'Offshoring' could help you to stay competitive
None of us likes the thought of the UK losing its manufacturing base to low labour-cost countries. But it is an increasing fact of business life that this has to be considered as a strategic option in order to remain competitive.
Over the past two years I have worked with the internal teams of some large companies to help identify, plan and implement the relocation of their manufacturing facilities from high-cost European countries to Eastern Europe and the Far East.
Unfortunately many small and medium sized enterprises have little time for such strategic planning. The day-to-day running of the business means that most owners and managers are just too busy “getting on with it” to plan where they will be in 12, 24 or 60 months time.
However, strategic planning is essential in order to identify the trends and challenges the business faces... and that includes the possibility of ‘offshoring’.
Struggling manufacturers who do not take time to look forward are missing the fact that their customer base is declining as the migration gathers pace.
By taking time to plan strategically, business owners and managers can identify issues and seek solutions through changes to production, technology or the location of their manufacturing bases.
A planning checklist should include the following questions:
- What do you hope to achieve – e.g. cost savings / locating nearer to customers?
- What will you relocate? Manufacturing / admin / all or part only?
- How will you manage the business? Local people or your own?
- When do you plan to relocate?
All of these questions and there answers will help the business decide whether to relocate some or even all of their operations in a low labour cost country and how it will be managed and very importantly how any transition will take place.
As in retail, location is fundamental to the successful relocation of a company’s manufacturing site overseas. Many Eastern European countries are attracting clusters of business types. The Czech Republic is attracting automotive industries, Hungary is attracting communication and IT hardware and Poland is attracting textiles. So be prepared to follow the herd – that way the employment pool is more likely to have the skills that you require and you should have a ready made supplier base already there.
But look out for the pitfalls. For example, in one recent banking survey the Czech Republic came out as the most prevalent for corporate fraud! The Czechs have a phrase which roughly translates to “if you are not stealing from your boss, you are stealing from your family”.
There are many government-sponsored incentives for businesses to relocate to Eastern European countries from straight tax incentives, through cash payments for employing people to subsidies on investment costs. These can be researched easily through using inward investment websites of the host country, the EU and even our own DTI.
EMC has helped many companies to develop strategic plans for offshoring their manufacturing facilities. As with everything in business, success is in the detail – if you have not planned for it, you can bet that it will happen. If you need support or advice, please contact your local EMC office.
