Insights

Far East outsourcing

In order to remain competitive in both the national and global marketplace, increasing numbers of businesses are outsourcing their manufacturing to the Far East, particularly those companies with no in-house manufacturing capability. While this is proving successful for the manufacture of mass produced, run of the mill products, this strategy can lead to unacceptable compromise when it comes to innovative, small-run products where quality, attention to detail and design integrity are important. PDD, one of the world's leading product innovation consultancies has been helping its clients through this potential minefield for several years, and believes that it is possible to combine innovation with low cost manufacture – if you know how to ask the right questions.

PDD was drawn into the realm of Far East outsourcing by its clients. "We've always been known for taking innovation into manufacture, so naturally we must respond to our clients' commercial pressures at every stage of the product development process," explains Graham Lacy, Development Director at PDD. "When it comes to manufacturing, this increasingly means looking for cost cutting wherever possible. Our search for competitive outsourced manufacturing has, over time, taken us to China, Hong Kong, Taiwan, Malaysia, Korea, and Singapore. This has helped us to develop a good understanding of the potential pitfalls and also to discover the fantastic opportunities."

Many UK companies are drawn to local agents in the Far East who specialise in outsourced manufacture, but this can prove less than ideal if the product being manufactured is anything other than standard. "Innovative products often require innovative manufacturing techniques – that's why it's generally difficult to have them made cost effectively," says Lacy. "It is hard enough to get the results you want when dealing directly with the chosen manufacturer, suppliers or toolmaker. Using an agent adds other link to the chain – and another opportunity for a design to become diluted and standardised."

PDD has tackled this issue head on, in order to be able to offer its clients the same level of innovation and design integrity with all the cost benefits of Far East outsourcing. What began as a service sourcing suppliers abroad is now a complete turnkey solution where clients enjoy a seamless design to manufacture process, project managed by PDD.

Stephen Lau, Senior Project and Production Manager at PDD: "Local knowledge goes a long way in this situation," he says. "Manufacturing centres in places like Malaysia, Korea and Hong Kong are set up to mass-produce millions of identical products. Finding suppliers and manufacturers that are prepared to explore different techniques and also accept what for them are laughably small product runs takes a lot of face-to-face negotiation and a real understanding of what motivates different people."

Bringing products successfully to market in this way is a logistical challenge that Lau and his team relish. During one project recently, PDD designed a product for internal use by a client company – not a product manufacturer at all, but a service company with no in-house manufacturing capability of its own. The product had never been made before and, since it was not for retail, costs had to be kept as low as possible. "There was no benchmark for its manufacture," explains Lacy. "This product had 50 components and we had to source several suppliers of different raw materials. After that, we established the tooling and mould making and then found a manufacturer that was willing to use our suppliers – turning their back on their usual supply chain. For this project we brought together five different suppliers and managed to get them to agree to price and a feasible delivery schedule. All in the Far East."

These days, PDD has over a dozen clients manufacturing their products in the Far East. Lau and his team have access to a complete range of suppliers at every level, including one set up for high-volume manufacture if required. "We have witnessed a complete attitude shift in these suppliers," says Lau. "Although they had never had to embrace innovation before, they can now see the value and integrity of what our designs are trying to achieve. They have learned to be flexible and adaptable in their production techniques, and find this a useful service for their other clients too."

For Lacy, the real challenge is retaining his clients' product manufacturing and innovation credentials. "Through the pressure of having to cut costs, many European companies are turning their back on developing and designing their own products, in favour of buying and repackaging products from overseas. This makes them little more than distributors, and certainly not product manufacturers. That business model quickly falters since the overseas manufacturer will simply start dealing with the retailers directly. Our service enables our clients to retain the essential elements of invention and innovation, the intellectual property that will keep them in profitable business for years to come."

www.pdd.co.uk

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