In recent years, emerging markets such as India and China have proved to be a problem for smaller companies in other parts of the world, particularly in the US. One of the reasons for this is India and China are able to carry out similar work for a lower cost. These countries have a lower cost of living, lower operating costs and pay lower wages than first world nations so they are able to offer similar products at a much lower price.
Shift in manufacturing
Over the last decade or so many companies have opted to stop manufacturing in their home country and moved operations abroad, to countries such as India and China. When times are difficult companies need to consider their operating costs and if moving manufacturing abroad is the difference between remaining in business and shutting up shop then most will take that step of relocating. However, times are changing a little now and it is much easier for small US companies to compete with Chinese manufacturers.
One of the reasons for this is that labor costs in China have increased. Workers there are acquiring more skills and therefore are commanding higher rates of pay. In some areas there is a limited workforce as the one child per family rule has taken effect over the years. This is also driving up wages. Factories have to compete for the most highly skilled workers. Problems have also been encountered with exchange rates, which often make it more expensive to manufacture in China. Some US companies are still making the switch to foreign shores despite changes such as this taking place.
How US companies can compete
Streamlining manufacturing costs would be an obvious way to compete with cheaper manufacturers abroad. For example, implementing Lean processes can help to cut waste and save money. This could make the savings offered by taking your company abroad look a little lame in comparison. Lean can be applied to every aspect of a company’s working day but it is important to make sure that it is done properly and with precision so that the most costly processes can be streamlined.
Innovation is important for companies that want to compete. Even the introduction of just one niche product can help to solidify a company’s place in the market. Companies such as Transducer Techniques have done just that – focusing on weight gauges and becoming experts in the manufacturing of precision weights and other instruments. This has allowed the company to keep the manufacturing process within the US and compete effectively with other markets.
When a company hits difficult times it can be very tempting to take the obvious route of moving the manufacturing process to a place where traditionally it is cheaper. However, as times are changing this may not be the most cost effective option and competing with foreign manufacturers is getting easier all the time, particularly for those businesses that are happy to focus on the future and make the necessary changes to their working practices.