Another article about the ‘return’ of manufacturing from China; this time to Britain.
Sunday Times: “Janan Leo had waited what felt like for ever to find a British shoemaker to help bring production of her ballet pumps to Britain from China.
When Leo launched her company, Cocorose London, in 2007 the savings offered by cheap Chinese labour outweighed the benefits of British production. In recent months, however, her costs have gone up about 30% because of spiralling wages and raw materials prices in the Far East and rising shipping fees.
“In the early days we had the bags for our shoes made in London, but it was far too expensive so we sent everything offshore,” said Leo, 32, who had sales of £1m last year. “Now the cost advantages are less clear-cut.”
In 2011 she approached a family-owned factory in Northamptonshire, near the headquarters of the renowned Church’s and Loake shoe brands, to make a new range of pumps.
At first, the supplier was unsure. “They were worried about sourcing materials and the cost of the equipment needed just to make the samples. These aren’t problems I’ve ever had in China.”
The deal went ahead and Cocorose’s second luxury collection is now on sale. “British manufacturing is still not as cheap as in the Far East but the upsides more than offset the costs. Customers in Japan and South Korea are going mad for the British heritage [and] the quality is outstanding.”
It started as a trickle, but now a steady stream of small firms are bringing some or all of their manufacturing home as the gap between Chinese and domestic production costs narrows. Chinese pay has doubled over the past decade.
Small firms are also finding that supply chains stretching from Beijing to Britain are vulnerable to disruption. More than a fifth said cashflow complications from delayed orders had hurt their businesses, according to research by EEF, the manufacturers’ group.
“Companies in sectors as diverse as clothing, components and computer equipment are all weighing up whether to bring production back home,” said Simon Nicholson, an international trade adviser at Barclays. “It’s driven by cost and delivery, but firms are also catching on to the idea of Britain as a brand with real cachet in foreign markets.”
Yet factories here may be ill- equipped to meet this growing demand. “British firms have been quietly starting to bring contracts back home since about 2009, but it is taking time for them to find the right suppliers, and for producers to buy the plant and machinery needed,” said Lee Hopley, chief economist at the EEF.
Andy Loveland’s business, Earlyrider, has used a Chinese manufacturer to make its wooden Balance Bikes for small children since its launch in 2006. But Oxfordshire-based Loveland, 41, wanted a British company to make his latest product, a toddlers’ ride-on toy called the Spherovelo.
“We needed to work closely with an industrial designer and to control production because the Spherovelo is completely original — and, unlike our Balance Bikes, labour would be only 15% of overall production costs.”
Loveland’s experience with Inject Plastics, the Plymouth factory he commissioned to make the tools and produce the Spherovelo, was mixed. “The tooling was supposed to take three months, but in the end it was seven. It meant we had to let down a key customer, which was devastating.”
Inject went into administration but in December it was bought by Magmatic, the business behind the Trunki ride-on suitcase for children. Rob Law, Trunki’s founder, had moved production from China to the factory seven months earlier.
He said: “It was a long-held ambition to manufacture in Britain — for ourselves and other companies, such as Spherovelo — and shipping was going through the roof.” Magmatic’s door-to-door transport costs rose 58% in the first five months of 2012.
Since the move to Britain, Trunki’s lead times have shrunk from 120 days to 30. As a result, the firm holds less stock, and pressure on cashflow has been eased. “Best of all, we saved jobs and created new ones,” said Law.
Andrew Cock has also opted to take manufacturing into his own hands. In May his £30m-turnover company, Multipanel UK, will open a factory near Dover making panels for road signs and shop fascias. The £5m facility will use Taiwanese machinery and British recycled plastic to make about 60% of the firm’s output. The rest will continue to be made in China for sale to Asian customers.
“We took the decision a couple of years ago when Chinese costs started rising,” said Cock, 51, who reckons that labour has increased 30% over 18 months, while raw materials are up about 15% after currency movements are included.
“It’s not just a financial decision, it’s about quality too,” added Exeter-based Cock. “We want to win business by making the best product at the least cost. We also think that cutting our products’ carbon footprint will open the door to big corporate customers with a corporate social responsibility agenda.”
Multipanel’s investment has so far been funded from cashflow, but not all manufacturers in loan-starved Britain have access to expansion capital.
“We are working with lots of producers that have downsized during the recession but are now being asked to make small, high-quality batches,” said David Wright of Growth Accelerator, a government-backed advisory service. “They have the skills to adapt to new jobs but they lack the cash to scale up.””
via The slow boat back from China | The Sunday Times.
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