as percent of the total. Three years ago, TCP made all of its bulbs in China by hand. Today, 60% are made by machines. The automation has led the company to reduce its workforce there to just 8,000, down from 15,000 in 2007.

Company CEO Ellis Yan says it will likely cost 20-30 cents more per CFL bulb to produce them in Cleveland versus China, but that the cost can be managed given that the retail price of such bulbs is generally more than $3.00 and that TCP will be closer to eventual US customers.

The US has passed legislation that will ban the sale of incandescent lamps starting in 2012.

 

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Feedback
2009-07-22

July 22, 2009

TCP's decision to manufacture lightbulbs in the US is a brilliant strategic move.

Regional, or local, sourcing makes sense in today's down-trodden economy. Reducing the number of miles a product ships will benefit the triple bottom line (Profit, Planet, People) of TCP.

Profit: Transportation costs will be reduced, as the North American market can be sourced from Cleveland versus China. The transportation savings from regional sourcing become even greater when fuel prices inflate. Inventories needed to support their supply chain will be reduced as the transportation component of their lead time is shorter. Reducing inventories frees up capital. All these moves financially benefit TCP.

Planet: By reducing the miles their products are shipped, less fossil fuels are consumed in transportation activities. This in turn reduces their carbon footprint and is better for the environment.

People: Many people in the Cleveland area are out of work. By placing their light production in this economically depressed area benefits all the people who will now become gainfully employed. By branding their products 'made in the USA,' I believe will be an order winner for many US consumers who quite frankly are becoming more environmentally and socially responsible.

This last point, I believe, will drive more sales for TCP as it feels good to be able to purchase an item that is made in the USA.

Joanne Gorski, CFPIM, CSCP
Instructor, Manufacturing Technologies
Fox Valley Technical College


 
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