Monday, March 29, 2010

Economic Convergence

Samson/Laquercraft a very large furniture manufacturer originally from Taiwan is opening a factory in Bangladesh. The reason they chose Bangladesh?

It will be Samson's first plant outside China. The company says it can fill some of its product needs at a lower expense in Bangladesh.

The 500,000-square-foot plant will be in the port city of Chittagong in southeast Bangladesh, along the northern coast of the Bay of Bengal. Company officials have been working on the project for about two years. Construction began in October and initial production is set for July.

The plant will produce a line of lower-medium to medium-priced solid and veneer casual dining sets for Samson's U.S. marketing companies, Legacy Classic and Lacquer Craft USA. The company isn't currently producing such sets in China that hit the price points it can achieve in Bangladesh, said Lacquer Craft President Mohamad Amini.

While China remains its main manufacturing hub, the company said it chose Bangladesh because of its lower-cost labor. Amini estimated that labor costs are about 40% of what they are in China.

Of course, they are bringing over Chinese managers and technicians to start the plant up, but that's not new as they did that when they moved to China, too. Laquercraft was one of the first Taiwanese factories to move to China to take advantage of lower labor costs there.

Since furniture is a relatively new industry to Bangladesh, it will take time to train workers and also to get the supply chain in place, Amini said. This includes anything from finish to hardware suppliers.

"There is no furniture presence there," he said, adding that the lack of a furniture infrastructure reminds him of China 15 years ago. "Although we are very optimistic about what we can do there, we will have our share of challenges. But we have done this in China so we know what to do to accomplish our task."

Amini said a team of supervisors, technicians and engineers from China will help get the plant running and train workers.

Prediction: In 20 years, it will be Bangladeshi supervisors, technicians and engineers flying into Somalia to set up the next factory.

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