“It’s a small world after all” was made famous by Walt Disney Studios when the company included the song in a showcase of singing children at the 1964 World’s Fair, and while the sentiment has become cliché, the concept is more relevant today than ever before. In manufacturing, “It’s a small, inter-connected world after all” could well be the theme song for 2017.
The influence of global industries, global suppliers, and global commerce is growing exponentially, and before long it will reach a point when all manufacturers will be part of a fully integrated global network. We are well on our way there already.
Thanks to ease of shipping, lower transportation costs, and the proliferation of online shopping and e-commerce, many manufacturers are either selling to a global market, or are buying raw materials or components from international suppliers across borders.
While borders may complicate processes such as currency exchange and compliance mandates, the opportunities usually outweigh the hassles, if advanced software is in place to manage the specifics.
Rising above the complexities of globalization
The challenges often associated with global expansion abound, but an increasing number of manufacturers have overcome them – and are now seizing new opportunities brought about by globalization. According to Deloitte’s Global Manufacturing Footprint 2020 study, there has been a seismic shift in manufacturing location trends over the past 20 years as manufacturers take advantage of labor arbitrage opportunities and gain access to raw materials, while accommodating an increasingly more global customer base. The report also underscores the benefits, specifically pointing out that the growing global economy has enabled manufacturers to open new markets while surfacing opportunities to increase shareholder value through improved margins, reduced operating costs, shorter supply chains, and refinement of global tax structures.
In addition, the Future Watch Report by Intercedent Asia, a specialist consulting and research organization for companies managing and establishing operations in the Asia Pacific region, underscores Asia’s growing dominance in the global marketplace, as well as a global source of competition. Outlining strategies to meet challenges in a rising Asia, the report highlights that the best of these business organizations – even those coming from emerging markets – are the ones that have embraced rapid globalization, targeting industrialized economies including North America, Australia, and Europe, as well as resource-rich Africa and the Americas.
Growth and the global perspective
According to a recent study by KPMG, which surveyed CEOs of manufacturing companies, 92 per cent of manufacturers expect to expand their geographic footprints in order to drive further growth.
“We have seen manufacturers make significant investments into new businesses, models, and technologies that help them expand their footprint into new sectors,” said KPMG’s Tom Mayor, Principal, Strategy Practice, KPMG, in the KPMG Global Manufacturing Outlook.
KPMG’s report also indicates that more than half of the manufacturers surveyed are focused on aggressive growth – though it remains challenging as most global markets continue to forecast limited baseline growth. This means that manufacturers will likely be forced to either invest in new technologies in order to increase market share, or face brutal one-on-one competition to grab market share from global rivals. Already facing ultra-thin margins, manufacturers will need to emphasize value and service, not price.
Combining value and service to create a total customer experience cannot simply be stretched out to cover the globe. Pretty much like stretching a variety of substances, weak spots or actual holes are likely to appear when resources are stretched too thin.
Supply chain issues is one thing; product design differences need to be addressed as well. People in different regions have diverse preferences on most consumer goods, eliminating the possibility of simply mass marketing one product line.
Expanding in 2017
For manufacturers looking to grow their businesses in 2017, it is crucial for them to evaluate their global stance. There may be opportunities for expanding the company’s footprint with additional branches or products. However, care must be taken to step into the global arena, knowing that fierce competition lies ahead.