There are some things that are obvious in business; for example, maximizing profit by reducing costs and increasing sales. Are rights an example of this, or is it a concept that requires a pioneer? Neil Ballinger, Head of EMEA at Global supplier of automation parts EU Automation explains it all.
Besides obvious ideas, there are also theories that only become obvious after a pioneering thinker has made them so, such as Henry Ford’s development of assembly line mass production or Masaaki Imai’s introduction of the concept of Kaizan.
Now, it would seem insane to structure a manufacturing enterprise as a series of unit cells in which specialized craftsmen produce an entire product, regardless of how many parts or steps are required to make it. Likewise, it would seem crazy not to focus on your process, regularly making incremental improvements to help achieve a better outcome.
But before Ford and Imai, both were standard practice.
Rights exchange seems like an obvious idea; place each component or process in your business in a country or locality that offers the optimal combination of output quality versus cost. However, when businesses started offshoring, that’s exactly what they thought they were doing, and many were. Only later did they discover that the distance could create a trade-off in quality that didn’t make up for the lower price.
When the industry began to shift, it was in the same search for the best quality and the lowest price; or so he thought. As offshoring has been found to create a natural evolutionary process of increasing costs in your chosen locations, many companies have re-evaluated the output quality versus cost matrix and concluded that costs have risen enough in offshore locations that it makes sense to everything back to where we had to start.
In the first half of the last decade, between 2010 and 2015, one in six British manufacturers shut down some production. Many of these firms, including Barbour, Burberry and Mulberry, produce luxury items that have a significant ‘made in’ element to the brand.
In an article published by Springer Link in 2016 called Reshoring: Strategic Renewal of Luxury Apparel Supply Chains, Pamela Robinson claims that:
“Supply chain strategy renewal and the relevance of re-provisioning have increased for luxury branded goods, where brand efficacy and authenticity have become a consumer-driven requirement. This is particularly appropriate for companies wishing to secure the provenance of their product offering and maintain a comparative advantage in a highly competitive market sector.
In other words, many companies have used Made in UK, Made in Germany and Made in France phrases, etc., as justification for reshoring. It’s as if provenance itself makes as obvious a business case as profit. The problem is, there’s no concrete evidence that the “made in” label adds to the top line — or the bottom line.
Enter protection rights
To paraphrase Shakespeare’s most famous stage instruction, by Winter Storyat this point we see the rights I’m coming in stage right, chased by a bear — though in this case a bear market. As manufacturing companies began to tire of the costs associated with moving from one location to another, chasing a mythical cheap price that they may never capture, the off-or-restoring market began to decline.
For example, in 2000 Chinese workers earned an average of 52 cents an hour, but since then wages and benefits have grown by double digits every year, including an average of 19 percent from 2005 to 2010. Cost increases in the U.S. markets and Europe was a small part of that – because China caught up.
As a result, the idea of rights protection has become popular, and yet there is still no pioneer in the production; there is no Henry Ford or Masaaki Imai to demonstrate its undeniable merits. This is despite the fundamental truth that the weight of raw materials and thus the cost of delivery can be one of the most important factors in the equation that determines the “correct” location.
However, there are pioneers in other industries that we can draw inspiration from. In 2008, Capgemini France registered a trademark for the word “Rightshore”, describing its process of rationalizing costs and improving innovation through global sourcing and outsourcing. Similarly, the financial industry, offering a service without the requirement of raw materials, has turned rights into a roaring success.
At EU Automation, we have always used a global network of hundreds of suppliers to deliver automation parts to our customers at the best price, as quickly as possible and at the right place to increase delivery speed and reduce shipping costs. Over the past five years, we have also added facilities in Germany, the US, Singapore and the UK to enhance our ability to serve every inquiry from the right place.
Is the protection of rights obvious? I think it is by definition, but perhaps some inspiration can be drawn from Imai’s philosophy of Kaizen, which is “that not a day should pass without some improvement being made somewhere in the company.”
Given the history of off-re-and-rightshoring production, it would be wise to view these day-to-day decisions in the context of historical and projected market changes, otherwise the right choice can quickly become the wrong one again. .