Manufacturing Success Is No Accident!
by Corey Weekes
As the right honourable Prime Minister indicated in his latest budget speech, we are experiencing very difficult times, and now more than ever, it is important to embark on strategies that generate sustained future growth in exports and foreign exchange. The strategy outlined in this article is penned with the idea of propelling the country on such a journey. It relates to the question of how we can bolster our manufacturing sector for greater foreign export earnings
Despite the policies of several governments, the challenge of increasing manufacturing’s contribution to Gross Domestic Product (GDP) remains. A review of central bank reports leads one to the conclusion that successful manufacturing in Barbados is a mirage, with no future in today’s apparent world of services.
But, before we detrimentally forecast this sector’s demise, let’s examine a model of success that continues in this area, and serves as a platform for sectoral development.
I have written before that the success of the medical device manufacturer, Lenstec Barbados Inc, is no accident, and has precedence for where team Barbados’s focus should be. The initial attractiveness of Barbados as a destination for manufacturing foreign direct investment (FDI) is very much present, in the form of low tax rates and duty-free material access etc, as found in the international business company act. These policies are the first important pillar for a successful manufacturing strategy, and remain laudable and attractive, but by themselves, are not enough to lure industrial FDI en masse.
What has attracted and maintained Lenstec Barbados Inc, when other large manufacturing companies e.g. Intel have left, is the fact that the majority of critical elements needed for successful manufacturing, and more importantly supply chain management, remain present today.
Make no mistake, no manufacturing enterprise will succeed and grow in the long term, unless the elements of successful manufacturing supply chain management exist. To fully appreciate this we need to look at the business of manufacturing and its supply chain. Raw material inputs have to be affordably procured and moved to a production location, where skilled, affordable labor and facilities convert inputs to products. Importantly, these products have to be distributed quickly and efficiently across the globe. Yes globally, a market of 280,000 can hardly sustain the production volumes needed to properly amortize capital purchases found in significant manufacturing. Unless we are processing food and beverages which benefit from the effects of repeat local consumption.
After all, many of us enjoy a good Banks beer more than once per year.
This highlights the second pillar of our manufacturing policy which is to focus on attracting an industry with global appeal and not only serve a local market base. Small business and small business incentives should always be encouraged, but to generate significant FDI inflows and foreign exchange, the focus has to be on a global industry from the outset. Lenstec Barbados Inc has a global focus as it ships its medical devices world-wide from its Barbados location.
This leads us to the third pillar of the manufacturing policy, which is the provision of an efficient logistics environment to the customer base. The best designed and made product is useless if it can’t reach the target market. Less-than-container load (LCL), Full-container-load (FCL), airfreight and parcel lanes and capacity are crucial. We can have trade agreements with Venezuela and Colombia for example, and future agreements with Nigeria, but without efficient freight lanes to these countries, no products will move there.
Try importing apparently cheaper items from Brazil as opposed to Florida, and we will experience the problem of freight lane availability first hand. This is a conundrum faced by local furniture manufacturers, who struggle with getting their products throughout the Caribbean, despite favorable Caribbean trading arrangements, and obviously good products. With poor freight lanes e.g. to Dominica, then marketing a high quality mahogany set to potential customers becomes a futile exercise, limiting the producer to the small local market. This is also the problem that a local manufacturer faces when trying to export hard goods to the dispersed Barbadian diaspora.
So how does Lenstec do it? It ships in high densities, hence affordable unit shipping costs, via global parcel carriers e.g. DHL and Fedex. These logistics providers are already established, and have efficient global freight networks to distribute products to markets within 1-5 business days. Importantly, we must provide significant incentives for shipping, air cargo, and parcel companies here to continue and expand the provision of freight lanes into and out of Barbados. This is as vital to a manufacturing industry as airlift from key markets is to the tourism industry.
Industrial Clustering Effect
The fourth pillar where attention is needed, is in the creation of an industrial clustering effect, to propel a manufacturing sector with spillover impacts to other aspects of the economy. This is a comprehensive strategy which evolves over time, but is also an important aspect in maintaining an environment where industry can source softer attributes needed for sustained competitiveness. This can be as simple as dedicated bus services to the industrial park where the industry is located so employees move to and from work easily, or daycare facilities within the industrial park. It can also extend to providing specialised courses at the Community College or Samuel Jackman Prescod Polytechnic with curriculum developed by the industry, to ensure that the workforce is skilled and trained in areas the industry seeks. Or, it can be offering incentives for existing logistics and brokerage companies to locate within the industrial park for obvious industrial synergies. Or rebates given to manufacturers who utilise local service companies in the provision of packaging items, advertising and marketing services etc
A Strategy For Barbados
So how do these suggestions all come together to form a comprehensive manufacturing policy for Barbados’s export growth? Let us consider an approach where we aggressively seek to attract more medical device companies in the $5-25 million USD revenue range, making products that can shipped globally in high densities, thereby leveraging airfreight and parcel companies e.g. DHL and Fedex for their global distribution. Companies such as Cool Eyes and MicroLites Scientific out of Canada and tens of others across North America. IBC incentives are favourable and should even be bolstered by additional incentives which may include subsidised utilities etc to make Barbados very attractive to this industry. The location for these companies in the cluster could be Grantley Adams Industrial Estate, where close proximity to the airport location, facilitates easy movement of management personnel and extended pickup window times for export bound air cargo or parcel shipments.
As the fourth pillar suggests, the industrial park should be served via a small bus terminal with direct routes to key urban areas in Barbados, and other ancillary facilities e.g. daycare, which ensure labour can move easily to and from the location and the companies should benefit from employee training grants etc, provided they work with tertiary institutions on island to develop the curriculum necessary for labor training needed in the industry. It is agreed that times are indeed challenging, and solutions will be difficult and costly to implement, but successful journeys always begin with one step
Corey Weekes MSc, CPIM, CIRM, CSCP is an Operations/Supply Chain Management Consultant and Director of Tropique Wines. He can be reached at email@example.com