Client Company
An international manufacturer of automotive components with factories in China and primary sales operations in the United States and the European Union.
Objective
To identify a location for manufacturing in Southeast Asia able to provide sustained operational savings over a 15 year time horizon without compromising product quality.
Current Status
Company entered China in 2003 and has factories established in three 1st or 2nd tier cities, supported by a deep network of suppliers. Company has identified Thailand, Vietnam, and Cambodia as candidates for a relocation.
Key Challenges: Company lacks on-the-ground resources to identify and compare locations for manufacturing. Company is particularly concerned that a wrong decision could compromise its current supply chain setup.
Solution
Company engages BZ•IN•TL to evaluate its top options for relocation. BZ•IN•TL employed its Multi-Country Benchmarking Methodology to compare each market with the following findings:
1. Cambodia provides the lowest costs for the client and is likely to present the least regulatory risk to start. Supplier network and quality of local labor force are shown to present significant constraints on the client’s ability to retain product quality control over the long term.
2. Thailand possesses the most developed manufacturing supply chain for the automotive industry, BZ•IN•TL found that costs in Thailand are likely to limit the client’s time horizon in market by nearly 50%.
3. Vietnam’s cost trade offs result in a slightly shorter timeframe than required in specific locations but BZ•IN•TL notes that the less developed central region of the country provides opportunities for further cost reduction.
Conclusion
In the end, client company was drawn to Cambodia and discussed the idea of relocation with a number of its key suppliers China. Many of these suppliers were not ready to make the move. As a result, Company was forced to forge new partnerships with companies operating in Cambodia.