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Outsourcing Manufacturing to Romania and the Region - Risk or Opportunity?

The logistic restrictions generated by the COVID pandemic for over two years have shifted the major manufacturers’ outsourcing strategies and made them look closer to home, for alternative solutions...
Aug 01, 2022

The logistic restrictions generated by the COVID pandemic for over two years have shifted the major manufacturers’ outsourcing strategies and made them look closer to home, for alternative solutions.

The delays and disruptions caused by the pandemic determined Western manufacturers to consider diversifying their options towards Emerging Europe.

In addition to the trade war between the U.S. and China, the Russian war in Ukraine brought a new challenge: that of relocating production capacities from the countries caught in the conflict towards nearby areas in Poland, Romania, the Baltics.

Nearshoring manufacturing to Eastern Europe is not a new concept and it has its advantages over operating in China, in Asia, perhaps also Mexico.

One of the advantages of nearshoring production in the Emerging European low cost countries is the available options of new suppliers and vendors. Most of the professionals in the manufacturing sector in countries such as Romania, Poland, Czechia, Hungary are tech-savvy, skilled and cost-effective. They speak English or German or both and many have an engineering degree.

Having been part of the European supply chain since the 1800s, industrial areas in countries such as Czechia, Slovakia, Romania, Poland, Hungary etc. benefitted from investments and development even during the communist regimes. Once democracy was restored in the 1990s, to this day, their governments consider them a priority and technological up-grading takes place on a regular basis. Foreign investment as well as local entrepreneurs contribute to the manufacturing sectors’ expansion.

Romania is the 2nd largest country in the region. It presents numerous opportunities for production outsourcing and relocation of manufacturing.

For example, according to the Romanian Institute of Statistics, in Q1 2022 compared to Q1 2021, the manufacture of paper and paper products in Romania went up 4.7%, the manufacture of other non-metallic mineral products increased by 13.1%, while the manufacture of machinery and equipment n.e.c. went up 4.4% and the the manufacture of other transport equipment reached a growth of 18.9%

Due to its vicinity to Ukraine and exit to the Black Sea, through the Port of Constanta, Romania represents a logistical hub in the region and one of the major relocation points for manufacturing operations.

For more than 20 years, FRD Center has been assisting foreign Clients in their efforts to identify and select new vendors, new relevant suppliers and to approaching their Decision Makers in view of strategic collaboration for contract-manufacturing, for outsourcing of production and assembly, in several cases followed by joint-ventures or acquisition by the foreign player.

For those companies used to source in one big market, such as China or Mexico, identifying new suppliers in Eastern Europe can be a rather difficult and time-consuming task, even in the situation of having an in-house department dedicated to procurement activities.

To start with, they would have to consider approaching several different countries of rather different sizes, cultures, level of industrial know-how and languages. This process requires considerable resources dedicated to identifying, analyzing and selecting reliable suppliers.

That is why, having a local consultant working for the Foreign Manufacturer rather than for the Local Supplier, can come handy and save a lot of time and hassle in the process for New Suppliers Search and Selection in Eastern Europe.

Here are some Romanian companies that could be a good local partner should you be looking for sourcing of such types of products and services:

Established in 1993 TESS INDUSTRIE SA, a subsidiary of the Conex Group, has grown to become one of the leading Romanian manufacturers of automotive parts and assemblies for machinery and industrial equipment. They specialize in complete exhaust system solutions for the automotive and industrial machinery industries, body parts and various industrial items. In terms of manufacturing capabilities, they use pressing, punching, stamping, welding and painting. From CNC punching to fabrication, finishing and assembly, they offer a wide range of fabrication services.

Based in the NE of Romania and operating from a 5000 square meter manufacturing space, the plant offers the latest sheet metal technology and manufacturing techniques. Recent investments of more than 5 million Euro in equipment and facilities such as fiber laser cutting machine, CNC press breaking, automatic feeding presses, welding equipment, electrostatic painting etc., support them in offering high quality products and services.

GRUPUL INDUSTRIAL COMPONENTE - GIC - represents a group of Romanian companies dedicated entirely to manufacturing components for the automotive industry. With 30 years of experience, they achieved an optimized customer-oriented organizational structure and technological innovation in the 3 sectors they are acting: PLASTIC DIVISION, METAL DIVISION and SYSTEMS & ASSEMBLIES DIVISION.

Located mainly in Arges county (Central Romania), GIC companies are focused on Thermoplastics processing, Metal processing, Manufacturing Systems and assemblies, Tools manufacturing as well as Project management and Engineering.

With more than 125 years of existence, COMPA SA - is major Romanian manufacturing company and one of the main exporters, to 23 countries on 3 continents, located in Sibiu (Central Romania).

According to the FRD Center analysis based on official public data, in 2021, their turnover increased y-t-y with almost 29%.

The main groups of products manufactured by Compa are: components for injection systems; blades, arms and arm heads for windshield wipers; central housing, nozzle ring and rollers for turbochargers; steering gears, steering column components; springs; stamping parts; drive shafts; mechanically welded assemblies; components for air conditioning installations; industrial equipment.

Compa products are assembled on cars like BMW, Mercedes, Peugeot, Renault, Audi, Ford, Fiat, Citroen and Kia. Compa managed to impose and convey the principles of professionalism, building strong, long-term partnerships with leading companies in the automotive industry and beyond: Bosch, Delphi, Honeywell, Fuji, Kiko, Daikin, INA Schaeffler, ThyssenKrupp Bilstein, Takata, Haulotte Group.

ARSAT INDUSTRIE - is another major Romanian metal processing player. Based in Arad (West Romania), they provide high quality metal parts to the most respected global manufacturers and have a strong reputation worldwide. From Aerospace to Automotive, from Medical and the Fast Train Industry, they use micron precision to supply the perfect components. By using almost 100 CNC machines of the latest machining technology, in their state of the art production facility, their skilled engineers can create anything from a 20 gram bolt to a 10 Ton metal piece.

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Author
Jackie Bojor
Director
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