Making it work 

Avoiding the pitfalls of overseas manufacturing is an important consideration for businesses considering the move.

Avoiding the pitfalls of overseas manufacturing is an important consideration for businesses considering the move.

Having products manufactured overseas may offer compelling cost benefits, but there are often problems and surprises, from unfamiliar payment terms and volatile exchange rates to intellectual property protection issues and quality control.

Geoff McCormick, director of industrial design specialist TheAlloy, has been working with manufacturers in China and the Far East for 12 years. The biggest lesson he’s learned is the need to establish strong relationships.

‘Skype and email do not establish relationships, they just maintain them,’ he says. ‘You have to get out there and meet people and understand them.’

It’s a message also taken to heart by Mark O’Connor, CEO of manufacturer eXception. He visits China, where the company has nine contracted suppliers, every four months. ‘We will visit nine or ten manufacturers across four or five days, and as senior executives review them at a higher level.’

O’Connor adds that in the past two years eXception has deployed a risk management team locally in the Far East, which he feels has helped enormously in managing relationships. ‘We have a local team in the East with people who have the appropriate technical, audit and processing skills, and this team is backed up with a UK-based international team,’ he explains.

Closer to home

While China may have been the hot destination ten years ago, the past few years have seen a flow of manufacturing coming back to Europe, particularly Eastern Europe. For UK executives who need to visit overseas facilities regularly, this could bring the benefit of lower travel costs. 

Willie MacKinnon, senior director of EMEA operations at electronics company Plexus, says, ‘Over the past few years, Eastern Europe has begun to really compete with the Asian manufacturing market.’ But he cautions that there is no one-size-fits-all solution, and that any decision made must fit with a business’s strategy and not depend on short-term convenience or cost efficiency.

‘You have to be careful with certain things, such as payment terms,’ he adds, ‘as these can be very different from what you expect. For example, many Asian suppliers demand payment upfront.’

McCormick agrees that businesses need to look at all the angles before making a decision. ‘For example,’ he says, ‘if you are talking billions of units then it may be cheaper to look at China, but if you are looking at something more specialised, you could be better off with the UK or Ireland.’