Factory relocation is a far more complex operation than many companies believe. Many companies do not create relocation plans and believe it is as simple as picking up equipment and dropping it in a new location.
Nothing can be further from the truth. A successful factory relocation requires careful planning, a clear understanding of the current and future state, and follow through to enact and adjust the relocation plan as required. Conversely, companies that reject the need for a plan will likely have painful moves that are more expensive than expected and often have less efficient factories than the ones they left.
The goal of the relocation should be to have a better, more efficient factory at the new location instead of just a repeat of the previous operations. This blog will help you understand how to move locations effectively and maximise the value of the move.
4 Tips For An Effective Factory Relocation
1. Assessment and Value Stream Map (VSM)
A factory relocation should always begin with assessing the current operations - where are you now? The assessment should include a value stream map and gap analysis and could consist of other assessments on supply chain, overall equipment effectiveness, etc., if necessary.
Understanding where operations are and how inefficiencies can be removed in the relocation process is essential. For example, if the VSM shows significant bottlenecks and poor line balancing, these issues will be exacerbated by moving to a new location.
The results of assessing the current system to plan a new one are rather impressive. It is common to find over 30% efficiency gains after moving to a new location. That is with the same equipment and the same production schedule. It usually entails fewer operators and/or more production capacity. New factories are a chance to start over, and it would be wise to take advantage of them.
2. Guiding Location Search
It is better to understand what you need in a location first rather than trying to force a pre-selected location to fit your criteria. Failing to do so can lead to costly delays. For example, we worked with a company in China that moved its production without proper thought on what it was trying to gain from the move beyond cheaper labour. As a result, the company moved into a factory that retained most of the same issues as the previous one and added additional problems that interrupted good flow.
Using the information gained from the previous step, find a location that fits the production needs. Doing so focuses the decision-making on specific criteria and lowers the chances of making the wrong decision on a new location.
The amount saved can be substantial. For example, CMC assisted Cyden with a location search, which helped the company save millions of dollars, and gain significant tax incentives and assistance from the local government.
3. Project Management Through Decoration
Decoration in the manufacturing context does not mean hanging up matching curtains (though that can be an element of it). Instead, it means changing the factory building and setting up to meet your production’s specific needs. That can be as simple as adding overhead utility connections to strengthening the floor and installing filtration systems for water and air pollution.
The oversight and process management are important as it keeps the focus on production efficiency and capacity. For example, construction and utility installation companies can be experts in decorating a factory but rarely in manufacturing.
We have an example of this situation with a client from the Middle East. The construction company built their new building with utilities under the concrete floor. This is not an industry best practice, and it would reduce the flexibility necessary for factory organisation. However, we saved the company tens of thousands of dollars by ensuring the utilities were in the right place before too much was underground.
4. Assistance From Pilot Run Through The Start-Up Production
Before the pilot runs, it is necessary to start building the local team. The first hires should be the general manager and the HR manager. Both will help organise the local team and hire other members.
It is vital to complete a few pilot runs to test the production set up and fix the shortfalls that arise through the process. Planning is essential for a successful relocation but there will almost certainly be some challenges that will need contingency plans. Additionally, new staff will need to be trained and it takes time to build up their skills. No matter the simplicity of the manufacturing process, training operators to the work instructions and specifications does not happen immediately and there is always room for improvement.
Download Our Free Plant Relocation Guide
If you want to relocate your factory smoothly, it is essential to have a well-thought-out plan. This is particularly important for small and medium-sized businesses that have a lower margin of error for significant investments like factory relocation.
To help you navigate this complex process, we've created a comprehensive 'Guide to Plant Relocation in Asia'. This guide will help you determine if relocation is the right decision for your business, identify factors to consider, and provide a step-by-step breakdown of a successful relocation strategy. You'll gain insights into market dynamics in key hubs and learn tips and tricks from other big brands' relocation strategies.