Localizing production in China and India

While in the 1980s just a few pioneering German companies waged the step of setting up production facilities in China, today almost all important players in key German industries have plants in China or India. Automobile manufacturers and suppliers alone have now built nearly 200 production sites.

Whereas a decade ago, the local-content rules of the respective governments in the area were the pivotal factor in localization decisions, today it is the proximity to a market of billions that leads Western companies to China or India and results in further expansion of production capacities.

However, localization as a means of globalization can be accomplished successfully only when taking into account several key factors:

First and foremost is the development of a clearly formulated China/India production strategy. In the past, this was quite often defined as a pure cost-reduction strategy, which in many cases moreover failed to achieve the desired savings objectives.

Instead, decisions on future production structures must be made at the local level in much stronger reliance on site-based planning for regional market penetration and customer supply. It is becoming increasingly critical for companies to create their own value-added structures as a source for the import of components and products on the German or European market, particularly when existing global production capacities and the trend in wage structures are taken into account.

Another central issue is that companies must weigh the creation of their own structures against the entering into of a local partnership.

After addressing this strategic issue, the groundwork for operational establishment and the ramp-up of production structures needs to be laid at the local level by professionals . Particularly with respect to location search, the choice of legal form, personnel search, property purchase, or building planning and construction, an experienced local expert should be retained.

Together with its partner company, China Management Network (CMN), ROI Management Consultants offers you comprehensive, holistic support on all strategic and operational issues relating to successful localization of production in China or India.

You can find an overview of our entire spectrum of services in this area under Lean Production.