The supply reliability of OEM-businesses is often under pressure. This is obvious for a number of reasons. Firstly we learn that an OEM often attracts and finds its customers within a specific sector. As such, fluctuations apply for all customers at the same time, in terms of market or season. This affects the supply reliability.
China remains a significant factor
Over the last few months the newspapers were fairly unanimous: offshoring was one of the most important economic trends of the last decades. Lots of manufacturing went to China and India. But now many companies are bringing back their commercially critical manufacturing processes to Europe. The reasons, according to the papers, are the increasing cost of wages in countries like China and India and disappointment about the levels of quality.
It is recognised that the cost of wages in China is still relatively low, but on the rise. The Chinese currency is also becoming more expensive. In addition, companies are increasingly experiencing difficulties with logistics and the quality of the products made in China. Then the extra cost of transport no longer pays.
Menzing has observed something else.
Menzing recognises a trend that banks and journalists do not describe. For metal components in particular Menzing still sees the benefits of having these components made in China. We often see that the total production of the part can be achieved in China, for the same price as we pay for the material in Europe. This is not just because of the low cost of wages, but also because of the low price of metal on the Chinese market. We are pleased to take advantage of this, for the benefit of our customers. Quality is always a point for extra attention. Menzing rarely experiences problems with this, because it employs different quality control. It does not just inspect in-situ if a product falls within the limitations (good-bad) but observes if, within this bandwidth, there is a trend towards the boundaries of this bandwidth. This facilitates swifter action and guarantees quality.
In the newspapers we then read that the Chinese production often lands in Eastern Europe. Especially in the Czech Republic. The level of education there is high, the wages are reasonable, there is sufficient capacity and the cost of transport is acceptable. The latter is especially true. And we were aware of this at Menzing. Which is why Menzing has had an assembly facility near Prague for as long as anyone can remember, where we can manufacture very flexibly and where quality is never an issue. So the newspapers weren’t completely wrong.