Companies should focus on manufacturing footprint, established supply chain systems, and other factors when regionalizing.

By Hooi Tan, President, Global Operations and Supply Chain, Flextronics

Global manufacturers are increasingly turning to regionalization to improve supply chain and production resilience and speed time to market. At the same time, manufacturers are reaping other new business and environmental benefits by moving some of their operations closer to the markets they serve. A recent example is Flextronics customer Enphase Energy, which recently announced that its first microinverters for solar systems have been shipped from Flextronics’ facility in Timisoara, Romania. This strategic decision enables Enphes Energy to reduce delivery times to European customers.

This is not an exception, and regionalization has become a common trend nowadays. According to a McKinsey 2022 survey of 113 global supply chain leaders, 44 percent of respondents said they expanded their regional supply networks in the past year, up from 25 percent the year before.

However, successful regionalization requires careful planning and a clear understanding of the four prerequisites:

Footprint/Capacity: Existing manufacturing ecosystems and facilities within the region

Supply chain: The process of purchasing materials and transporting products

Technology: Advanced manufacturing technology and technical expertise available in the region

Talent: Labor required to support the operations of manufacturing nodes in the region

Footprint/capacity

First, the company must assess whether it owns a factory in the region and whether it currently has the capacity to support moving some of its operations to a location. For example, a company may already have a factory in North America that specializes in a particular product line. In addition to space considerations for adding plant production lines, leadership must determine whether the plant is equipped with the machinery and resources to support the product lines they plan to move back.

If the existing space is insufficient, or if the company does not have any factories in the area, it must balance the cost of building additional facilities against the benefits of regionalizing the layout. In some cases, it may be more cost-effective to find a production partner in the region with the ability to support subcontracted line operations.

Supply chain

For companies considering regionalization, part of the cost/benefit analysis is also understanding how a relocating manufacturing base will interact with other parts of the value chain. Will it be easier or more difficult to get raw materials? Once the product is manufactured, would it be faster, more reliable or more sustainable to fulfill the order and get it into the customer’s hands? A strong network of suppliers in the region that is transparent, collaborative and responsive is essential.

technology

The adoption of advanced manufacturing technologies such as automation, simulation, additive manufacturing and digitization can effectively improve the efficiency of manufacturing processes. At the same time, these technologies can also save space and materials from a footprint/capacity perspective. For example, a company can invest in a multifunctional device, or rely on digital twins and simulations, without the need to build a physical prototype.

Person with ability

Of course, it’s hard for a company to simply build a plant and add equipment there without a staffing plan. Without dedicated staff to run it, the whole project would fall apart. Therefore, companies can’t just look at the number of people when hiring, but also need to consider the expertise and talent available in the region.

If companies are equipped with advanced manufacturing capabilities in regional manufacturing bases, they will need a workforce with the technical expertise to keep operations running smoothly. Flextronics has implemented a capability acceleration program to train employees around the world in a wide range of knowledge and skills, including automation, future stage modeling simulation, extended reality, and more. At our factory in Althoven, Austria, we have established an “iot Academy” and work with universities to train employees in skills.

Regionalized layout is a multidimensional equation

Regionalization is a strategy that benefits many companies and promises to improve their resilience, efficiency and even sustainability. Thinking about regionalization in terms of my four preconditions – footprint/capacity, supply chain, technology, and talent – ensures that companies reap the full benefits of their relocating efforts.

Guanghui Chen is President of Global Operations and Supply Chain at Flextronics.