Pages Navigation Menu

Manufacturing and Outsourcing in Asia

Manufacturing and Outsourcing in Asia

If you try to talk about Asia and manufacturing in the same sentence, you’re likely to get a lot grumbles about product quality and the price the United States is paying for moving blue collar jobs to Asia-Pacific. Specifically, you’ll hear complaints about China being a major destination for companies looking to manufacture. Yet it’s South East Asia that’s actually seeing an increase in outsourcing.

The Shift to South East Asia

China stands out as the obvious choice for businesses that are looking to outsource their manufacturing processes. However, once risks and outcomes are weighed next to the business model’s end goals, it’s clear that Indonesia, Malaysia, and points further east are more viable locations. The huge economy of China, expensive labor costs, and low talent pool are all factors in driving away outsourcing. Technical staff is in high demand but can’t be found. Expenses are on the rise on its developed coast, where most manufacturing takes place. Manufacturing wages are increasing in China and companies are facing profitability concerns, which has them looking east for a solution.

In Vietnam and Indonesia, labor costs are much more inexpensive than in China, but laws regarding intellectual property are stricter and enforced often. Compliance and ethical manufacturing practices have also prompted business to establish outsourcing bases in the east. Boeing and Apple both have manufacturing plants in South East Asia and are major players in the economy. Boeing has more than twenty projects based in Vietnam alone. Supply chain issues have also prompted companies to move outsourcing from China, further south.

Manufacturing Transportation Routes

Another big savings for companies moving outsourcing to South East Asia are shipping costs. Shipping from South East Asia is exponentially cheaper than shipping to and from China. To really make an impact in the manufacturing sector, South East Asian countries must make changes to infrastructure, especially roads and shipping routes. Over a billion-dollar investment in Myanmar has led to a plan to support and improve infrastructure. Decreasing exports fees and tariffs will also increase outsourcing that’s based in South East Asia.

Singapore remains one country willing to take steps to ensure its inclusion in the manufacturing and outsourcing boom. Projects supporting energy reserves and oil and gas centers are ongoing, as are plans to build a storage center for its hydrocarbon sector. When critics used Singapore’s lack of space as a reason to stop manufacturing in the country, government officials took notes and made steps to mitigate concerns.

The rapidly growing economy of South East Asia is producing a boon for companies looking to outsource manufacturing processes. By becoming the world’s workshop, South East Asian companies will see an increase in economy and the quality of life for citizens. As the flow of available labor continues to decrease in China and costs continue to rise, the trend of moving manufacturing to South East Asia is likely to continue, especially as those countries improve their own infrastructure.

 

Reference

http://www.economist.com/node/8515811

http://www.ainonline.com/aviation-news/singapore-air-show/2012-02-10/southeast-asia-manufacturing-boeing-aircraft-booms

http://www.thehindubusinessline.com/opinion/the-emerging-asean-hotspot-for-india/article5254484.ece?homepage=true

http://www.rigzone.com/news/oil_gas/a/128745/Singapore_Adds_Infrastructure_to_Remain_Major_Asian_Energy_Hub/?pgNum=4

404