Far East manufacture should not be the default option
Over the last 14 years Manufacturing in the U.K has shrunk from a respectable 28% of GDP to today’s all time low of 10%.
So maybe it is time to rethink our outsourcing strategy ?
Over the years we have become very complacent in the U.K about manufacturing, and in many respects have given up the ghost. We have blithely subcontracted all of our manufacturing operations with no long term view of the consequesnces. We have given away millions of jobs for a short term monetary gain and are now reaping the rewards of an economy built on sand.
Outsourcing to the Far East should NOT be the default option. We need to look at the alternatives and take the following into consideration:-
1) Compare Apples with Apples – just because the Direct labour Cost may be cheaper in the Far East what about the support costs. It is inevitable that a subcontracted operation will need more indirect suppport, sometimes more than you could possibly imagine, and this cost needs to be accounted for somewhere.
2) Is the Quality of the product really going to be the same ?- how will you ensure this ?
3) Cost of shipping – with rising fuel costs have you taken this into consideration ? you need to understand the cost per unit shipped.
4) Environmental Policy – How does the transport and distribution of products across the world fit in with your Environmental Policy – if you want customers to “buy in” to your Environmental Policy it needs to be credible and any offshore manufacture and transport should be accounted for in your overall Carbon Footprint.
5) Time of shipping – can you afford to delay initial deliveries while they are on the Sea for 5 weeks or do you want to pay extra for air freight to ensure fast delivery ?
6) Have you considered the cost of Import Duties ?
Consider the success of some of our best industries in the U.K – auto manufacture, Aerospace, telecommunications, mobile phones etc etc
Outsourcing should remain a key component of our manufacturing strategy but should note be the default option. We need to challenge the assumption that manufacturing will be subcontracted by asking the right questions.
chris@projectsguru.co.uk
www.projectsguru.co.uk
A recent report from Deloitte suggests that bringing jobs back in house (Insourcing) is a small but growing trend against the much larger tendency to Outsource which has dominated western industry for the last thirty years.
