factory selection selecting a CM Ongoing Production Contract Manufacturer CM production oversight APAC Future of Manufacturing Trade War US China

5 Things I Learned About the Current State of Manufacturing in APAC

on July 30, 2019

In light of the U.S.-China trade war, I have traveled extensively within the Asia Pacific region in search of understanding how the global supply chain is rapidly evolving. The one hundred day journey abroad raised my awareness of the opportunities in designing a robust supply chain in this ever-dynamic landscape. For manufacturing, Asia Pacific has a lot to offer, but navigating the complexities of the region can prove daunting for many. When evaluating where to build your supply chain, one should look beyond the price, and instead focus on the manufacturing readiness as it relates to the product.

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1. Economics

In today’s global manufacturing landscape, our economies are tightly coupled. That said, when deciding on where to manufacture your product, one should consider the economic health of a country. Everything from the economy to population growth feed into the stability and competitiveness of manufacturing, which in turn leads to prosperity. This virtuous cycle is a path to economic development for many countries.

2. Infrastructure

A country’s infrastructure has a direct impact to the supply chain. The quality of the roads and ports all play a vital role in moving everything from raw materials to finished products within the system. Oftentimes this backbone is overlooked as one focuses on the factory itself. While a factory may be highly efficient, the bottleneck and risks are merely shifted to other areas of the supply chain and at the end, impacts the overall efficiency.

3. Politics

The political landscape and culture often dictates the ease of doing business in a country. “How easy is it to import and export”, or “are free trade zones available”, are some questions to consider. Additionally, intellectual property protection and dispute resolution are often concerns for many when it comes to outsourcing manufacturing. As such, one may wish to consider the transparency and reliability of the local legal system. Overall, it is important to contemplate the varying norms and practices in every country as it relates to expectations.

4. Resources

With headline news of major hardware companies shifting their manufacturing strategies, it may be easy to just follow the herd. However, when it comes to manufacturing, it is hardly a level playing field. The scale and bargaining power of a large company is often magnitudes different to those available to a competitor; even more so to a smaller company. This is not to say that a smaller player cannot benefit here, but rather, that it is more important to compete smartly by knowing your position and leveraging them to your advantage.

5. Competency

Many people may default to labor wages when seeking where to manufacture. While wages are important, this approach does not consider the competency of the labor in that country. A country may have the skilled labor for the textile industry, but that does not necessarily translate into the same workforce required by that of an electronic or mechanical manufacturing factory. When it comes to hardware manufacturing, there is more to it than product assembly, and putting together a device is very different than that of constructing a garment. Every industry involves different skill sets and it is critical to identify if those qualifications are readily available.

Conclusion

There is often not an optimal choice, but rather a set of options in architecting a supply chain. Understand that there will most likely be trade-offs when deciding where and who to manufacture with. With a better understanding of the vertical supply chain across the Asia Pacific region, identifying different capabilities and the need for specialization and customization is greater than ever. Lastly, know that investing to achieve a robust supply chain often translates to a sustainable competitive advantage for a hardware business.

Shawn Chang

Vice President of Strategic Planning at Dragon Innovation

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