Surviving the downturn

Everyone was told that companies in the Far East and Eastern Europe could make what you wanted more cheaply, so why would you need to make anything here? Offshore manufacture became the zeitgeist of recent years, compounded by the strength of the pound against the dollar, which helped make the physical cost of manufacturing abroad even cheaper. However, as we take our first steps into 2009 and with a recession biting hard on all areas of the economy, things have begun to change. Many companies are now realising that their adventures in foreign lands have perhaps not been as cost effective as they had once thought and are now having to seriously audit their manufacturing strategy as they bid to survive the economic downturn. On a purely economic level, the weakened pound against the dollar and euro has, almost overnight, significantly increased the cost of manufacturing offshore. However, even before this many companies were already starting to realise that offshoring wasn’t necessarily the right answer to their problems. Low wages aren’t everything. The promised savings from manufacturing direct in places like Asia have, in many cases, not been fully realised when the inconvenience, lack of flexibility and IP risk is taken into account. And don’t forget the multitude of hidden costs associated with managing the supply chain in these countries and getting the final product to market. There are also many case studies where Western companies have experienced serious downstream problems like surprise deliveries, unauthorised specification changes and subsequent shipment price hikes, as a result of the massive cultural and communication barriers.