Manufacturing News

Off-shore production providing domestic benefits

MORE Australian companies are finding that by establishing cost effective production facilities offshore they are better able to grow their domestic Australian business.

A prime example of this can be seen in the significant number of Australian companies that have set up successful operations in industrial estates on the eastern seaboard of Thailand to support their businesses back in Australia.

According to Austrade’s chief economist, Tim Harcourt, there is much diversity in what these companies produce — everything from simple everyday goods like nozzles and towbars to specialist medical equipment and precision instruments.

“But all these companies have one thing in common — each has expanded its operations in Australia as a result of its foray into Thailand,” Harcourt said.

“Many of the Australian companies have been attracted to Thailand because of incentives offered by the country’s Board of Investment, as well as arrangements under the Thai-Australia Free Trade Agreement and Thailand’s strategic location in the Mekong Delta.

The availability of skilled labour in the business parks and the close proximity of training facilities are other incentives for establishing operations on Thailand’s eastern seaboard. Factories are deliberately placed close to technical colleges to ensure a ready supply of skilled labour.

“The eastern seaboard of Thailand is a hub for the automotive industry and many automotive component makers have a foot in both camps — Australia and Thailand — to take advantage of the booming market in the Mekong Delta,” Harcourt told Manufacturers Monthly.

TriMotive

Melbourne-based company TriMotive, which produces automotive components for one tonne pick-up trucks, has established a 5,600m2 purpose-built plant in Thailand equipped with sophisticated machinery including state-of-the-art precision laser cutting. Products include towing systems, roof carrying systems, occupant protection and cargo management systems.

TriMotive’s MD, Robert Saunders, regards an off-shore presence as vital to the company’s prosperity back in Australia.

“Every Australian manufacturer should think globally in order to survive locally, and we are certainly finding that much of our business relates to managing the global logistics of the supply chain,” Saunders told Manufacturers Monthly.

“The Thai operation is allowing us to tap into the booming market in Asia, and has enabled us to expand our operations both domestically and internationally.

“As well as selling directly into the Thai market, many of the products manufactured at our plant in Thailand are shipped back and finished here, and the company’s R&D and quality control are centred in Australia.

“It’s important to look at the relative demand opportunities. Our investment in Thailand is leading to expansion of the company’s market in the Asia-Pacific region, so a win/win situation is being created.

“TriMotive is obtaining a global footprint from a single location in Thailand, and the expansion of the market for our products in turn enables economies of scale to be achieved.

“We are able to export to most of South East Asia through Thailand. In 2006 the company had no sales to that region, but by the end of 2007 some $2.5m in sales was recorded, and we are looking to double that figure for 2007/8.

“The Thai workforce is very cooperative, reliable and keen to learn, and significant investment incentives are provided by the Thai Government, including income tax benefits.

“When establishing overseas production facilities it is important to choose the right location and to develop a strategy to minimise risk.

“In particular, this includes control of intellectual property such as patents, registered design and technical know-how as well as control of cash and management of currency exchange risk,” Saunders said.

ANCA Manufacturing

About two years ago, Melbourne-based company ANCA Manufacturing, which produces high-precision CNC grinding machines for a global niche market, established a manufacturing facility in Thailand.

Joint MD, Patrick Boland, says some 98% of the company’s production is exported and that the Thailand operation was established in addition to significant expansion of the highly skilled technical operations in Australia.

“The more sophisticated high-tech aspects of production are carried out in Australia, but our manufacturing in Thailand is currently going through an upgrade. In future we plan to ship product directly to market from that site as well,” Boland said.

“The decision to establish a facility in Thailand was based on a range of factors including full capacity at our Melbourne site and difficulties in recruiting skilled labour in Australia, which has not been a problem in the Thai industrial park.

“Investment and integration have also been relatively easy under the Thai-Australia Free Trade Agreement, and attractive incentives were offered by the Thailand Board of Investment.

“Production in Thailand is helping us to meet market demands as well as providing increased cash flow, which in turn facilitates expansion of R&D and creation of jobs back in Australia.

“Increasing customer demand for ANCA products across a wide range of countries has resulted in an annual production growth rate of some 30%,” Boland said.

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