The Asian giants are shaking

For many decades know, high-volume producers from Asia seemed to have a clear competitive advantage in “big business” due to their production capacity and their ability for low prices.

Recently, this law seems to become questioned. Big producers see their sales stagnating or even dropping, especially in the European markets.
The winners of this development are much smaller companies with incomparable smaller production capacity.

So the question is, what exactly is happening in the markets?

The answer is that the business model in Europe is changing. Even high volume customers in many European industries, especially in consumer goods, are not willing anymore to place big orders and to receive them after 3-4 months.
What they ask today for, is to work with smaller quantities, renewing more frequently their product assortment.

And even more important, they expect from their suppliers, a proactive consultancy in product optimization and product innovation.
Sometimes a small technical product adjustment can lead to significantly lower production costs or an improvement of the end – product.

High – volume producers have all assets in their hand to meet the new market requirements.
Cooperating with strong customers all over the world, they have a good knowledge for international market trends and a tremendous number of product designs in their database.

Though, turning these assets into innovative consulting services for their customers and to leave their comfort zone of large-scale production batches is another issue.
It requires a completely different way of doing business and affects the interaction with the customers, the production and the logistics models.

In the textile industry for example, Asian producers are used to work with an “upon order” production logic. What they have to do, is to take the risk of creating, based on their specific know how, own assortments and offer them with the option for smaller quantities and short delivery times. To do that, they would need to establish European warehouses with repackaging facilities, a model which would enable them to deliver the products within few days

With such a new approach, they even could unlock significant new business potential, cooperating with medium-sized customers and entering in online business, which they cannot serve today.

This is a new, disruptive business logic and many large-scale producers still refuse to accept it, as their practices are turned upside down!
The reality is, that adaptating the new market requirements is extremely difficult, but at the same time a matter of survival.

We all know many cases, where big, international market leaders, giants in their industry, have disappeared within very few years, due to a wrong evaluation of the market changes.

Fall or opportunity, this is something which depends on the ability of Asian producers to transform themselves from pure manufacturers to product developers.

 

 

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