Monday, May 28, 2018

Say YES to local manufacturing

How to reshore the manufacturing of your LED lighting products cost-efficiently – 5 tips 

In March, we participated in the Light + Building 2018 exhibition where we talked to hundreds of international lightning experts. A poll we did at the exhibition revealed that, depending on the region and country, 83 per cent of all LED lighting products are manufactured in China, on average. In some countries, almost all LED lighting products on the market are imported from China.

However, importing LED lighting products from cheap labor countries is in many ways problematic and causes trouble for retailers. The orders transported from China take a long time to reach their destination, meaning the seller can’t react to changes in demand flexibly. 

The LED lighting products in the containers of ocean liners tie up capital for weeks, or sometimes even months. The risks related to the delivery chain and logistics grow when products are manufactured far from the end users. The products are often lacking in quality, as well.  

The labor costs in cheap labor countries, such as China, have increased year by year. Technological progress enables us to return the manufacturing closer to our customers in a profitable way.

I also discussed this with Chinese guests at the exhibition, and I’d estimate that they are also interested in moving their own factories to Europe and the United States to be closer to the customers.  

How should you go about reshoring the manufacturing of LED lighting products?

Our ANT Plant Microfactory concept is an easy solution for returning the manufacturing of LED lighting products close to the customers. Here’s what you should remember when considering an investment in a Microfactory: 

1) Make a realistic cost calculation and compare alternatives

“Well planned is half done” – this also applies to beginning the manufacturing of LED lighting products. It’s important to make a realistic calculation of how much importing the products costs the retailer, all expenses included. The calculation must include indirect costs, such as funding, logistics, complaints, customs duties, taxes and insurance costs. When you total up all costs, you can realistically compare them to the potential alternative: the ANT Plant Microfactory that enables you to manufacture LED lighting products locally and profitably.  

2) Conduct a market survey and ensure you have the market for your LED lighting products

Next, you should make a detailed market survey. According to our research, people are ready to pay 10–20 per cent more for local, high-quality and well-branded products. In addition, the market potential of these products is better. 

3) Learn about subsidies for local production

In many countries, the local government offers subsidies to investments aiming for local production because the production provides employment and tax income. You should find out which subsidies are available as early as possible.

4) Calculate the repayment period and make the decision 

When the cost calculation and market survey show that the Microfactory investment will pay itself back in less than a year, the investment can be considered risk-free. In the lighting business, consumers’ requirements change rapidly. The service agreement of the ANT Plant ensures that you won’t be left alone with the Microfactory. The ANT Plant concept is a partnership. The functions of the Microfactory can be adjusted according to the changing needs, and the hubs of the ANT Plant concept will ensure that the end-product materials are delivered to the Microfactory on time. 

5) Recruit employees to look after the Microfactory and we’ll take care of the rest

The automatic ANT Plant only needs minimal staff. That’s because the LED tubes produced at an ANT Plant are automatically assembled, tested, labeled, and packaged. Your staff can focus on marketing and selling your LED lighting product and managing your company. The ANT Plant Service Center takes care of orienting employees, remotely updates and optimizes production, offers online support, and, when necessary, provides on-site support.

In summary, if you have a sufficiently broad market for the end product, investing in an automatic ANT Plant Microfactory is worth it.

Thursday, March 1, 2018

Say YES to local manufacturing:

Tax reform boosting the rise of microfactories 

It is with great interest that I’ve been following the reforms being implemented in the US for reshoring manufacturing. Many positive steps have been taken, although we probably won’t see the overall results until sometime in the near future. With the tax change, implemented as the latest significant reform, domestic manufacturing is now more profitable and cost-efficient than ever before.

The reform allows for investments to be written off in taxes for the same year. This makes it possible to generate significantly better profits from business activities after the first year of operation.
From a total cost of ownership (TCO) perspective, it makes more sense to manufacture commodities for the market locally in automated microfactories than manually in countries with cheap labor. 

With that in mind, our ANT Plant microfactory
concept is a brilliant solution for manufacturing LED lights domestically, efficiently near the end users. By bringing manufacturing back to your home country you’ll also support local employment, as even an automated production line requires people to operate. You can read more about this topic in my previous blog entry where I write: “How can robots take our manufacturing jobs if those jobs aren’t in our country?” 
The sooner you make the investment decision, the sooner you’ll get to enjoy the profits from your investment.

The tax reform is great news for the manufacturing industry

In December, the US Senate and House of Representatives approved President Trump’s historic tax reform, the goal of which is to boost economic growth and create jobs. The reform creates a strong incentive for investments and encourages reshoring manufacturing from countries with cheap labor, bringing it close to the consumers. The tax reform involves a model that is different from before, in that it allows companies to deduct investments immediately from their taxes for the same year. This encourages both domestic and foreign companies to invest in the US. The manufacturing industry welcomes the long-awaited tax reform with open arms. 

The reform speeds up automation and robotization in the manufacturing industry, which is a step toward the next manufacturing revolution in which robots and automation enable companies to improve their competitiveness and people’s well-being as robots take care of repetitive, boring and dangerous jobs for people. Automation changes the kind of skill set that workers are required to have, but it doesn’t take jobs away.

