Manufacturing News

Exporting trumps off-shoring

Smart manufacturers that are reaping the benefits of manufacturing in lower-cost countries are also turning to export as a profitable business decision, according to the director of business and investment consultancy, Think Global Consulting.

For David Thomas, companies can benefit more from exporting to developing countries like China and Brazil than simply farming-out their manufacturing in a bid to save money.

“The first wave of manufacturing was to start with a completely domestic business where you manufacture in Australia, and you distribute in Australia. Then, companies started to gain benefits from what’s happening in other countries by outsourcing their manufacturing to places like China, Vietnam, Indonesia or India. I think we’ve been through that wave – we’ve seen 10 years of that,” Thomas told Manufacturers’ Monthly.

“Now the companies that are doing that successfully are saying, ‘Why don’t we now start thinking about exporting?’”

For Think Global Consulting’s manufacturing customers, Thomas promotes the benefits of setting-up supply businesses in China – as well as manufacturing firms – to export to other emerging economies, such as Brazil.

“You’ve got to stop thinking of yourself as an Australian business and start thinking of yourself as a Chinese business. Instead of just manufacturing in China, why not use your manufacturing base and connections to distribute locally and outside China,” Thomas said.

We’re also seeing some companies that have a lot of experience in manufacturing in China starting to aggregate that into one warehouse in China and use that as a supply base to the rest of the world.”

According to Thomas, Australian manufacturers should do their research before they make the decision to export. Standards, for example, are an important issue to look into. With Australian standards so high, however, some consumer and industrial products don’t need to be changed much at all.

“Different countries have different regulations. But generally Australia’s standards are pretty high. If you can meet the Australian requirements, generally the changes you need to make to meet the standards in another country are not huge. We already come from a highly-regulated environment,” he said.

Australian Made’s chief executive officer, Ian Harrison, agrees, saying Australian design rules are high, but local manufacturers still need to take caution when exporting.

“Generally speaking Australian design rules and standards are as high as anywhere in the world. However, anyone exporting to another marketplace needs to be aware of local standards. This includes packaging and tastes, if it’s a food or beverage,” he said.

“Research into any market is absolutely critical. Requirements of labelling, for example: in Canada, there are two languages that need to be met on the packaging.”

Australian Made is responsible for the green-and-gold logo that companies exporting can feature on their packaging.

According to Think Global Consulting’s Thomas, foreign standards should not inhibit Australian companies from exporting. In fact, Thomas goes so far as to say that manufacturers who don’t export will be left behind in another five years.

”We have to export. We’re a very small, inconsequential country, and if we sit still for too long, whatever it is we’re manufacturing will be manufactured better, cheaper, faster and probably of a higher quality in different countries,” he said.

“If Australian manufacturers are sitting in Australia distributing product just in Australia, they’ll find it very difficult in the years ahead. In Australia, we don’t do much manufacturing at the low-end, only the high-end. We’ve got away with it for ten years because countries like China have taken the low-end manufacturing and not yet developed their capability higher-up the value chain.

“But this is changing incredibly quickly. There is a lot of scientific research and research and development being done, and emerging economies are moving in to the higher end of manufacturing very quickly.

“They’ll always be able to do it cheaper than we can. The only advantage we have at the moment is our quality, but this advantage is very quickly diminishing as they catch up. We’ve only got another five years perhaps to stay ahead of them.”

For Harrison, due to the world’s uncertain economic situation, export is a vital part of Australia’s economy.

“It is very important. The Australian marketplace is small. Export allows businesses to take advantage of a much greater scale of activity,” he said.

Harrison is confident that Australian products are well-received in overseas markets because of their high quality.

“What we take to the world markets is a very good reputation for high quality, innovative products, and engineering know-how. Australian products are generally not the cheapest, but they offer very good value in whole-of-life costing. This is an important part of our marketing strategy.”

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