China – a formidable force.
There is no denying it, China is a formidable force. It has truly transformed itself and the world economy has had to take notice. In 1990 China produced less than 3% of global manufacturing output, by value; its share now is nearly a quarter!
Just to put this in perspective China produces 80% of the world’s air conditioners, 70% of its mobile phones and 60% of its shoes. Many thought that the baton would pass to other parts of the world in due course but this has not been the case, and if anything we can see China’s grip tightening.
What makes them so strong?
1. Low Cost Manufacturing
China is still known for it’s low cost manufacturing and that is why so many people still manufacture in China.
2. Factory Asia
“Factory Asia” is a term used by manufacturers. It has come about due to wages increasing in China. Because of these increases they are having to pass some of the “low cost activity” to large low income populations in South East Asia whilst still maintaining their central base in China.
3. Increased Demand
As spending and sophistication of Chinese consumers grows we see “Factory Asia” grabbing a bigger share of the higher margin marketing and customer service. As chinese demand increases it strengthens Asia’s supply chains.
4. Less Regulation
In the past China has been able to produce with much less regulation than in other parts of the world. This is changing as China is forced to take a look at it’s industry and the regulations it operates under.
How does it all affect us?
Here in NZ, we have a growing manufacturing sector. Some companies like ourselves, choose to do business on both sides of the world. We not only manufacture here in NZ for our customers but if we deem appropriate we will offer to take some of their manufacturing over to China. Having the flexibility and relationships with China enables us to get larger production completed at a lesser rate and pass this saving onto our customers.
So where does the future lie?
At Fero we believe that our model gives customers the best solution. Manufacturing locally gives customers peace of mind. They value the fact that we are NZ owned and that we have a team of engineers in-house that can design solutions and offer advice. They also know that Fero understand their business and can react quickly if a small batch of looms is required.
But on the other hand some of our larger companies love the fact that we also have very strong relationships with our factories in China and can give them the cost down that they need to be competitive in the marketplace. Due to the number of years that Fero have spent in China we know that the materials used and the manufacturing is as good as ours in NZ so are happy to use these factories.
It’s a WIN WIN situation for most of our customers – the best combination of both local and offshore manufacturing and assembly.