Manufacturing Matures in Central, Eastern Europe

One of the fun parts about following the high-tech supply chain is trend tracking. Sometimes, spotting a trend comes from personal observation, a sudden insight that puts the bigger electronics picture into focus. Many times, other people more expert than me provide much-needed perspective. In this vein, I'll give credit to International Data Corp.

In the research firm's recent Webinar on “Exploiting the Opportunities of Manufacturing in Eastern Europe, Middle-East, and Africa,” Pierfrancesco Manenti, head of IDC Manufacturing Insights, EMEA, and Craig Simpson, research analyst, Vertical Markets & IDC Manufacturing Insights, CEMA, shared useful tidbits about the manufacturing evolution underway in Central and Eastern Europe.

A key takeaway is that the regional manufacturing hub is maturing, migrating from volume-driven production to a sharper focus on quality and efficiency.

“Within [Central and Eastern Europe], no longer can manufacturers really compete just on cost. There are too many competitors out there,” said Simpson. “Instead, manufacturers are moving their focus more towards the quality side as a key differentiator from other large-scale competitors. However, the ways and means to achieve this quality goal varies, depending on the industry.”

The transition, which involves shifting away from a low-cost approach to higher-value innovation and partner collaboration, has a number of implications for both the individual manufacturers and the broader supply chain, according to Simpson.

Many Central and Eastern European companies, for instance, are changing the way their products are designed, promoting more collaborative design initiatives. “This means, they are making an effort to take into account the external inputs from suppliers, and designing more in consultation with the factory floor while making use of single components that can be combined to form multiple products,” he said.

There is also a noticeable increase in the emphasis manufacturers are placing on collaboration with other partners, particularly in the areas of production inputs and delivery scheduling.

Citing an IDC survey of manufacturing executives, Simpson and Manenti said companies will reprioritize their operational and strategic aims, and likely seek out IT tools that help meet these objectives. Operationally, regional companies will be looking at improving demand planning and forecasting, and workflows and processes. Strategically, supply chain management, customer/demand management, and product lifecycle management improvements will win more attention.

Although the IDC folks didn't spend much time on manufacturing trends in Africa or the Middle East, they did speak to the fact that Central and Eastern European manufacturers — many of which have earned favor from both Western and Asian investors — are well placed to break into fast-growing emerging markets in surrounding geographies. They are, in fact, just a stone's throw from big, tech-hungry, population centers like Turkey, Russia, and sub-Saharan Africa.

This takes me back to my beginning paragraph about the fun part of trend tracking. The significant changes underway in the Central and Eastern Europe manufacturing mindset obviously are going to force a change in the way Western OEMs and suppliers interact with them. Hopefully, conversations are already happening about this within and between supply chain groups, and C-level management has begun to reassess strategic expectations. If so, the transition will lean towards a win-win for the whole industry. If not, we're heading for a bumpy ride of disconnects and mixed signals.

8 comments on “Manufacturing Matures in Central, Eastern Europe

  1. Ariella
    July 1, 2011

    Jennifer, you end with “If so, the transition will lean towards a win-win for the whole industry. If not, we're heading for a bumpy ride of disconnects and mixed signals.” Are you optimistic about this turning into a “win-win?”

  2. t.alex
    July 2, 2011

    I wonder if there is any comparison between eastern europe and other regions, say china, in terms of manufacturing?

  3. Daniel
    July 4, 2011

    Jennifer, “manufacturing hub is maturing, migrating from volume-driven production to a sharper focus on quality and efficiency”, Quality and efficiency matters a lot. Without these two factors, the volume-driven products may probably moves to low moving or non move category. Taking feedback about the products and incorporating customer requirements for design and moldings are good indices for considering customers value in account, even at primary stage.

  4. Jennifer Baljko
    July 4, 2011

    Ariella, you ask how optimistic I am about this turning into a “win-win.” Not sure how to answer that… it will really depend on how the EMS and OEMs make this work within the next few years. There's going to have be a give and take supply chain partners will have to make if the transistion will be a success. Manfacturing maturation isn't new, and every region eventually moves through these phases as the quality vs. low cost equation equation swings into a different balance. I imagine for many OEMs the idea of having better quality products coming out of their partner's plants has considerable value, but it depends on the product requirements. Some products will continue to lend themselves to low-cost volume models, while others won't.

    t.alex,  I'm sure there are comparisons out there between Chinese and eastern Europe manufacturers. Unfortunately, I don't have immediate access to those reports. In some ways, manufacturing is the same  beast everywhere; some differences, however, lie in how willing manufacturers are – or how much pressure is exerted on a particular set of manufacturers  – to adapt to changing OEM/customer needs or to innovate on the value they add to the entire chain.

    Jacob -“Taking feedback about the products and incorporating customer requirements for design and moldings are good indices for considering customers value in account, even at primary stage.”  I agree. Collaboratively designing for manufacturing will be an important seed in any successful manufacturing strategy shift.

    July 4, 2011

    Skoda is a perfect example of this trend in Europe.  Historically Skoda has had the reputation of a poor quality cheap car from Czechoslovakia but over the last few years they have strategically partnered with Volkswagen and have brought out a range of new and innovative cars that actually are leading many opinion polls in terms of quality and customer satisfaction.  This goes to prove that with the right management and strategy, a “joke” company can become a revered company in a very competitive market.

  6. Eldredge
    July 4, 2011

    The right management team, strategically focusing the organization on quality, can turn a company around in a fairly short time.

  7. Jennifer Baljko
    July 5, 2011

    You're right  – Skoda could be an interesting case study. They've seem to come a long way in the last handful of years. Wondering how much of this is progress stems directly from VW's influence on the company and how much of the quality/innovation is being driven internally.


  8. DSP
    July 5, 2011

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