Growing onshoring trend; PowerShield goes inhouse – Scoop.co.nz

Growing trend for onshoring as PowerShield takes
manufacturing inhouse

By Fiona Rotherham

Sept. 24
(BusinessDesk) – Kiwi specialist battery monitoring firm
PowerShield, whose customers include the likes of Nasa,
Microsoft, and Huawei, is entering a joint venture with an
experienced local manufacturer where both benefit from cost
savings rather than shifting production offshore in response
to growing demand.

The Auckland-based company will
officially open its new Albany factory on Oct.1 and chief
executive Len Thomas said he expected to immediately save
around 15 to 20 percent on its contract manufacturing bill
despite relatively low volume runs.

Manufacturing New
Zealand said there has been a move in recent years for kiwi
companies, especially those with higher value, more complex
products, to bring manufacturing onshore. It’s part of a
global trend that has seen a 70 percent reduction in
offshore manufacturing in the US between 2003 and 2014,
according to data from the Reshoring Initiative, which
promotes onshore manufacturing in the US.

PowerShield’s
power circuit boards were being made by a New Zealand
contract manufacturer and Thomas assessed the
cost-effectiveness of shifting manufacture to either China
or Malaysia, given sales have risen 40 percent so far this
financial year. “It’s not as cheap manufacturing
offshore as many people think and it was cheaper to do it
here than I thought,” he said.

Instead, the company has
set up a hybrid inhouse model – a 60:40 owned
manufacturing company, PowerShield Solutions, drawing on the
expertise of David Todd, the founder and former majority
owner of PowerShield’s contract manufacturer, Quick
Circuit.

Todd said there’s little incentive for a
contract manufacturer to reduce costs because it will reduce
their sales figures, a dilemma solved by a joint venture
arrangement where both benefit. He’s confident of reducing
PowerSheild’s production and supply chain costs by 30
percent within a year.

“That’s quite significant,”
he said.

On paper, the Chinese and Malaysian contract
manufacturers may offer a slight lower unit cost, but
companies have to consider the total cost of ownership of
their product, including having to fly in engineers to fix
problems and difficulties monitoring quality, Todd
said.

One of the biggest intangible benefits will be the
company’s design engineers working face to face with the
production staff. PowerShield’s previously high stock
inventory could also be reduced by better direct
communication between the manufacturing and sales
operations.

Manufacturing NZ executive director Catherine
Beard said rising labour costs in China and the difficulty
of protecting intellectual property had caused a number of
kiwi companies to rethink offshoring in the past two years.
Another factor was the previously high dollar, which had
allowed companies to invest in new, more efficient plant and
equipment that may have been too expensive in the
past.

The hollowing out of New Zealand’s manufacturing
industry has left a skills shortage, Beard said, with an
Export New Zealand survey due out soon showing nearly 69
percent of respondents were experiencing difficulty finding
enough qualified staff.

Set up in 1997 by majority
shareholder and non-executive director John Grant,
PowerShield monitors and manages mega-banks of batteries
that are pulled into service in the event of a power outage
at critical infrastructure. That guarantee of back-up power
is crucial for emergency communications for customers in 30
countries such as Whitehall’s Ministry of Defence or the
San Diego Sheriff’s department. Call centres, which are
growing worldwide, now account for around a third of its
annual revenue, which sits between $5 million and $10
million.

PowerShield’s system monitors whether
individual battery cells, often numbering into their
thousands at one site, and the system as a whole, are
working. The data transmits daily to PowerShield’s secure
server and it also has a remote reporting service that gives
customers detailed analysis so they’re alerted of any
potential dangers and the need for preventative
maintenance.

In New Zealand PowerShield monitors the
batteries for Meridian’s wind farms, Genesis Energy’s
Huntly power station, Auckland Watercare’s urban water
reservoirs, the Department of Internal Affairs, and
SkyCity’s
casinos.

(BusinessDesk)

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