Localisation is the (prescribed) use of local content (skills and components) in manufacturing. As a requirement, it’s almost impossible to avoid as governments globally impose policies that require firms to use domestically manufactured goods or supplied services in order to operate in an economy. Local content requirements serve as either a precondition to receive government support or an eligibility requirement for government procurement.
But localisation is not just an exercise in compliance; it promotes skills development, innovation in local manufacturing as well as job creation, and is usually coupled with other policy measures to encourage economic growth.
A high-profile local example can be found in digital terrestrial television (DTT) set top boxes: These highly publicised digital TV signal receivers for use with old analog TV sets have created jobs and training for hundreds of workers, with knock-on benefits for tens of thousands of installers, households and their local economies.
How can localisation be assured of attaining these excellent objectives?
Location, location, location
A local partner can be an important success factor for an original equipment manufacturer (OEM) entering a new market. But to woo international brands, manufacturers should offer easy access to local markets. Choose your setup location carefully!
Expect a full audit
Candidates should expect searching questions about their ability to match the historic output, manufacturing standards and quality of the outsourcing OEM. Anticipate compliance with IPC and ISO quality standards, traceability of components, and health and safety to come up as preconditions to contracts.
It’s a partnership
As with any business relationship, a manufacturing deal is about trust, commitment, transparency and communication. If anything, the degree of trust involved in sharing intellectual property with another company raises the relationship requirement to the level of a trusted partnership.
Don’t expect everything to run smoothly from day one. Potential trouble areas include sourcing – if the OEM prescribes specific sources, the manufacturer is obligated to disclose known issues with quality or availability, as this will affect its (and the customer’s) ability to deliver.
Diligence – a two-sided coin
Partnership obligations also extend to the OEM. There must be a real commitment to providing the manufacturer with a full set of manufacturing processes and procedures, including changes to these over time.
Sensitivity to change
At a high level, liaison between OEM and manufacturer ‘merely’ involves a meeting of minds; at operational level, far more frequent liaison is necessary to iron out everyday issues. OEM staff may feel aggrieved at losing manufacturing to an outsider firm, requiring sensitivity on the part of the latter.
The long haul
Typically, six months are needed to identify the ideal manufacturing/OEM partner, perform audits, hand over processes, obtain the necessary equipment and components, produce and test ‘first-offs’, and then go into mass production. On the upside, diligent preparation can form the basis of a sustainable long-term relationship.
It’s just business
In the end though, it is just business. A cost-benefit analysis at the outset will reveal if localising manufacturing is profitable. No end user will pay more for a product just because it is locally made, so any extra costs must be offset against quantifiable benefits.
The importance of brand
Over and above having an effective localisation strategy, to truly stand out from the crowd a contract manufacturer needs to build the sort of brand customers want to identify and associate with. And that involves going back to their roots and rediscovering why they’re in business.
What a manufacturer does
A contract manufacturer is essentially a service business. Its value is in offering its services to business customers that buy into its consistent delivery of products on time, within budget and to the appropriate level of quality.
But does this offer much differentiation? Many manufacturers satisfy all these conditions, essentially rendering manufacturing a commodity. As a result, manufacturers engage in price-based competition, placing immense pressure on a sector already operating on very tight margins. This tends to play into the hands of a few large competitors with deep pockets and healthy volumes.
What makes some companies, and their products or services, more desirable than others is not simply what they make or how they make their products, as in most cases there is just so much similarity out there. Instead, what makes customers buy from a brand is that brand’s reason for doing (or making) what it does. In short, according to business success guru Simon Sinek, the customer buys into the brand’s ‘why’ (www.startwithwhy.com).
Why they do it
A good manufacturer goes out of its way to deliver consistently high-quality product on time and within budget, seeking innovative solutions to ensure it meets agreed service levels, while also communicating regularly with its customers on progress and timeously alerting customers of any problems standing in the way of delivering their service.
A great manufacturer knows why they are in business. It is so that their customers can focus on meeting their business objectives without worrying about the product build, logistics and manufacturing. A great manufacturing partnership allows customers to put all their efforts and focus on understanding and servicing their markets, enhancing their products, developing new ones, and most importantly, on selling their products so that a ‘river’ of demand continues to flow through the manufacturing service business to its customer and on to the end customer, nourishing all the hands it passes through.
Rediscovering your purpose
For many, their purpose may have been lost or forgotten, and as a result needs to be re-activated or reviewed to achieve sustainability and growth. To get started on this journey of rediscovery, manufacturers need to go back to their roots.
There was an initial need which they believed they could satisfy, and that is WHY the business was started. Once that reason became clear and was agreed, all other actions, services and products were aligned to get the business going and keep it going. Perhaps your reason for being in business was no more than loosely connected with your products or services. Don’t let it stop you – it can nevertheless sit very well with customers.
In a country where unemployment is rife, manufacturing that makes a difference to citizens’ lives and our national competitiveness can drive significant brand value. Through skills upliftment and job creation programmes it can uplift a largely unskilled labour force and play an anchoring role in the community and greater society.
On a purely economic level, a manufacturing sector that discovers its social ‘why’, and operates effectively, can strengthen the country’s manufacturing value proposition, justifying government support for the industry and ultimately encouraging people to think twice before they import.
Do your customers see your vision?
Successful companies share their vision with the world, and back it up with delivery, to attract customers. The ability to share and continually reinforce the reason why you and your staff do what you do through action, rather than what or how you do it, engages customers, gains their buy-in and in so doing, over time, fuels their desire to be a part of that vision.
Whether your vision is to bring good design to business, like Invision, or to turn customers into high-performance businesses like Accenture, your customers want to see evidence of it, so corporate communications must reinforce it, performance must demonstrate it, and staff must live it.
Ultimately, manufacturers must engage and create visibility for themselves, share their ‘why’, and prove their commitment to it, in order to be successful. Say it loud, say it proud and walk the talk! Customers will follow, because they want to!
For more information contact Leratadima Tellumat Manufacturing (formerly Grand Tellumat Manufacturing), +27 (0)21 710 2400.