UK and Offshore Manufacture through a Best Fit Model
Tony Inskip, Commercial Director – Stadium Electronics
The migration of high volume production to perceived lower cost regions such as China or more recently Eastern Europe, is being revisited with evidence of OEMs bringing production back to the UK or even in house as the recession hit and offshore manufacturing costs increased. China took a big hit last year due to currency fluctuations and rising labour costs, however, it is estimated that Asia will stand for 65% of the entire EMS market in 2013 so the case to dismiss Far East manufacturing locations is not yet proven.
A decade ago UK OEMs would operate ‘arms length’ transactions with their offshore partners or brokers, however the pitfalls have been apparent in slow response times and limited flexibility. Today we are increasingly seeing products being manufactured in offshore sites that mirror that of a UK EMS operation with identical production equipment, test facilities and quality approvals – whether that is through a strategic partner or a wholly owned operation.
In 2000 Stadium set up a wholly owned China facility and Hong Kong sales and sourcing office with full Western ownership. China may still be perceived as a high volume, low cost location but in recent years capabilities are emerging fast with a significant increase of China EMS facilities offering niche sector expertise in automotive and medical. For example, we operate a class 10K clean room and ISO13485 approval at our site in the Guangdong Province which was put in place in 2008 – nearly two years before our UK sites began implementation of the medical standard.
However, to reap the benefits of offshore manufacturing doesn’t necessarily mean putting all your eggs in one basket. An ideal ‘Best of Both Worlds’ approach can be invaluable, through an integrated UK/offshore solution whether this is through a part build model splitting account management, engineering, tooling, material sourcing, injection moulding, pcb assembly and final box build across multiple sites, or a mix of UK/offshore across your product portfolio.
This approach brings vast confidence to the OEM in dealing with a local company, IP assurance from an operation that is thousands of miles away because the site is UK owned and managed, and time to market benefits through added flexibility. An example of this is demonstrated with Stadium’s production of a SmartMeter product. The OEM initially looked at offshore manufacture to bring competitiveness through lower cost components and labour and a manufacturing partner in Malaysia was originally sourced. However, as the partner did not have representation in the UK they were presented communication and confidence concerns early into the process.
In addition, due to the nature of the product, quality is of paramount importance and the customer felt that the logistical and communication risks concerned with dealing with a company overseas were just too high. Stadium’s unique proposition with both UK and China sites offers security, quality and time-to-market benefits of UK manufacturing, whilst also accessing material sourcing and tooling through the China operation.
Time to market was crucial, and with time lost already following the breakdown of communication with the original partner, Stadium was also able to react quickly utilising expertise across all three sites, providing electronic design support, prototyping and fast-track tooling, allowing the first batch of Smart Meters to be manufactured in just 12 weeks from the initial quotation.
Utilising both UK and offshore sites for manufacturing ensures that the EMS can respond to shifts in demand quickly. Moreover, the decision to outsource production is not just one based on UK or offshore, or both. OEMs must become less cost focused, more product driven, and develop the best manufacturing strategy for the short, medium and long term.
Consider which location offers the best technology and capability for the product. Which is suitable for product launch volumes and which can meet demand as the product reaches a peak in its product life cycle and production levels increase. Also consider what will happen if demand suddenly slows, will your offshore production remain viable. Is there opportunity to switch to local UK production until demand picks up.
The ideal solution is a responsive strategy with flexible access to both UK and offshore production that is aligned with the product life cycle and switched on/off accordingly. This model allows us to offer a best-fit flexible production model to our customers. Stadium’s decision to establish a wholly owned manufacturing site in China, rather than forming strategic manufacturing partners, gives customers confidence in dealing with a UK owned company and assurance that their commercial and technical offshore production needs will be met to uniform international standards.
A single source supplier with this offering will prove economies of scale to the OEM by working with your EMS partner to develop a best-fit product manufacturing strategy for both today and tomorrow.