Tags labeled "Made in Taiwan” or “Made in China” can be found on everything from t-shirts to computer components. In fact, manufacturing and sourcing products locally is becoming increasingly rarer. Costs, locations, market targets, viable infrastructure, and outright availability are becoming bigger and bigger roadblocks in trying to manufacture locally.
In the security industry, like in all industries, there are several key factors that contribute to where companies decide to manufacture, such as the local infrastructure, availability of inexpensive but skilled workers, local government regulations, and ability to find a suitable site to build a factory.
General feelings in the security industry are that the industry is still developing for local manufacturing. According to Scott Lindley, President of Farpointe Data, it is because security typically enjoys longer product lifecycles which better lends itself to off shoring.
Why Manufacture Locally
Certain product types, such as heavy, mechanical products, make good candidates for local production, as they could be more difficult and expensive to export. Products with high import duty and/or tax are also good candidates, pointed out Per Ädelroth, VP of Operations at
Axis Communications.
Local manufacturing also provides more flexibility when it comes to transport and delivery of products. “When we can find cost effective alternatives with local supply chains, we prefer local manufacturing, due to shorter and reliable lead times as well as environmental aspects,” Ädelroth explained. “Moving production of components closer to the user’s market is part of Axis’ efforts to diversify its supplier base in order to further increase flexibility and delivery reliability, as well as to decrease environmental impact from transports. We strongly believe this will be an important part of our manufacturing and final configuration strategy going forward.”
As part of this strategy, Axis has increased their focus on local manufacturing in Mexico for its customers in North America, and in Eastern Europe for European customers during the last few years. “We also offer ‘Assembled in America’ products in the U.S.,” Ädelroth said. Currently, Axis collaborates with six contract manufacturers in China, Mexico, Poland, Thailand, and South Korea to produce printed circuit boards and assemble complete products. The company now has more than 100 strategic component suppliers around the world.
Providing Cost-Effective Quality
Cost and product quality are two very important considerations when looking at manufacturing location. “The primary decision to undertake local manufacturing is cost,” said Greg Hamm, VP of Sales and Marketing at
Delta Scientific.
While cost is obviously a primary concern, quality and reliability should still be of utmost importance. “Buyers need to look for companies that build their components ‘in-house’ rather than outsourcing,” Hamm explained. “They should be more critical of companies that are based in one country, yet outsource to another. In these cases, the project can suffer from improper product certifications or other issues.”
Certain characteristics can help ensure that the best supplier is being chosen in order to produce the highest quality product. “Suppliers are based on criteria including capacity, cost efficiency, geography, work conditions, and environmental responsibility. As product designs are finalized, companies should engage in a dialogue with component suppliers to gear up production, securing access to a structured, cost-efficient, and flexible production of high quality parts,” Ädelroth explained. “Continuous dialogue with suppliers helps build loyal partnerships, and in the end, allows for a reliable production planning that secures higher quality production volumes.”
Ädelroth further highlighted that control of the step-by-step manufacturing procedures are critical in producing quality products. This is how Axis maintains their quality while outsourcing — by remaining in control over the assembly and quality control tests. “We select and qualify the component suppliers and their processes, we dictate how the products should be assembled and tested by the contract manufacturer, we provide the assembly equipment and fixtures, the test equipment, and we can access the test results remotely,” he said.
To Go Local Or Not
Despite the benefits, challenges such as cost and taxes still hold companies back from manufacturing locally. “Corporate taxes will most likely continue to be the biggest hindrance,” Hamm said.
Government regulations in certain countries also act as obstacles; many countries have regulations that prevent or make more difficult the entering of foreign companies to their country. On the other hand, some countries may provide local benefits to manufacturers or tax benefits in order to increase manufacturing in their country.
Regardless of where manufacturing takes place, maintaining quality products should outweigh production location. And, ultimately, whether local manufacturing is chosen will depend on each individual company’s market strategy.