TIME TO RECONSIDER SENDING MAUFACTURING OFFSHORE?

Following the recall by Mattel of millions of products made in China, should UK companies be reassessing the risks associated with sending manufacturing offshore to low cost regions?

Colin Allaway, Principal Manufacturing Specialist at the London Manufacturing Advisory Service, offers some advice….

The Mattel experience will cause many businesses to review the way they manage their manufacturing offshore…and perhaps even question its viability.

Business isn’t just about keeping costs low – quality issues can have a dramatic impact on reputation and if companies aren’t rigorous in the way they manage and monitor production, particularly when it’s at ‘arm’s length’, then they are running enormous risks.

We have to accept that the UK can’t compete on certain manufactured goods, particularly lower value units, but cost is only one small element to consider. Businesses moving production offshore need to take account of the longer lead times, lack of day-to-day control and the need to manage stock level far more effectively.

Managers should ask themselves what impact offshore manufacture will have on their customers – how do you respond to those requests for urgent orders when production is thousands of miles away; how do you monitor quality and ensure that products meet UK legislative requirements and not just those of the producer country? It can also be very difficult to tell good suppliers from poor suppliers – or indeed to know whether your goods are being manufactured by that supplier or contracted out.

It’s also very easy for UK companies to over-estimate the size of the business opportunity and to put all their eggs in one basket, when what’s really required is an approach that develops a business relationship over time.

Many UK companies have moved production to low-cost regions but quite a few have decided that the pitfalls, over issues such as quality and lead times, actually outweigh the benefits and are now moving manufacturing back to the UK.

Don’t: - Rush all production into a perceived low cost region - Make assumptions – specify every detail for components and raw materials - Ignore the risks of arm’s length production - Think it’s a quick fix! - Expect world-class delivery - Try to manage relationships remotely – you need to visit frequently - Ignore your contingent liabilities – it’s still your products being sold to customers – and your reputation on the line

Do - Weigh up the total cost of acquisition, not just the obvious costs - Keep all documentation in good order - Take a structured approach to developing relationships - Visit regularly and conduct formal audits of quality and performance

For further advice on the pitfalls associated with offshoring please contact Colin Allaway on 0845 850 44 00.

www.mas-london.co.uk