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Vol 30 - No 04 June 2004 National events: Migrating to the Sun Moving your manufacturing to low cost countries On the 29th April 2004, the IOM ran a seminar in London, in association with the Institution of Electrical Engineers and sponsored by PA Consulting Group, who hosted the event. The seminar ran under the highly topical title of “Migrating to the Sun - Moving your manufacturing to low cost countries” and addressed the issues of moving UK activities to low cost areas. Creation of value in the eyes of the customer and the shareholder is paramount in any commercial business and exercises the minds of managers in all industry sectors. It is generally understood that a business does many things that do not create value even though they are vital to the running of the business. Non-core processes or activities, which are better or more cheaply provided by others and which do not add to competitive differentiation, might as well be given to external organisations that will often provide them at lower cost and better performance. Within this context, manufacturing activity is currently under consideration for many companies focusing on dramatic cost reduction by migrating to low labour cost areas. Businesses will do this either by outsourcing manufacturing to local manufacturers or by migrating to new, wholly owned plants in other parts of the world. The seminar was arranged to explore some of the issues, opportunities and pitfalls of migrating manufacturing to low cost countries. Stephen Radley, Chief Economist of EEF started the day and presented a range of highly relevant statistics and analyses addressing global competitive issues of manufacturing cost and productivity, concluding that the UK must excel in innovation in products and services to provide competitive advantage. Several case studies described the approach, issues and results from successful projects from diverse industries. John Spottiswood of Pace Microtechnology gave a particularly good insight into the approach of using large global manufacturing service providers to deliver product cost effectively from low cost facilities. The theme was picked up by Caroline Dowling of Flextronics, the largest global third party electronics manufacturer, who described the capabilities of her company and also presented a fascinating approach to supply chain modelling to determine the best manufacturing location and the cost and service trade-offs for different options. Other case studies were provided by Jeremy Hammant of LCP Consulting and Tim Lawrence of PA Consulting Group. Eric Edmonds from Hornby Hobbies described the well publicised move of their manufacturing activities to China, which has had a dramatic and positive effect on Hornby’s financial performance. Günther Kruse of Supply Chain Analytics addressed the supply chain issues in migration, discussing the issues of supply assurance, extended supply chain and greatly increased lead times on supply chain cost and performance – factors often not fully considered in migration cost models. Ian Brinkley, Chief Economist of the TUC, gave a refreshing and well balanced view from the standpoint of the trade unions and raised a number of highly relevant points. He pointed out that the UK, in particular, is losing many manufacturing jobs whilst our major European partners are increasing manufacturing employment. Quite rightly he questioned some of our assumptions on manufacturing competitiveness and the need for migration to low cost countries. He also coined the phrase “migrating to the snow” to refer to manufacturing migration to Eastern Europe, which has recently become so very topical, especially in engineering and automotive industry sectors. In general, the event gave a positive picture of migration and left the audience with a view that migration is not as high risk as one might imagine and has the potential for high financial benefit. All the usual caveats of sound strategy, excellent project management, strong legal and commercial management and realistic expectations apply, of course, but there are now so many examples of successful migration projects that it should be possible to foresee most of the likely pitfalls and problems. The question of what it does to the UK manufacturing industry in general and how UK manufacturing should position itself to meet the competitive threat of low cost global sourcing is still left open and needs to exercise the minds of Government and industry more than ever. The UK must have a strong manufacturing sector – it must understand, however, what it can produce locally and what is best outsourced to low cost countries. The Chairman, Martin Strutt, Partner at PA Consulting Group thanked all of the speakers for a highly successful and informative event. Over 50 people attended the seminar and were not disappointed by what they heard. Attendee ratings were, once again, very high, demonstrating that the IOM is highly competent in delivering high quality events for its members that meet the needs of industry. Günther Kruse, FIOM Related Topics:
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