Be involved in creating a new era of advanced manufacturing

Thanks to its modular structure, the ANT Plant microfactory has a short lead time. Additionally, the factory is built and commissioned in the customer’s premises within a week, enabling you to get your production running soon after the investment decision. In the following years you’ll get to collect the profits from the automatic ANT Plant microfactory, as depreciations won’t have to be stretched over several years.

By investing in a fully automated turnkey ANT Plant microfactory, you can be involved in creating a new era of advanced manufacturing – you’ll operate locally near the consumers, have flexibility to adjust to demand, utilize the latest technology for the common good and increase your profitability in a sustainable manner.

The ANT Plant is not just a manufacturing plant, however. It’s a new kind of service concept that also makes it easy for you to manufacture LED lights domestically. Say YES to local LED light manufacturing, make the investment decision this year and take advantage of the possibilities of the new tax reform.

Wednesday, November 22, 2017

Say YES to local manufacturing

The robotized microfactory is key to bringing jobs back from overseas and boosting productivity

I was driving my car one day and listening to a chat show on the radio: two Finnish politicians were discussing how to pump more productivity into Finland’s economy. One interesting but incoherent suggestion was to impose “robot taxes” on companies that use automation to replace human workers in manufacturing. The on part of the idea was that companies using robots would lose their cost advantage, so that robots can’t take all the jobs away from people. The most famous spokesperson for such a tax on robots is Bill Gates, who stated that the funds from it should go toward training those who have lost their job because of robotics.

Interesting views, but robot taxes are a minefield, and we need to be careful. If automation creates an opportunity to compete locally against imports from countries with lower labor costs, why destroy that advantage right away by sacrificing it to the tax man? I’m not against the taxes. We need them to keep our societies running. Just need to be carefully when planning new taxes. Besides, mass production has been offshored or sent overseas to “low-cost countries” since the early 1990s or before. How can robots take our manufacturing jobs if those jobs aren’t in our country? For example, nowadays LED tubes of Western brands are made mainly in cheap-production countries.

I think that, rather than pile on the taxes, we need to support new investments, to draw manufacturing closer to the end users. An additional tax for robotics doesn't help very much with our efforts to prioritize local manufacturing and support companies’ efforts to nearshore. This is what President Trump is doing in his country: he is reducing taxes on companies, in attempts to bring manufacturing back to the USA.

Success in this isn’t about building huge factories. It’s a matter of creating flexible and well‑modularized, fully automated, intelligent microfactories that can serve the surrounding region.

Fully automated production with the latest robot technology still improves local well-being throughout the region.

Even if operations are 100% automated, they always provide people with work – for instance, to support the manufacturing and handle human–robot collaboration. While a fully automated and intelligent microfactory doesn’t need people to assemble or package the products, someone still has to do other specialist work. As ManpowerGroup puts it, this is a matter of transforming jobs, not eliminating them. The company’s chairman and CEO, Jonas Prising, says, “Digitalization is transforming the job market, creating a need for people withmore advanced skills in manufacturing.” Technological advances in tools for engineering already make it necessary to have a college degree in many types of manufacturing jobs. This development brings new possibilities for millions of workers with skills inadvanced machinery in the near future.

This doesn’t mean that you need to be a manufacturing specialist to run the factory, though. All you need is a market for the end product – the rest you can arrange to receive as a service. The surprising result is that at the end of the day you have a high‑quality yet cost-competitive product in your hand that truly was produced locally. No shipping costs, no human error, and no possibility of poor work conditions in the factory as can often be found in low-labor-cost countries.

For some years now, we at EID Tech have been looking into how local manufacturing can be cost‑competitive and have a lower total cost of ownership (TCO) than overseas manufacture of items such as LED lighting products. The main conclusion from our research is that all of us need to increase the level of automation in our manufacturing.

The same conclusion was reached by Cambridge University’s Senior Lecturer in Public Policy Finbarr Livesey, as outlined in his book From Global to Local: The Making ofThings and the End of Globalisation and the article “Manufacturing Is Staying Home: How GE and Adidas AreSetting the Standard in Higher-cost Economies”. He thinks that we are going to see the end of globalization. Deglobalization is already taking place.

Also, the Boston Consulting Group has conducted research into a fourth manufacturing revolution or Industry 4.0. They say that the manufacturing revolution to be happening right now, with robotics and other new technologies (such as 3D printing) boosting productivity, growth, and employment. We just need to get ready and train our people to work in more advanced jobs. 

So, with the aid of robotics, we can take up nearshoring or bring production all the way back home if it isn’t already close to the users, supporting the local economy. Automation is the answer, and at EID Tech we have spent many years preparing for the upcoming manufacturing revolution. We are ready to offer a practical local-manufacturing-based alternative to imports of cheap merchandise from low-labor-cost countries.

EID Tech’s ANT Plant microfactory for LED lighting has been developed to help you find the best and most energy-efficient, productive, and TCO-friendly solution for you, precisely matching your needs.

In my view, it is a task for all of us to continue our work toward making the world a better place to live. And we aren’t doing this only for ourselves. We are doing this for the sake of our children and grandchildren as well.

“EID” stands for “Everything is Doable,” and by being true to our slogan, “EID Together”, we believe we really can change the world together, with you!

Paavo Käkelä

Founder, Chairman of the Board