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  • Ing. Peter Strommer

Production in Transition - Increasing cost pressure and competition from low-wage countries

Production in Transition - Increasing cost pressure and competition from low-wage countries require new thinking and action!


The progressing globalization has resulted in production sites being increasingly outsourced to countries with lower labour costs with the aim to reduce production costs. At the same time production facilities in high income countries come in increasing competition with similar products from these low-wage countries. What to do?


There is the possibility of either chasing the trend or oppose it. Yet transport costs still play no major role in calculation but energy costs keep rising and also environmental awareness among consumers is growing. Increasing environmental problems arise mainly in the growth regions of Asia while wage dumping begins to build negative effects on the image of companies. Power supplies often come as a result of unbridled growth to their performance limits. At this point a gap is constantly widening between the expected const reduction and the potential problems and developments rising at the horizon in future. The question is whether the investment in production facilities in such countries will be able on medium to long terms to return the necessary revenues in order to justify the investments.


The seemingly simplest solution- the relocation of production to low-wage countries – by all those reasons often turns out to be a very risky step, since most of the productive staff do not follow to these places and consequently the present knowhow therefore largely is lost and has to be rebuilt again. In highly automated production expertise very often is in the engineering, the more skilled workers knowledge is needed, processes are more susceptible to these problems.


For these producers rather another way of looking at that is recommended in order to search, identify and raise the available potential. This does not necessarily mean that you either have to purchase a more expensive technical solutions for further automation or a partial transfer of production or outsourcing. Often it is enough to do what the so-called common sense dictates, and above all: to deploy and motivate all employees in a target-oriented manner, and let them contribute their knowledge and experience.


Who knows the pitfalls of everyday production better than the woman or the man at the machine? How to better exploit this potential? Is your staff deeply involved in the design of processes and procedures so that they can contribute their ideas? Are your employees motivated in their work setting, or are they perhaps rather driven by the fear of job loss in their neck? In fierce competition with its' many challenges, there is of course no longer enough space to be inefficient, but are you also effective in your approach?


With the right methods and the right approach production companies from Austria or Germany today excellently can exist in the market and even grow. Here, the highest quality and service standards play a significant role in combination with a stringent cost efficiency.

Optimization methods such as Kanban, One Piece Flow, LPMS (Lean Production Measurement System) or GEF (Overall Equipment Effectiveness) and modified structures on the shop floor like self-managing work groups are widely applied. Buzzwords such as 5S, Six Sigma, PullPrinciple, PokaYoke buzz through the factories and if administered improperly, not coordinated in an overall strategy of application very quickly the opposite effect to what they were originally intended may be the result.


Important is not the at random or blind applying of different methods, but rather a tailor-made solution for any kind of business, taking into consideration the corporate culture and imprint of employee’s mind setting coordinated in an overall implementation strategy that comprises all levels of the organization in a culture of change - just as a controlled change management. It is undeniable that even when choosing the right methods, but with an incorrect or uncoordinated deployment strategy (in the wrong order, or at the wrong time with the wrong preparation), can lead to disastrous consequences for the further development of the company.


It is important, in our view, to consider and to optimize not only individual process steps, but the overall processes and their interaction. Only thus efficiency and effectiveness can be further increased. The prior, it has also to be checked whether the strategy in terms of products, services and locations still matches or whether adaptation is needed.


The 7 types of waste are precisely identified not only in production but have to be identified and eliminated in a value stream analysis over the entire business process. And because the world does not stand still, you have to structurally start, establish and maintain a process of continuous improvement in the company in the sense of the "Deming circle".

TPM (Total Productive Maintenance) has proven as a very good system, which is composed of several main constituents.

This includes the continuous improvement process for the elimination of losses in production and administration, the introduction of an autonomous and a planned maintenance, the implementation of a zero-defect strategy, and action in the field of occupational- the environment- and health safety, with the aim of "zero accidents ".

The aim behind all these methods and strategies, it is always to increase the productivity and make the disposability measurable and continuous. Not only purely economic perspectives are important for our concepts, but also the employees and the human factor represents a central pillar of our considerations. We believe that any company is only as good as its employees.


The best project can only be implemented successfully if all project members are highly motivated and are convinced in sharing the same goals of the project.

Just a single demotivated team member can bring a project to tip no matter how ambitious the project was and the hoped-for success will not come to effect. Therefore, it is highly important to provide an appropriate corporate culture, in order to listen to and reach all employees.


Maybe a lot of questions have result from the above and answers must be found. Ask us your questions by addressing office@tsm.services

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