One of the major questions which lies in front of every entrepreneur is how to set up his own manufacturing unit, or to put it simply what are the factors he should consider while making this decision.There are certain parameters which should be the basis for this judgement:
1. Sourcing: Where does he source the raw material from? Try and locate it in such a way that the raw material reaches your warehouse in the shortest possible lead time.
2. Labour: Perhaps one of the biggest, if not the biggest parameter for selecting the location. Select the location in such a way that there is no shortage of it.
3. Delivery time: How soon can you deliver your client the goods? Can you minimize it further? Certain countries like Egypt have advantages in this regard owing to their geographical location.
4. Prevalent Laws: Do analyse this factor! Are labour laws in that country industry friendly and what are the restrictions like ?
5. Duty-free : The “heaven on Earth” for industrialists. There are certain countries which enable investors to operate without paying a single cent in taxes and also certain like Egypt, Bangladesh, Kenya which have duty free access to US market. Furthermore, few countries also offer incentives to exporters for exporting goods beyond a certain value.
However there has been a paradigm shift especially with the emergence of China as the sourcing hub of the world. No matter what you buy, you source it from China or other south-east Asian countries. So what it leads to is that the focus shifts just to labour costs, as it is this cost alone which will decide the fate of the industry. The manufacturing sector originally existed in US, UK and other EU countries, but with rising costs, it first shifted to Japan, then to Latin american countries , middle-east and south east Asian countries like China, India, Pakistan, Vietnam, Bangladesh, Cambodia, Thailand, Indonesia and others.But there is another major shift underway- the emergence of these south east Asian countries as markets: there is absolutely little doubt that the manufacturing costs will rise and rather than being production bases they will tend to prosper as consumer driven entities.India and China are already moving in that direction and others will soon follow suit.
So where will the manufacturing base of the future be? It will be Africa! If the early part of the 21st century has been dubbed as India & China ‘s century, there should be little doubt the later part will belong to Africa. It remains the only unexplored territory with tremendous natural resources and indigenous human talent, it is only a matter of time before it makes its presence felt. In fact Coca-cola’s goal to increase its manual distribution network in Africa in the next 3 years and Indian telecom major Airtel’s acquisition of Zain telecom are clear pointers in the same direction.So whenever you plan for “setting it up”, do analyse keeping all the factors in mind !
Food for thought: Would you setup your unit in Africa ? If yes, which countries will you prefer ?