So we can all probably agree that optimizing the network makes sense, starting with a look at how the current network matches up with strategies, market trends, and cost goals before plopping a new factory down in Asia to try to expand the company's markets.

Not said in the report, but today this footprint assessment is most often done using supply chain network design software. And the report does note a key general trend, which is that today "optimization of the enterprise footprint takes more effort due to the continuous monitoring required to ensure assets are in the right place at the right time." Hundreds of companies have implemented internal network design teams that use the optimization software to answer questions on a continuous basis - a sea change from even a decade ago when most companies only looked at these issues every few years or after a merger or acquisition.

Issues to Consider before Making an Expansion

The report later on offers a nice set of issues companies should consider when looking at a network expansion:

Consider the benefits and risks of being a pioneer and achieving early adopter benefits, instead of operating in proven locations: While you may get lower costs from being early into a country/region, that can come with a lot of risks.

Make sure risks are understood, including active mitigation and monitoring strategies in place around such things as cyber security, protection of intellectual property, managing corruption risk, foreign currency risk and other financial risks.

Evaluate customers and consider potential biases they may have toward goods produced in certain locations: Are there perceived issues with manufacturing quality? Is there a social or cultural issue that might impact sales of product abroad?

Determine whether the right leadership is in place to take on the challenge: One of the greatest impediments to global greenfield expansion is the availability of leaders to conduct knowledge transfer and run new facilities. The ability of existing executives and managers to commit time to the expansion must be carefully assessed as investments are planned and aggressive timelines set.

Understand trade agreements and how the company might benefit, keeping in mind country relations are dynamic and the stability of trade treaties should be independently assessed.

Consider cultural alignment: Many companies suffer false starts by simply misunderstanding the business culture in new countries. Selection of facility leaders must acknowledge the need for local expertise in navigating business culture, local regulations and workforce related nuances.

Consider the right market entry strategy for each investment: If the company has limited experience with the local standard operating procedures, a joint venture can provide integration support. JVs may enable faster speed to market, lower upfront capital investment, and provide access to an established distribution/customer network. Contract manufacturers are also an option for manufacturers determining whether to make a significant capital investment in a particular country. Contract manufacturing may reduce the burden of labor attraction and management, upfront capital investment, and market exit flexibility.

Where Manufacturers See the Value in Various Target Countries

The report includes a nice graph that lists a variety of countries that many manufacturers might consider for expansion, highlighting the relative attractiveness of each across a number of business and supply chain attributes, based on responses to the Deloitte survey.

Where Companies See the Benefits of Moving Production to Different Countries

Source: Deloitte and MAPI

"Manufacturers can better position themselves for success by viewing their growth and expansion decisions as a dynamic fluid strategy, encompassing their entire footprint," the report concludes. "Maintaining a proactive stance on managing the global footprint using cyclical planning can help manufacturers ensure their assets are aligned to changing market and manufacturing conditions and can avoid issues associated with business as usual approaches that result in severe misalignments."

The full report is available here: Footprint 2020: Expansion and optimization approaches for US manufacturers

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