Unravelling the globalisation conundrum
This article has been taken from The Gen newsletter - Summer 2009.
Click here to download the pdf.
Many experts predict that one outcome of the current recession will be greater deglobalisation – one feature of which will be a return to local manufacture in order to better control the supply chain. The argument, put simply, is that better supply of the supply chain leads to reduced risk, at the same time saving time and money. Support for the deglobalisation view often cites China, where transport, materials and labour costs are rising significantly. But is such a retreat advisable, or even feasible?
Any business planning to deglobalise needs to assess all factors, not just immediate costs. Local manufacture demands local expertise. After 20 years of offshoring high volume, low cost products, the ‘traditional’ roles of design and manufacturing engineers have changed, as have the way in which they are sourced and organised. Those responsible for the reintroduction of local manufacture will need to be aware of the way in which engineering talent is now deployed and where best to find it. This can take time, and while this is taking place production will have to continue.
With its fast growing population of newly affluent consumers, China also represents a huge potential market for new products. Presently and for some time yet, this emerging middle class remains distinctly biased against Chinese brands. Retaining a manufacturing presence in the region enables a Western company to access this market directly, and with products designed to meet local needs. Predicted international currency fluctuations will only make exporting to China even more lucrative.
Underpinning all this, however, is the fact that Chinese manufacturing infrastructure offers unrivalled efficiency in terms of cost and speed, key advantages for a whole range of products, from telephones, to toasters, to medical devices.
In the five years since we set up our office in Hong Kong, the context and environment in which we operate has changed. Our offer to our clients, however, has remained the same and is as valid now as it was when we established Sagentia SGAI. We act as a bridge between West and East, providing both direct access to reputable Chinese partners, and a continual, culturally-sensitive presence on the ground. We significantly reduce travel and management time for our clients, while providing the level of micromanagement required to guarantee a successful outcome. Setting up in China is getting more expensive: our facilities are an attractive alternative to a local office, and are also available only when needed.
Additionally, we are able to provide essential services that Chinese industry cannot supply. Although unparalleled in terms of manufacture, China does not have the infrastructure or expertise to deliver turn-key product development – prototyping, for example, can be difficult. By managing this phase in the UK – informed by a true understanding of Chinese manufacturing capabilities – Sagentia SGAI enables our clients to get the best of both worlds.
Deglobalisation is inevitable in a post-recession economy, where the safeguarding of
domestic jobs becomes both an economic and political imperative. It also addresses environmental issues, increasingly important to consumers, and reduces travel and shipping budgets. But it is unrealistic to expect a national manufacturing sector to resurrect itself overnight, or that in-country manufacture alone is capable of exploiting the huge markets opening up in the Asia Pacific region. Sagentia SGAI’s flexible, tailored approach allows our clients to access Chinese manufacturing excellence only when appropriate to their business, and to use the expertise of both the West and China to make product development a success.