Front End I News Looking to re-shore production?
A growing number of companies in the UK are considering on-shoring or re-shoring, according to figures from the Bank of England. Higher oil prices are pushing up transport costs, rising prices in the Far East are making products made there more expensive and more companies are concerned at the problems associated with managing an extended supply chain, which means more are looking to source locally rather than wait weeks for components to arrive from the other side of the world. While CIE welcomes any decision to
bring production back to the UK and the country does have some excellent manufacturing capabilities, companies do need to consider the risks before doing so. According to Steven Healings, Group Supply Chain Director, eXception Group, there are five key questions that companies should ask themselves before deciding whether to re-shore.
As he explains, whilst there’s increasing
pressure on outsourced or offshore business to return closer to home, rising labour costs are only part of the equation. “There are a number of things to consider before making that decision, not least exchange rate fluctuations, logistics costs, support costs, tax, duties and importantly government policy - all key factors in the sourcing decision process. The
Steven Healings, Group Supply Chain Director, eXception Group
fact remains that without proper due diligence the risks associated with a significant change in sourcing strategy can be enormous and costly.
The first step when considering re- shoring is to review the existing business model assumptions and the drivers that led
you to reach the decision to off-shore in the first place, and the next, what is driving the need to consider re-shoring now. Was the original business model simply labour cost driven with logistics costs, inventory levels, cashflow, quality, responsiveness, exchange rates and travel costs not considered or considered to be marginal factors? Secondly, are the factors or parameters that have changed since the original sourcing decision was made likely to reverse again in the next few years, or are the fundamentals that had driven the off-shore decision initially still true but a poor supplier was chosen? Will re-shoring bring production close to the markets of today but be moving further away from the end markets of tomorrow? Due to the recent trend in off-shoring and outsourcing, left in its wake are the skills and knowledge gaps that many industries face as jobs have been lost to lower cost overseas suppliers. With this in mind, consideration needs to be given when bringing production back to the UK, that the supplier selected can meet the needs of your business, has the skill in its workforce and the processes that will allow it to fulfill demand. A robust assessment is needed to ensure the supplier will be able to manage any forthcoming product and knowledge transfer, particularly when the off-shore supplier may be less than co- operative. A clear transfer methodology must be deployed. Agree the risks to a transfer programme
with the new supplier and put in place contingency plans to ensure a successful transfer. In any process that involves the change of a key supplier, planning the cut- over and ensuring continuity of supply for end customers is an essential part of managing the risk. This can be achieved by building up inventories to cover the transfer period (key equipment may need to be re- located) or parallel production. Whichever methodology is adopted a risk register should be a key element of the transfer toolbox.
Finally consider the contractual and
commercial aspects, including reactions of the incumbent supplier when notified of the change. You should consider if new approvals are required for a change in manufacturer, and if so how long will the process take, and how much will it cost?” As Healings explains re-shoring needs strategic thought, it’s very easy to change tactics quickly in reaction to changing events, but the long term view needs to be considered if the move is to be successful, perhaps that is something that should have been considered more thoroughly when the original decision to outsource was taken.
Healings concludes, “The risks in re- shoring are often as great, if not greater than the risk associated with off-shoring. Businesses should not under-estimate the time, effort and resource that will be needed to successfully manage a major re- shoring operation.”
Design App:A new Android app from STMicroelectronics is able to provide a fast way for engineers to design circuits using their smartphones or tablets. The new app, called “ST op-amps”, is available free from the Google Play Store (formerly Android Market) to help engineers design circuits using operational amplifiers (op- amps); frequently designed into audio, control, monitoring and communication systems. The ST op-amps Android app has been fully tested and certified, and looks to simplify and speed up op-amp selection and circuit design. It is the second Android application published by ST, and joins the Dual EE app that enables smartphones with NFC (Near Field
Communication) capabilities to read wireless tags containing ST’s RF memory chips.
World’s most valuable: Technology giant Apple has surpassed $600bn in value for the first time, making it the world's most valuable firm. The company’s stock is up almost 60% since the start of the year and is, according to analysts, likely to become the world’s first $1trn company. With rival Microsoft worth $260bn there has been some talk that we are witnessing another tech boom - and potential bust.
Apple reported record-breaking net profits for the last three months of 2011 and, at the end of last year, it revealed it had $97.6bn in cash. The company’s current chief executive Tim Cook said it will use its cash to start paying a dividend to shareholders and to buy back some of its shares.
Losses mount: Sony has forecasted an annual loss of $6.4bn, double its previous estimate and a record loss for the firm. The forecast comes as the company’s new chief executive, Kazuo Hirai, prepares a turnaround plan. Reports say that the struggling giant will have to lose over 10,000 jobs as it moves away from loss making businesses. This will be the fourth year in a row that the company will have made a loss and while Sony blamed the record loss on tax charges related to its US business it is struggling against competitors like Apple and Samsung as well as with a high yen giving companies based in Japan a distinct disadvantage.
Sony's performance has been dragged down by its television business which has lost money for eight years, but it is not alone. Sharp has also forecast big losses of $4.7bn.
Appointment: EnOcean, the inventor of energy harvesting wireless technology, has appointed Matthias Poppel as Chief Operation Officer (COO). In this newly created position, Poppel will be responsible for the operational side of the business aligning technology development with specific customer needs and the opening of new markets. “Matthias’ extensive background in developing
innovative products for international markets is ideally suited to carry out EnOcean’s development and business strategy,” says Laurent Giai-Miniet, EnOcean’s CEO. “His further expertise in achieving great success with new embedded products while also maintaining profitability is highly regarded. We are delighted to have Matthias on board to support our growth phase.”
6 April 2012
Components in Electronics
www.cieonline.co.uk
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