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In many markets, where production costs contain a significant labour element, an often discussed trend is the move of manufacturing operations to overseas locations with significantly low labour costs. Is it time to reverse this trend in the search for customer loyalty and competitive advantage? Moving manufacturing to low cost overseas locations can produce a backlash due partly to the loss of local jobs, even though they may have been boring and repetitive, or the poor working conditions in the new overseas plants, sometimes likened to a return to slave labour. There is a marketing aspect which, many are aware of and to which companies are usually quite sensitive. This is the "not made here" aspect. In some markets customers are fiercely loyal to locally made produce be they cars, food or consumer electronics. In Germany the population like their German made BMW and Mercedes cars and are not that keen judging by sales figures to switch to a Japanese Lexus from Toyota or Rover from Britain, who employ few Germans in their production. Even in Germany, a heartland of European manufacturing, there have been significant moves away from manufacturing at home in the last 20-30 years with big name companies having developed extensive production facilities in lower cost locations like Hungary, Czechoslovakia or as far away as Mexico Singapore, China, or Korea, each move depriving their former German employees of their production jobs. It seems to me that fewer and fewer companies now use the "made here" marketing slogan across the globe. Often this is simply because they cannot make that simple claim because they now make so much of their product in low cost locations overseas. There is some resistance to the globalisation argument as can be seen from the demonstrations at recent summit meetings. Perhaps it may be that the move to a service industry employment base in western countries is not welcomed by all, when the majority of people cannot expect to be top salaried information brokers but rather can look forward to burger handling or shelf filling. What I am talking about is not anti globalisation, rather I am talking about a localisation, of smaller more automated production units in locations within their target markets. Therefore the multinational can say "American products for Americans" within the US, "made in Germany" in Germany etc. The increasing use of automation has over the last 50 years changed the manufacturing picture somewhat and may increasingly allow companies to adopt this perhaps new strategy of "locally made produce". What the application of automation to production does, is it removes much of the low cost labour element, replacing it with the cost of financing capital to purchase and maintain automated machinery. With the sophisticated financial markets in Europe and the US, there is really no excuse for thinking that the cost of capital may be lower in China and no excuse except that of Chinese demand to move your productive base to China, it should be just as cost effective within Europe for European market demand. There are admittedly fewer people in total in an automated factory but those that do remain, are design and commissioning engineers, production engineers and quality planners who are higher paid and more numerous for their type than would have been required using the labour intensive production methods of yesteryear. So the quality of jobs increases, the average salary of the jobs increases and the demands on the local education establishments increase, with effect on their standard and the quality of the local workforce, the taxable base increases to fund this education requirement, all leading to a better standard of living for the locality and its nation. The company itself can now return to branding its products with the "made here" slogan confident that, by its use of automation, high and repeatable quality will maintain or improve its brand image. The company may get a significant improvement in their local market penetration if such localisation finds favour among their customers who will I expect be quite pleased with the return of productive factories including highly paid employment opportunities, and reversing the trend of their loss for at least the last 20 years. Author Mark Abraham (mark@sticky-marketing.net) 8th August 2001 Note the use of "may" and "could" throughout this article and the lack of substantive evidence. I like the idea of this strategy but it is completely up to you if you decide to research its implications and follow it anywhere. |
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