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Tony Caldeira Founder & CEO Caldeira Caldeira A re-shoring case study • Brief introduction to Caldeira • Key factors behind re-shoring • Issues for companies re-shoring • What should Governments do? Caldeira UK – Introduction 1991 – 2003 • Founded 1991 by Tony Caldeira in Liverpool, UK • Sells cushions & textiles to volume retailers • Grew from a market stall to UK market leader • 2003 Sales £5m+ 100+ Staff 2 UK factories • Successful UK SME - Then came globalization... Caldeira UK Sales 1996 - 2003 (£GBP) 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 1996 1997 1998 1999 2000 2001 2002 2003 Caldeira China – 2005 – 2009 • China admitted to the WTO so easier to trade • China selling price cheaper than UK cost prices • Retailers and supply chain forced to react • Simple choice - “China or bust”“step by step” • UK designs at Chinese prices - Rapid growth Caldeira China 2005-2009 ($ USD) 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 0 2005 2006 2007 2008 2009 Caldeira UK & USA – Reaction to Globalization • Moved upmarket with European fabrics - Fashion • Higher quality, faster lead times, service, JIT • Advantages - Same language, business culture • Advantages - Time zone, currency, close to market • Caldeira USA - Opened in New York, rapid growth Caldeira USA 2007- 2010 (£ GBP) 1,200,000 1,000,000 800,000 600,000 400,000 200,000 0 2007 2008 2009 2010 The Tipping Point • Tipping point happened around 2007-2008 • Next phase of globalization begins • Tide turned - Chinese prices rise faster than West • UK & Europe become more competitive each year • Two critical factors labour costs & exchange rates Key Factors – Relative Labour Costs • Since 2007 Chinese labour costs have rocketed • Caldeira China factory staff earnings up 400% • 2003 RMB 1000 per month - 2015 RMB 4000 pm • 2003 China factory staff earned 10% v UK • 2015 Now China staff earn 35% v UK and rising Key Factors – Relative Exchange Rates • In 7 years the Euro has dropped by 34% v RMB • This makes Chinese goods even less competitive • Caldeira Reaction - Downsizing in China step by step • Caldeira Reaction - Re-shoring jobs back to the UK • Others moving all production home EUR V RMB - JULY 2008 EUR 1 = RMB 10.87 SEPTEMBER 2015 EUR 1 = RMB 7.20 Issues for Companies Re-shoring • Capacity - Production moved East, capacity lost • Skills - Production moved East, skills also lost • Supply Chain - China “cluster model” strong • Supply Chain - Local supply chain lost in West • Finance - Following crash, banks reluctant to lend What Should Governments Do To Help Re-shoring? • Aim High – Aim to make the UK & EU “the best place in the world to do business” • Create Economic Stability – Sustainable public finances help investment decisions • Create a Pro Business Environment – Tax and regulation should be low, simple, competitive & fair • “Talk the Talk” – UK is the role model “Britain is open for business!” Sell your market. • Prepare and Set Expectations – Educate and advise business and consumers of global changes. • Understand – “Tipping point” & help step change • Investment – Infrastructure, education &training • Incentivise – Help companies to invest & re-shore • Opportunity – More growth and jobs in countries which re-shore, both in companies & supply chains Are You Ready For Re-shoring?