Advancing communication technology paired with rising levels of middle class wealth around the world are making the farthest flung corners of the globe both easier to access and more lucrative to do so.
Many companies begin manufacturing at home and shipping overseas, but there comes a time when exporters need to consider moving some or all production closer to demand, or into a cheaper market.
The Fifth Annual Change in the (Supply) Chain Survey, produced by UPS, found that in Europe 58% of businesses expect exports to grow over the next 12 months, and another 18% expect to maintain their level of overseas trade.
Of these companies, 59% had leveraged off-shoring, moving production to a country with cheaper or easier manufacturing, and 56% had taken advantage of right-shoring, moving production to be closer to demand.
Despite a home in Lancashire, the one-time cotton capital of the world, Bizzi Growin moved production of its blankets and cot bedding to factories in China and Turkey.
“If we did manufacture in the UK we would still have to source all the raw materials from abroad so, in the current climate, it is not feasible from either a cost or logistics perspective,” says head of sales Cathy Bolton.
The decision meant that lead times stretched to five weeks, though the high quality of work has been more than a fair trade-off. And while trade is now vulnerable to currency fluctuations, the huge cost savings on production have allowed the company to plan margins which limit the negative impact of any exchange rate variations.
Regular meetings with manufacturers are held over Skype video calls, and Bizzi Growin works with teams overseas to inspect 10% of all bulk product before they are approved to ship.
Bolton says: “Critical paths [all the tasks that determine the end date in a project schedule] are the key to keeping on top of supply and managing the projects effectively. Every week we have a logistics meeting and go through critical paths together to flag any concerns or issues that may occur and this enables us to react quickly to keep the shipping dates in line with customer requirements.
“We are now in the privileged position that most of our factories work exclusively for us in the UK on nursery interiors and while this comes with its own pressure, this ensures we have total control to plan ahead and to adapt quickly to changing situations or changes in the market.”
Keeping manufacturing local
Direct Healthcare Services manufactures products designed to prevent and ease pressure sores in patients. Customers include NHS trusts and global healthcare clients, and the company currently exports to 20 countries across Europe, Asia Pacific, Australasia and Latin America.
Production remains in the UK, despite the lure of cheaper alternatives.
Graham Ewart, managing director, says: “The biggest advantage of keeping manufacturing local is maintaining tight control of product quality, which is absolutely fundamental to the healthcare market.
“Retaining all of our key processes under a single roof means our teams can work together on product improvements and, equally importantly, to resolve issues whenever necessary. We have built a reputation of delivering true product innovation. The fact our manufacturing is right alongside our R&D function means we can innovate, prototype and launch relatively quickly which really matters when we are competing against better known and larger global brands.”
Working closely with its supply chain means that the company can service demand from overseas markets with their own unique requirements.
“Every market tends to want some degree of customisation of the core product. It is essential you work in partnership with the relevant parts of your supply chain to ensure standards are maintained and the customer gets what they want.”
The most important factor is building a supply chain that recognises the way you work.
“Your supply chain is an extension of your business, so whoever you choose to work with needs to understand what drives you,” says Ewart.
Luis Arriaga, managing director, UK, Ireland & Nordics, adds that an efficient supply chain is crucial to ensuring that your business keeps to its delivery and exporting deadlines.
“Partnering with fully integrated and truly global logistics provider allows for all of your supply chain needs to be handled by one company. Not only does this mean you will have one point of contact for any questions or enquiries, but it also allows the logistics provider to really get to know your business and its supply chain.
“The level of technology available can also have a significant impact on the speed of your supply chain. For example, UPS customers have access to millions of pounds worth of innovative technology, such as UPS Quantum View Manage which provides complete visibility for all air freight, ocean freight and small package deliveries both inbound and outbound.”
Keeping up with demand
Integrated Technologies Limited (ITL) designs and manufactures complex electro-mechanical devices, specialising in the medical and laboratory field. The company has manufacturing operations in both the UK and China, with another in the USA to follow soon.
In addition to low-cost manufacturing in China enabling ITL to pass savings on to customers, it gives the company great access to the burgeoning Chinese market.
CEO Tom Cole believes building a solid and trusted supply chain is key to handling rapidly-changing global demand from evolving new markets.
“We have a carefully selected and regularly audited list of approved vendors, and many have grown with ITL over its 40 year history and they all understand the need to be flexible from the prototype stages right up to volume manufacturing,” says Cole.
ITL manufactures its own brand products, and also products on behalf of customers. For the contract manufacturing clients, regular meetings are held to discuss sales forecasts, stock levels, reliability issues, goods returns and costs. Cole makes clear the importance of reporting information early.
“Many customers treat us as part of their business. That means we understand them and often know in advance when demand is likely to change. This allows us to plan early and put in place the necessary measures to keep up with demand.
“Having a varied mix of customers from medical, analytical and diagnostic fields means that peaks and troughs in demand fluctuate differently in each market. This allows us to be more agile and redistribute manufacturing resources as needed.”
Many factors need to be weighed against one another before deciding where production should be located. Manufacturing abroad often cuts costs, but in other cases the ability to react quickly and have more direct control is of greater importance. But common among all success stories is strong communication, whether that’s face-to-face, utilising video conferencing, or employing representatives in your target country.
Content on this page is paid for and produced to a brief agreed with UPS, sponsor of the Exporting to New Markets hub on the Small Business Network.
