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China Factory Relocation for Plywood Machinery Provider
The client, a global market leader in plywood machinery, established a workshop in Shanghai more than a decade ago. Since then, a trend of increasing operational costs and labor shortage has affected the client, making them look towards new opportunities and locations for their production site.
With their scope being set, the client contacted ARC Consulting to conduct a market study analysis on cities in the Yangtze River Delta (Nanjing, Hangzhou, Suzhou, Ningbo, Wuxi, etc.), to find a new suitable production location, meeting all of the client’s requirements.
Opportunity
Cities in the Yangtze River Delta have well-established logistical and transportation capabilities, as well as a large potential sub-contractor base and low labor cost levels compared to Shanghai. Relocating the production facility to any of these cities would result in major cuts in operational cost.
Local government and industrial parks in these cities are highly welcoming towards foreign investments in the manufacturing industry, thus offering lucrative tax incentives, e.g. corporate income tax cuts for certain years (depending on type of projects, industry, etc).
Approach
The project was conducted in three steps: Preparation and Research, In-depth Analysis and Final Evaluation. A long list of attractive locations was generated from primary research and initial contacts, based on key criteria of industrial parks, current labor cost levels and identified development trends and logistical capabilities. After conducting the first high-level filtering, an in-depth analysis was conducted to evaluate the potential locations, to identify all their strengths and weaknesses. A short list of alternatives was presented to the client for further assessment and analysis of potential fit for relocation the factory, based on previous requirements, but also staff and sub-contractor availability and overall cost benchmark analysis.
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