There are a range of influences on the manufacturing industry due to the effects of globalization. All global manufacturers, their supply chains and even end-users are impacted by free trade agreements, environmental issues and the demands of responsible sourcing. Let’s delve into three ways that manufacturing industries are being influenced by these factors and how the best global companies are responding to them.
No. 1 - Free Trade Agreements
Free Trade Agreements such, as the CHAFTA legislation between China and Australia, help to create equal and open access to markets for the consumers in participating nations. Such agreements are also meant to benefit all countries involved by creating greater economic opportunities for manufacturers, exporters and material suppliers.
With CHAFTA, the advantages to both parties are clear. Australia is rich in agricultural products and strategic raw materials like iron, nickel and coal — all valuable to China’s industrial infrastructure. On the other hand, China supplies Australia with value-added goods like electronics, machinery and clothing. If a trade partnership goes smoothly like this one has, it’s a great deal for everyone.
But this isn’t always the case and trade partnerships can fall apart quickly and dramatically. This in turn makes life hard for manufacturers in the affected areas, especially when competing against international counterparts who might face better business conditions.
When trade deals are intimately linked to larger political and economic trends it can be hard for global businesses to adapt. This is especially true when a company has no control over the market forces that bring about fluctuations in things like currency exchange rates, import/export duties or energy costs.
A global manufacturer that wants to remain competitive must therefore adhere to a few core strategic principles. These should be centered on offering high-quality products and services, reliable delivery times and low overhead. These factors are valued by product designers, sourcing managers and industrial engineers the world over, and allow for long-term stability in a global marketplace despite temporary and localized economic trends.
No. 2 - Environmental Impacts
As with free trade agreements, international treaties have been drawn up to join nations together to address pollution, resource depletion and climate change.
The best global companies don’t see environmental protection as a regulatory burden. Rather, they use this as an opportunity to continuously improve their processes. This might involve any of the following:
- Upgrading machinery and equipment whenever possible to be more efficient while making a smaller carbon footprint
- Streamlining procedures to reduce waste and unnecessary or repetitive work
- Recycling, re-using or upcycling to keep raw materials out of the waste stream
- Partnering with independent, third-party certification bodies like ISO to document and maintain high standards for health, safety and environmental controls
- Replacing hazardous or non-biodegradable supplies with ‘green’ alternatives
Companies around the world are facing continued pressures to adopt environmentally-responsible practices to meet global agreements. These measures can provide manufacturing companies with a strategic advantage over many competitors who do not institute best practices, by providing assurances to clients that they’re working with a reputable manufacturing partner.
No. 3 - Responsible Sourcing
Raw materials are routinely sourced from, and shipped to, many places across the globe. As the supply chain extends across continents, it can be difficult to know exactly where the material originated from and whether it meets all international standards for compliance with environmental regulations and honest trade practices. How can a responsible global manufacturer help to ensure the integrity of the resources they consume?
It’s important that manufacturers use reputable material suppliers that are fully certified and these certifications should be confirmed with the local or national government. Manufacturers should refrain from purchasing “cheap” materials, non-branded stock or leftover materials from a reseller, all of which may come from unverifiable sources or which lack a proper chain of custody.
Manufacturers should implement rigorous in-house testing and verification procedures for all incoming raw material. By making this practice a standard, manufacturers can ensure that raw materials are exactly up to specification — an essential part of ensuring high-quality production.
This practice also identifies the presence of banned substances like lead or cadmium, which must be monitored according to the RoHS regulations of the European Union for example. It also alerts manufacturers to suppliers who provide fake, mislabelled or even illegal material.
Manufacturers must always report suppliers who don’t pass testing and verification measures as this helps to create a more robust and reliable supply chain that benefits everyone. After all, responsible global manufacturing also implies being a good global citizen.
The Benefits of Globalization in Manufacturing
Globalization continues to make possible the worldwide exchange of new technologies, finished goods and even new ideas. But along with these opportunities come unique challenges. Those companies that want to take full advantage of the expansion of global trade must also be flexible, rapid to respond to changing conditions, and above all must demonstrate a commitment to providing world-class service and support. Those are universal values that will always be sought after in a global marketplace.
Gordon Styles is founder and president of Star Rapid.