20 Manufacturing
MANUFACTURING IN CHINA:
Operational Dilemma or Commercial Opportunity for European Companies?
I
n the UK, manufacturing output currently consuming. All of these challenges, and nies emerge as more agile organizations
accounts for approximately 20% of the others, have combined to reduce the abil- by increasing quality, managing their
national economy, generating more than ity of European manufacturers to compete supply chains more efficiently, employing
£150 billion a year and about 60% of the effectively, particularly with many of those lean manufacturing techniques and, more
country’s exports. The sector employs based in the Far East. and more, using sophisticated software
around four million people — representing solutions as global enablers during the
roughly 14% of the nation’s total workforce Other important constraints faced by Eu- last decade.
— and a further 2.4 million jobs exist ropeans include stringent environmental
in the services industries that support improvements regulated by pan-European While the Far East economies, particularly
manufacturing. legislation (obviously welcomed by all), China, have been continually increasing
employment protection laws and (certainly their production output, certainly in the
But the industry has been experiencing an in the UK) a general shortage of manufac- high-tech space, they have not to date
inexorable decline since the Second World turing skills. seized all of the design and development
War, dropping from about 40% of the initiatives. By embracing the best of both
UK’s economy to under a third by the late It is therefore understandable that many worlds, European organizations can
seventies and less than a quarter today. In international manufacturing organizations continue, not only to survive in this highly
‘high-tech’ areas such as electronics and are now migrating away from Europe competitive global marketplace, but also
computers, the decline is faster. Is it, like because of these difficulties, which on the to increase market share. I believe that, in
the rest of European manufacturing enter- face of it appear to be insurmountable. the future, we will have to balance where
prise, facing extinction in the longer-term? However, if we go back to basics — some we design and develop new products with
things do not change — enterprising alternative locations of manufacture, which
Manufacturing companies in both the UK manufacturing companies who can de- may often turn out to be a combination of
and Europe, particularly those in these sign better products, manufacture those Europe AND the Far East.
high technology fields, have faced some products at low cost and deliver on time
daunting challenges during the last few to the marketplace, will still be market lead- Arguably, right now, it is assumed that
years. In particular, production costs have ers. Okay, the competition is now global, Europe remains at the forefront of techno-
steadily continued to rise, international but wasn’t it always? logical development and has significant
logistics have become more complicated strengths in terms of conceptual innova-
and managing the complete supply chain While facing some apparently daunting tion and product design. China as a major
has become more complex and time challenges, we have seen many compa- manufacturer of the world’s domestic
Supply Chain Europe June 2007
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