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Made in France, instructions for use

Enhance the competitiveness: integrate value

Relocating elements of the value chain to emerging countries is a global trend that started a few years ago.

At that time, the firms’ main motivations were to benefit from low labour costs and to reduce fixed capitals (reducing non-recurring costs of tools) while bringing flexibility into the organization.

The only way to keep hourly rate and research & development capabilities is to maintain margins. The Low-Cost trend makes it impossible because one of the conditions for low prices is to minimize the overheads (indirect costs) and structure costs.

Furthermore, the key of Low Cost is to move abroad a product that we could produce here. But this principle excludes the opportunity of reinventing the product and erect an unassailable limit: breakdowns of design are out of reach as soon as the product is relocated due to a lack of skills and structure.

Finally, the benefits of the Low Cost only last a while: hourly rates and even exchange rates often deteriorate and this phenomenon is even stronger since relocation became trendy.

Moreover, logistic and import costs are particularly volatile but remained significant and lead to high purchase volume at the expense of flexibility.

The concept of value can be treated through multiple aspects that go beyond cost competitiveness:

  • Be the only one to do something – Performance and technology barrier concept
  • Enable savings for the clients, beyond the mere purchase price
  • Improve reliability
  • Increase reactivity
  • Offer advice
  • Align with good practice standards in terms of logistics
  • Finally, innovation in technology and production methods associated with new design tools allow, in many cases, to offer more attractive prices than in low costs countries where these improvements are not available.

At Inter Action Consultants we are convinced that duplicating well-known solutions cannot be considered as a differentiating competitive advantage.

However, the development for value is a growing trend and a great opportunity, because if there is a bottom limit, there is no limit up!

The keys to reintegrate value in France and the strength of France:

  • Be aware of its strengths and of the core competencies that we need to preserve or develop
  • Have systemand TCO (Total cost ownership) approaches
  • Promote the value concept – price competitiveness and non-price competitiveness – and refuse the race to the lowest-bidder
  • Invest in competencies and innovation
  • Use good industrial tools with well-trained individuals
  • Use this strategy with subcontractors and main partners as well

It’s a development philosophy that involves all the function of the firms, for the sake of global coherence between the goals and products strategy, design, industrial and supply chain.

These areas of improvement and competitiveness can be considered and deployed, either in each firm individually in a business approach or more macroeconomically. In this case the industry is considered as a major economic player aiming at creating a positive ecosystem to develop pools of expertise such as competitiveness clusters.

An example of a successful resettlement in France related to a drastic costs reduction (-45% accomplished, for an original goal of -25%): secondary electric distribution cell of medium voltage.

Emmanuel SABONNADIERE Head of Transformation Business at Philips Lighting , and at the time, Vice-President of the BU Secondary Distribution atAlstom T&D and project manager.

Mr SABONNADIERE can you tell us what were your expectations at the beginning of this project?

« This project involved a 220M Euros Business Unit based mainly in France and in Germany of ,employing 2.200 people. On the one hand, the project was to take over a high-end product developed in Germany for the german market with high over-costs and turn it into a competitive product. On the other hand, the project was to transform this product in a standard for the european market and for the world market. At the same time, French and German factories were refocused on primary and secondary product ranges. During this project, IAC helped transferring the technologies from Germany to France, manufacturing and the network of suppliers with a close partnership between France and Germany to ensure. »

Key points of the 18-month project:

  • Implementation of a Franco-German core-team with key activities representatives in both sides of the Rhine (Sales/Marketing, Technical, Purchase, Industrialization…)
  • Implementation of a steering committee to ensure project guidelines and a fluid interplay in the organization.
  • Approach by product features (tank, active parts, fuse, etc.)
  • Research of optimizations and Breakdowns thanks to numerous lever
  • Use of new technologies
  • Easier redesign of some sub-assemblies to enhance reliability of the cell while reducing its costs (Removal of the brakes on the disconnector, change of material of the shaft, …)
  • Purchase action from all kinds of angle
  • Competitive analysis of technical features used by major competitors
  • Simultaneous engineering work with the French factory to ensure a good design of the new assembly line for the new product.
  • Crucial involvement of the supplier’s network of the French team in moving key components while improving costs and logistics; this action brought to light the fact that French suppliers can be more competitive than Turk or Chinese ones.

A lonely champion doesn’t stay on top level for a long time, and this current trend that we emphasize here largely contributes to regenerate the national industry.

We often work with French companies that wish to relocate their production on the national territory for an equivalent cost. Our partners goal is to find an ecosystem where interconnection interests are better understood and more aligned between contractors and subcontractors.

Some foreign companies, are also seeking competitive national partners able to provide their French subsidiaries, to avoid importing proprietary technologies.

Finally, medium sized companies also make the choice of France to develop new innovative products and features or to enlarge their production capabilities.

« We have the competencies and the know-how, with the resources to support our ambitions, to be lastingly competitive in France »
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