Safety in numbers - The benefits of clustering for manufacturers

Emperor penguins huddle together to share warmth and protect each other during the intense winds of the harsh Antarctic storms.

Fortunately, it’s not just penguins that can benefit from huddling together. Here, Jonathan Wilkins, marketing director of obsolete industrial parts supplier EU Automation, explains why manufacturers form clusters around the world. 

Clustering is when businesses operating in the same industry concentrate geographically. It doesn’t occur by chance — businesses can gain numerous benefits from locating themselves close to similar companies or organisations that form part of their supply chain. The concentration of resources means costs for goods transportation are reduced and overall efficiency and productivity is increased. 

Easy access to resources is essential, especially if a plant is in downtime while a spare part is being sourced. Clustering helps manufacturers obtain resources quickly and EU Automation has offices around the globe to ensure obsolete spare parts can also be easily accessed. 

Clustering also means businesses compete with others on their doorstep and observe what their competitors are doing, whether that be introducing new technology, adopting new business models or offering new services. This close proximity of competition encourages businesses to improve, which drives advancements in the industry. 

Another advantage of clustering is that the area attracts large numbers of skilled workers and customers. This gives the local economy a boost while helping companies to keep business thriving. 

In 2016, the Indian Government announced it was funding the development of an electronics manufacturing cluster in the Shendra Five Star industrial area. While developing countries clearly recognise the economic benefits of clustering, most advanced manufacturing clusters currently exist in developed countries. 

Silverstone, UK

Following a report published in 2016, it was revealed that around 4,000 companies operating in precision engineering were based within a one-hour radius of the Silverstone motor racing circuit. These businesses serve a variety of manufacturing sectors including aerospace, automotive, electronics and motorsport. 

The local community values its manufacturing cluster and the economic benefits it brings. A not-for-profit organisation called the Silverstone Technology Cluster has been established to support the growth of the local industry and attract investment. 

Silicon Valley, US

The technology cluster in Silicon Valley, California originated in the 1990s when several computer technology companies emerged in the area. The concentration of skills and resources attracted many technology start-ups, which set off a domino effect where established companies expanded their offices in the region and more companies relocated to the area. 

Silicon Valley is where the world’s first microprocessor and microcomputer were developed and is now known as a global centre of technological innovation. It is home to many of the world’s largest technology corporations, including Apple, Chevron and Cisco Systems, as well as thousands of start-up companies. 

Shenzhen, China

Shenzhen used to be viewed as a poor area of China but in the last 30 years it has developed into a manufacturing hub often referred to as China’s Silicon Valley. 30,000 science and technology companies are located in the region, including electronics manufacturers Apple, Hewlett-Packard, IBM and Foxconn. 

Shenzhen has a modern shipping infrastructure and is close to China’s border with Hong Kong, which facilitates excellent connectivity with the rest of the world. The government supports and encourages investment in the manufacturing cluster by providing tax exemptions for entrepreneurs and businesses, which also helps to attract skilled workers to the area. 

Penguins believe in safety in numbers and so do manufacturers. The manufacturing industry has advanced enormously in recent years and has seen the beginning of the fourth industrial revolution. Perhaps this is in part thanks to the competitive drive that businesses have gained from clustering together.

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