Our newsletter dated last February focused, among other things, on designing and developing new products in fast-track mode, and on the advantages of designing and developing innovative new products in times of turmoil and even crisis.
In this edition of our newsletter, we will cover, among other things, production offshoring to China, project management to reduce costs, and Internet links to financial assistance programs.
Is Offshoring Production to China Still A Good Deal?
Not too long ago, China was one of the most competitive and even obvious spots for relocating production of manufactured goods. However, the economic instability that has prevailed over the past 12 months has also changed the order of things. Now, businesses must cope with the major production cost increases of the last few years. In addition, with the current economic downturn, manufacturing plants have closed down, which has prompted executives to review their negotiation criteria, not to mention the Canadian dollar’s devaluation relatively to the US dollar, which the Chinese consider their reference currency. Finally, transportation costs, which multiplied last summer, now leave us perplexed as to these costs’ relative “stability”.
Is China still such a bargain? We cannot overlook certain factors that carry their weight and sometimes disfavour communications: the major difference in culture between Westerners and Asians, the very long distance, the jet lag… Unless, of course, one is ready to go on site, in which case one must take into account financial charges induced by inherent costs such as transportation and lodging, all of which sooner or later affect any product’s true production cost.
Is it better to select the particular products whose manufacturing will be offshored? Doubtlessly, one must use a lot more strategy in order to maximize container space utilization: emphasize value-added products that take up less space, or choose stackable products. Or is it safer to carry out product research and development locally and relocate only production? This could prove to be another advantage from a development turnaround time reduction standpoint, in spite of higher costs. What is the use of saving development costs if the product is unavailable for marketing? A year’s worth of lost marketing also has to show up among the costs generated by such income shortfalls…
Finally, some North American firms are thinking, if not have already thought, of repatriating their production, in whole or in part. Why? Surely do they wish to make available sooner than later what their competitors can no longer offer because they have relocated their production to Asia: shorter delivery turnarond times and, especially, the capability of renewing seasonal orders. Failing an ability to stand out through highly aggressive pricing (which has become increasingly difficult, because their competitors have offshored their production), there are also no-less-important criteria like smaller production volumes and shorter delivery turnaround times, not to forget much tighter quality control.
Project Management to Reduce Product Costs
Whatever the case may be, industrial designers can provide sound advice as well as actively search the optimal product shaping and forming processes. Furthermore, they are also in a position to suggest the most appropriate suppliers for a particular production. As part of their mandates, they are sometimes called upon to manage projects involving various contributors, from the outset of creating specifications to production implementation.
Industrial designers are often excellent project managers, for they are familiar with the various imperatives around materials processing, and they also protect their clients’ interests regarding production costs and technical feasibility, whether the context calls for large or small-scale production. Their acute sense of aesthetics and innovation allows their clients to offer products with greater added value. Finally, they ensure that the designed and developed product’s intellectual property gets protected if there is innovation.
Financial Assistance to Businesses for R&D
To help businesses get through the current recession, the Quebec government has launched various investment funds totalling $1.5 billion.
For its part, the federal government still offers the Industrial Research Assistance Program (IRAP) via the National Research Council of Canada (NRC). Through the IRAP, 75% of external consulting fees are eligible in the form of financing paid monthly as a working capital for research and development. On the other hand, under the scientific research and experimental development (SR&ED) tax credit program, it is compulsory to first justify expenses to be able to obtain thereafter an income tax credit, or a refund in cases where the firm pays no income tax.
For further information, consult all the various forms of financial assistance granted by the MDEIE and NRC. http://www.mdeie.gouv.qc.ca/index.php?id=4202
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Skerpa Design inc.