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Why the global economy spins on water heaters

by Scott Wallask

March 23, 2011

By Scott Wallask, SAP Experts

What's that? You didn't hear the water heater story at the Manufacturing 2011 conference general assembly today?

You didn't see how the tale illustrated the idea of a global economy changing before our eyes? You missed how water heaters represent a fluid view on customers?

Well, sit back and hear the story as told by Chuck Pharris, director of manufacturing solutions marketing for SAP, who spoke during the general assembly.

A company hit it big during a housing boom in the central U.S. by selling water heaters. In an attempt to further sell to high-end customers, the company developed a water heater that had a video screen built into it so that you could always see the temperature of the water.

To control manufacturing costs, the company opened its own plant to build the shells of the heaters. Looking for even more opportunities, the company started selling in California and actually moved its plant equipment out there. But then the market dropped in the Golden State, and the company was in danger of drowning.

So the firm quickly rethought its strategy, focusing on another area of the world with a housing boom: India. However, the customers in India weren't looking for water heaters with video screens, nor did they desire standard 80-gallon tanks. They wanted 4-gallon tanks, because space was limited and they didn't need a lot of hot water.

The company had to close its U.S. plant and outsource its manufacturing in various distant locales, which raised quality control concerns. And it had to upgrade its transportation network.

Phew.

Is that story real? Maybe not, but it sure gets you thinking about how economies in different regions and countries ebb and flow.

It is key these days to collaborate more with partners and outsource contractors, Pharris said. And being creative at a moment's notice is important, too, because in the near future, we will all be living in a global, innovation-based economy.

Supply chains and manufacturers exist to make those water heaters. Your job is to take those resources and learn how to rapidly align global opportunities to changing conditions, Pharris said.

Follow Scott on Twitter @SCMexpert

 

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