Publications and Articles
Construction and launch of a new factory is a difficult and complex process that requires many aspects to be combined together with the needed time, resources, and goals. Many international companies that are building new factories plan this process years before and make significant preparations. During this preparation, many components of the project should be understood and calculated – starting from factory production volume and sales volume and ending with personnel cost and time for each stage. Each factory that is the result of such processes should start its operation and give necessary output.
For big companies, every new factory is a strategic expansion and optimization of the current production and sales portfolio. Every new factory will become part of the company’s global network. As a rule, such companies have dedicated teams for calculating, planning, and supporting factory construction and the start of production with following ramp-up. These people usually are part of the global team that is responsible for the company’s new model launch and production update. Some of these people will be directly on the factory during the construction process, start of production, and the first month or years of factory operations. From the other side, in a country where the factory will be created, a local team should be created to support factory construction and operations on the factory.
Why is the quality of the local team so important, especially during the factory start-up phase? Global teams usually consist of people who are from the company’s original country or countries where the company already has R&D or long-term operations. These people have good experience and understanding of global and original company processes but very often are not familiar with the local language, mentality, and operations in a country where the factory will be constructed. In countries like the EU or US where processes are nearly similar and most of the local people know, for example, English and other international languages, factory construction can be mostly implemented by global teams, and processes can be handed over to the local operational team.
Unlike most EU countries and the US, if the factory is constructed in a location where the production culture (especially international) is only narrowly established or not established, plus the mentality and language are not similar, and also local people do not widely speak English, the importance of the local team is strongly higher. In this case, successful factory construction and the start of production are the result of strong cooperation between local and global teams. And in many aspects, for such locations, the local team is the team that will play a critical role instead of global ones. In this case, the process of local team hiring and creation is a very important part of a successful factory launch.
For such countries, without the support of a local team, it will be very difficult to achieve necessary targets for factory construction and local production. Unfortunately, many companies prefer to make cost savings on local teams and think that they will save money eventually, but as practice shows, in the end, they spend much more than they saved on the cost of the local team. In such negative examples, the local team is hired using the principle “as cheap as possible,” and as a result, there is a strong increase in money loss during factory construction and preparation and a strong increase in workload for the global team. Even during interviews, they try to push candidates to decrease and decrease salary expectations until all candidates with more or less appropriate experience will deny the offer, and only not so good qualified candidates will remain. In these cases, they try to save some hundreds of EUR to show global HQ that they saved something like 50,000 EUR annually for salary in terms of factory.
As practice shows, this approach eventually will lead to the loss of money and time and a decrease in factory output quality. But what is 50,000 or even 200,000 EUR? Is it too much? It can be too much for an individual, but for the construction of even not so big factory with an average investment of around 200 million EUR, it is just 0.1%. What can such an approach cost a company? For example, if a company hires a head of department who is part of the local team and most of the candidates request a salary around 2500-3000 monthly, and the company tries to decrease the cost and offer candidates, for instance, 2000. What does it mean? It means that you will get a candidate that is underqualified. From one side annually you can save 10 – 15,000 EUR, but from the other side, what if, for example, it is a department head and he will lead the entire team in the wrong direction or will lose something or will forget something or will hire the wrong local team? How much can it cost a company? It can cost hundreds of thousands of euros in loss or in the worst cases even millions. And for example if this is a car factory, 15,000 EUR is just half the price of one car in a factory with maybe an annual capacity of 50,000 – 100,000 vehicles. In this case, risks are too big. Therefore, it is really important to have a qualified local team in addition to the global one.
At the end, there are two ways to make good local support for global teams:
1) To hire a qualified local team using a salary that matches with qualified candidate’s expectations in local area but not with the average amount in the exact location or city. At least all management team including middle level should have good experience (Or a team from neighboring countries with similar language and mentality)
2) To hire a consulting company who works on the local market and has enough qualification, local and international language skills, and appropriate experience in factory launch and construction. In this case, the consulting company can support factory start and train local teams and especially could be helpful when global support is limited.
If a local team will be created using the principle “as cheap as possible” without support of any consulting, results cannot be matched with the expected. Especially if the product is complex (not t-shirt but for instance cars or components). Also, it can cause money loss for the company and a decrease in quality.
Critical Role of Local Teams for start of new factory in Developing Production Cultures
