Why are we still manufacturing in Asia?
For decades it was a foregone conclusion: European brands manufacture their products in Asia, then transport them to Europe to sell them here. That construction has felt uncomfortable for some time from a climate point of view. And now that the costs of international transport are skyrocketing, you may wonder whether the entire construction is still sustainable. We don't think so.
You can manufacture cheaply in Asia. For the production of a pair of jeans you pay a maximum of ten euros. Such attractive rates also apply to other clothing, household goods, toys, electronics and so on. Even with the extra costs for worldwide transport added, the low costs do not outweigh the production in Europe. Until today. Because due to corona, the costs for sea transport are skyrocketing. You can easily pay seven times as much as before. Where a sea container from Shanghai to Rotterdam previously cost about €1.700, you had already lost €2021 in August 12.000. And prices continue to rise.
In addition to being cheap, production in Asia is also very easy. You can do business with only one party that organizes everything for you. The purchase of all raw materials, the required labor force, the design, manufacture, packaging, transport: everything is taken care of. If you want to organize the production elsewhere, you will have to organize it all yourself. Something you didn't just arrange.
Do you want to move production?
Nevertheless, many brands are currently looking into moving production to Europe. Because in addition to the increased transport costs, there are more arguments to be made, such as social responsibility and sustainability. To start with the latter: consumers are already very aware of the climate impact of their purchases. In that respect it is strange that we choose to manufacture our products on the other side of the globe and transport them all the way here. And then there are those stories about sweatshops where far too long working days are made, under inhumane conditions. You don't want such exploitation on your conscience. Your brand will be rid of this risk in one fell swoop if you move production to Europe, where working conditions are protected by law.
Where the input of parcels is normally fully automatically sorted via sorting machines into, for example, 63 regions and directions, this is impossible with the expected large volumes. It takes creative thinking to make an automated process scalable. Smart minds may find smarter solutions, but the most logical solution so far is dividing the process into several parts. first all input manually sort to four directions, and then sort those again manually. That keeps it manageable, but also makes it more laborious. The current busyness is forcing chaos and inefficient processes. Something that package deliverers absolutely shudder at, but do everything they can to prevent.
Less emissions, more parties
If you bring production here, the supply chain in particular becomes more complex. Everything happens on a smaller scale, such as the production of raw materials. That is why it is best to work with multiple suppliers and transporters to obtain sufficient material and to spread the risk. And you have to monitor their production closely, so that you can respond in time to fluctuations in supply, which can quickly lead to price increases. Ideally, you look for suppliers close by, so that the costs and CO2 footprint of the transport remain minimal. And it is even better if you are also close to your customer, so that you can even deliver locally.
Crux: managing complexity
Production of raw materials, production capacity, it is all organized on a smaller scale and more fragmented here. You therefore have to deal with many more parties, who depend on each other and have to work closely together. Managing that complexity, that is the challenge of producing in Europe. This is new to many, and may prevent them from moving production. I have good news for them, because it is precisely in this area that the Dutch are experts. Proven technology is available to help you manage supply chains. So that you have continuous control and you are never faced with surprises. My advice: do your research. You will be amazed at the ready-made options.
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