Monday, 10 September 2012

At home or abroad? The manufacturing dilemma

I recently wrote an article on London Business Matter Magazine 
Read the article and let me know your thoughts, I think it is food for thought.
You can also have look at the magazine;
Here the on-line version: 
September issue Page 29 

Below the article:

Over the past few years in the more developed countries, the number of national campaigns devoted to promoting domestic goods have increased considerably. In addition to this, Governments are taking tough measures against the fierce economic competition from China, India, and other developing nations.
The aim is to boost the national manufacturing industry by reducing the excessive import of goods, increasing the export of domestic goods, bringing the manufacturing back to their countries and becoming less dependent on other economies.    
We, as consumers, play an essential role in helping our Government achieve these goals as the market economy is driven by demand and consumers are the ones who demand.
Buying domestic products has economic advantages. Firstly, it contributes to the growth in domestic industries by generating new capital and creating employment. Secondly, the capital may be invested to create more goods that can be exported to others countries.
Exporting in the global market helps sustain and grow domestic industries as it leads to an increase in sales and profit that helps to reduce the overall unit costs.
However, we cannot stop importing goods. International trade is beneficial in many ways to today’s way of living. Without import we cannot benefit from the raw materials that do not exist in the domestic country, such as copper, ferrous metals, lead, zinc and rubber, all indispensable to the manufacture of most goods. We also cannot enjoy a specific quality of goods like the unique fragrance of a particular French perfume. We cannot have electronics such as mobile phones and computers at affordable price, as the cost of products manufactured or assembled in some overseas factories is much lower than in many domestic markets.
It is universally acknowledged that a country like China, for instance, is able to export cheaper products. China is a growing economic power thanks to its raw material resources, population and economic reforms made over the past few decades. But it is the abundance of cheap labour that makes this country so desirable. In addition, according to the International Monetary Fund (IMF) reports, the undervaluing of its currency makes Chinese goods in some cases unfairly competitive.
The final price of products plays a significant role in the marketplace. Due to the above reasons it is not hard to comprehend why some companies decide to set apart their patriotism and source goods from other developing countries.
On the opposite side of the coin, it has to be said that many businesses prefer using local manufacture for several reasons: import duties and taxes, high shipping costs and longer turnaround or language barriers that could lead to misunderstandings. The distant location also makes it difficult to verify and manage the quality of the product on–site and, most importantly, makes it very difficult to build a face-to-face relationship with the manufacturer. Establishing a close relationship with a manufacturer is crucial for any business as it leads to several advantages such as good prices and profitable collaboration during the design and development of new products.
Now the question is: Should a company manufacture their product domestically or in other countries? There is, of course, no prescriptive answer.  In my opinion, environmental issues and the cultural values are key factors that need to be considered. From an environmental point of view, the closer the source, the less transport energy is consumed. Moreover, the mass production of low cost products in developing countries encourages the waste of consumer goods that are bought but often are rarely used. Buying domestic products, although more expensive, can increase consumer awareness in understanding the real value of the product itself, increasing its lifespan and reducing waste.
From a cultural point of view, it is important to remember that there are a significant number of manufacturers that maintain ethics, quality and passion. In my opinion we should give more importance to these values, appreciating the tradition beyond the products, otherwise the risk is to lose our distinctive cultural heritage.
When I recently designed Ray Shelf, a contemporary shelving system, I also asked myself the same question and I have chosen to keep the manufacture local. As a result, my customers not only appreciate the design of the product but they also seem to accept the premium cost associated with the local manufacture.
The availability of cheaper products and materials from developing countries has led to a decline in buying domestic products and it has also increased the value-action-gap between our hypocritical approach to the environmental issues and our real actions.
The economic advantages in buying domestic products are enormous for a country.  By creating and harnessing customer pressure and government support, suppliers and retailers could be encouraged to increase their dealings with domestic manufacturers. These actions have to be considered an investment for future generations and for our environment. 

Illustration by Elisa Martinelli

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