Current situation and future direction of production based in Thailand. From JMAC consultant viewpoint

Current situation and future direction of production based in Thailand. From JMAC consultant viewpoint

~ What is countermeasure for obstacles ~

Chapter 1: The difficulties in production base expansion to Asia

In this article, I will mention Thailand as an example for production base expansion in Asia. I will explain about current issues and future direction of production bases in Asia and countermeasure to be successful in production base management from my consulting experience in Thailand. In this chapter, I would like to explain about necessity of production base expansion to Asia and its difficulties in Thailand.

Necessity of Production Base in Asia

The purpose of developing production base to Asia for business growth is now changing. Some said that domestic production will become popular and Japan will become production base of Japan manufacturing company. Currently, it is not the right time yet. It can be said that the development of oversea manufacturing bases especially in Asia was to reduce cost for exporting to developed countries, Japan, Europe and the United States from low labor cost benefit. However, due to declining of population in these countries and shrinking market, the purpose of production is changed to be produced and sold in Asian market where growth can be expected.

From that viewpoint, the positioning of manufacturing bases in Asia is not a manufacturing base as a substitute for manufacturing bases for Japan but aiming for the “produce and sell in local countries” which mainly focus on developing countries. In other word, target of Asian production base is to support the developing countries through employment (See diagram below)

In order to be “production base in local countries and sell in local countries” successfully, company must have its own Research and Development team.

Environment of Asian production base is changing. In the past, we can find many cheap labor but there was also country risk within those countries (in economic, politics and finance). Currently, due to the increasing of labor rate in China and Thailand, the recruitment becomes harder (reducing in unemployment rate in developing countries). But risk within the country (in economic, politics and finance) is declining (ability to cope with those factors has been improved). Therefore, the company may face difficulties in management which is different from manufacturing in Japan.

Difficulties of production base in Thailand

Thailand is called “The land of smile”, it is a good atmosphere for Japanese. From production base management perspective, there are things that need to be concerned which I will explain below. The concern points will not only for production base in Thailand but there would be similar issues that currently found or will happen in other Asian countries. Degree of difficulties is difference by each country but all countries are facing the same problem.

Understand Thailand’s law, culture and lifestyle

The first thing is to understand and follow Thailand’s law, then understand culture and lifestyle. Objective of understand Thailand law is to follow and apply. Therefore, Suggestion from expert is important due to law changes with time. In order to adapt it at the right time, collecting information is very important. We can conclude that cooperation with expert is essential.

In addition, even if you are in Japan, you can understand the history, culture, customs etc. of the country from various sources of information. In Thailand, it should not be only understood in your head but you have to live in Thailand, you will learn culture and lifestyle. It will help to adjust yourself and gain experience from living with Thai people.

Prepare for recruitment and human resource development

The next thing is recruitment and human resource development which is the most important factor in enterprise management. Unemployment rate in Thailand is less than 1% since 2011. It makes difficulty in recruitment which sometimes number of candidate is lower than target.

Moreover, not only the problem in quantity of candidate but also the problem in quality. In recruitment process, when we check education background and work experience, sometimes we cannot find qualified candidate. Also in Japan, from the viewpoint of academic background, there are few talented people with university level. Acquiring highly educated human resources is a more difficult situation.

In case of human resource development, it is difficult to communicate with people who have different academic background and language barrier. Other factor is few number of people who can be trained by on the job training (OJT) method. To maintain and develop human resource in this situation seems to be a big problem to organizations.

This chapter introduced the significance and purpose of manufacturing in Asia and some of the difficulties of operating manufacturing bases overseas. From next chapter, I will explain real situation at worksite and provide countermeasures for the situations.

Consultant Profile

Senior Consultant・Head of Process and Design Innovation Center

Kenji Tsunoda

Joined JMAC in 1998. Mainly using IE as core technique to improve productivity. So far, he has been supporting the improvement of productivity in many industries such as automotive part, chemical plants, molding, building materials and foods. Consulting themes include a wide range of activities such as improvement of productivity at manufacturing site, from quality improvement for procurement cost reduction and inventory reduction, including support of execution management.

From globalization of Japanese manufacturing industry now, not only in Japan, but also support for Thai manufacturing bases of Japanese affiliated companies in productivity and quality improvement, together with the improvement of management structure and training of local human resources. In support of overseas manufacturing bases, it is not only personal guidance, but it is developing organizational support that utilizes JMAC’s global network (collaboration between Japanese and local consultants).

Date :

20 NOV, 2017