Offshore manufacturing
Strategy options for offshore manufacturing
The changing environment and capabilities of the low cost economies are constantly creating new opportunities for offshoring your manufacturing operations to achieve revenue growth and production line unit cost reduction. How can you exploit these?
Business model
The best manufacturing business model is determined from a range of options, including joint venture, outsourcing, acquisition, and relocation.
Companies are going down the acquisition or greenfield factory build approach to minimise their exposure to the cultural issues associated with working in these regions. There is a trade-off here between the capital investment this requires and the risks of sourcing from unknown suppliers (60% of those surveyed in PA's Migration Survey had opted for a greenfield site).
Product
To achieve the optimum migration strategy, pick the right products that maximise the benefits from using local skills, suppliers and markets.
The ability to source locally is the major concern of migrating businesses and the single most common barrier to further migration (80% of those surveyed reported difficulties with suppliers).
Operations
Integrate product and business knowledge into a developing supplier base with a different culture and new way of working.
Manufacturing organisations in low-cost economies have a history of expertise in design for low cost manufacture and product cost reduction born out of the need to deliver low cost products to local markets.
Additionally the cost and risk of migrating manufacturing operations to a low-cost economy can be minimised by the use of 'offset credits' (click here for more information).
Support processes
When offshoring your manufacturing operations, re-engineer your product development, procurement and quality processes to leverage the local capabilities.
For example, Thailand is becoming a key design centre for light commercial vehicles and challenging the assumption that creative design will remain in the domain of more developed countries.
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