Over the past 3 years we have seen several companies move their electronics manufacture from the Far East and other “low-cost” countries, back to the UK. Surely this cannot be competitive, can it?
We recently carried out a cost comparison on a batch build of 2000 assemblies. Our UK cost was around 25% higher than that obtained from a Chinese partner, excluding import duty. That is quite a difference, isn’t it? So, why are some companies looking to build in the UK rather than exporting manufacture to another country?
After speaking to customers who have reshored their electronics production, the reasons are clear:
- It is difficult to find an overseas manufacturer who is interested in producing less than 5000 units.
- Quality can be variable between batches.
- Some partners will not partial-ship. They send one batch, many months after the order has been placed.
- Customers are being asked to pay 100% up-front with variable delivery times.
- Customers spend a considerable amount of time in China debugging their processes.
- There is ongoing risk to intellectual property theft.
Customers that have returned their manufacture to the UK have seen many benefits which can offset the lift in unit price. It is these benefits that are leveraging the return to UK manufacture. It is true, there are some products that do not lend themselves to manufacture in the UK. Low cost, high volume consumer products can be difficult to manufacture competitively in the West, but many products do not sit in this category. Industrial and professional electronics are less cost sensitive, are generally produced in lower volume and are great candidates for UK manufacture.
So, what are the benefits of manufacturing locally?
- No language barrier.
- If there is a problem, it is easier and faster to visit.
- Lower volume production is easier in the UK.
- Lower shipping cost and time.
- Batch manufacture gives the benefit of faster delivery and lower stock investment.
- It is easier to build a relationship with a local supplier.
- It may be easier to gain credit terms.
There are a few tricks that can be applied to reduce the cost of assemblies in the UK. We will look at these in more detail in our next article.