The shift to manufacturing localization is already well underway, and it’ll impact your factory at some point if it hasn’t already. Here are some ways to put your plant in a position to benefit from it.
John Mills ǀ Executive Vice President of Business Development ǀ Rideau Recognition Solutions
We’ve known for a while that manufacturing work is returning to North America from China and other parts of Asia. Yet the trend may be accelerating.
According to the HSBC purchasing managers’ index, Chinese manufacturing activity sank again in April -- the fourth consecutive monthly decline in the region -- even as U.S. and Canadian factories continue to thrive.
The Institute of Supply Management’s index of U.S. manufacturing activity rose to 54.9 last month, up from 53.7 in March and the best overall reading since December. In Canada, the RBC Canadian Manufacturing Purchasing Managers’ (PMI) index came in at 52.9, a slight decline from March’s 53.3 but still indicative of expansion.
Manufacturing employment is also on the rise, with RBC’s measure of factory staffing rising to 52 in April, a high not seen since November. The message? Even if your factory isn’t gearing up for handling more local work, your competitors are. Here are five ways to cash in on the trend:
1. Invest in technology that allows for fast prototyping and turnaround. Speed is the key advantage of working with a local manufacturer. Prepare for that by enhancing the line with advanced production tools. Improve your logistics capability via internal development or partnering in order to provide fast delivery of finished product.
2. Create a shared space. Local customers should allow for closer cooperation. Get your customers into the factory to help with design and real-time tuning of your production facilities. You’ll win a partner while making it more difficult for an overseas competitor to win business in your backyard.
3. Hire locals, regularly. Winning local business isn’t just a matter of having the right capabilities. It’s also important to have the right staff, including nearby workers with the proper domain expertise in order to limit or even eliminate relocation and recruiting costs. You’ll also advertise your factory’s capabilities while fostering economic goodwill.
4. Experiment and measure. Of course, you don’t want to focus so much on local work that you forfeit overseas opportunities. Design experiments that measure the time and investment required to meet local needs versus overseas accounts. Are they more or less profitable? Why? Ideally, you’ll work towards a mix that boosts overall profit as you grow to meet rising demand.
5. Create incentives and rewards to reinforce best practices. The recent influx of local work is sure to disrupt some factories, and yours may be among them. Don’t fret if that proves to be the case. Instead, document the changes local clients demand in a search for best practices. Note what you find, and then authorize incentive pay and modest rewards (e.g., a lunch gift card, a random day off, etc.) to reinforce profitable outcomes as your factory takes on more nearby clients.
The shift to manufacturing localization is already well underway, and it’ll impact your factory at some point if it hasn’t already. Prepare yourself by investing in technical efficiency, creating shared space for working with customers, and hiring locals. Design experiments to test your processes, and then recognize and reward changes that result in best practices. You’ll notice the difference not only in how clients see your work, but also on the bottom line.
John Mills is executive vice president of Business Development at Rideau Recognition Solutions, a global leader in employee rewards and recognition programs designed to motivate and increase engagement and productivity across the workforce.