The success of your product in the local market is a good indicator of its potential success in international markets, especially those where similar market conditions prevail. If your product does not compare favourably the changes of international success is very slim.
Capacity planning is especially important for companies preparing to enter an export market/s. Estimating whether your company has sufficient manufacturing capacity to meet customer demand in a timely manner is a priority. The capability to manufacture the correct quantities on time will depend on how well you manage the following:
- Understand existing capacity
- Estimate capacity required.
Quality involves national or international standards and determines where the product would be positioned in a market. There are various aspects of quality that should be considered:
- Design standards: This is usually defined by the way of specifications, national and/or international standards, grades, drawings, etc.
- Conformance: After a product has been designed, you may find that your manufacturing processes do not always produce each unit in conformity to the required quality. Therefore the quality of operation and the production must be continually checked against original specification.
- Marketability: Regardless of how well the product has been designed, specifications prepared and placed in production, conformance to specification checked and confirmed, and yet you may find that the product still does not meet with customer satisfaction
- Operational: The operational aspects of quality are minimum waste, scrap, repair or rework, downtime, absenteeism and certainly minimum cost.
- Economical: This relates to the optimum use of resources at your disposal. Among these are materials, machines, money, land, energy and people.
- Environmental : This includes such things as ecology, clean air, unpolluted waters, tolerable noise levels, safe waste and the making use of recyclable materials in your production and or packaging. Safety and suitable working conditions, training, health care and ethical working standards for all staff members.
- develop quality standards
- develop inspection methods
- develop quality control procedures for each of the above
The production function can be seen as a chain of events that starts with raw materials, the production process and ends with customer satisfaction. In other words, purchasing, manufacturing and distribution (including merchandising and or after-sales service), are all parts of one integrated production system. Strong "supply chain management", managing the system from the input procurement to consumption, ensures happy clientele. In order to build capacity it is necessary to secure inputs and give consideration to:
- How much will I need?
- When will I need it?
- From where will it be sourced?
- At what price?
Timely production of export orders will first depend on your production capacity and the efficiency of your distribution/delivery divisions. If you do not have the means to increase your existing capacity, or you cannot deliver on time then you cannot hope to meet the demands of your international buyers. Timely production of the quantities needed would also require careful planning. A series of forecasts would need to be made:
- The first forecast must be sales.
- The second forecast should be production.
- You must then use the production forecast to calculate the needs input. This would then give you your supply forecast.
- You would have an estimate of sales, a worksheet of production and an idea of how much of which input would be required for product and when.
- Manufacturing: based on the sales order, the sales division would forward a manufacturing order to production
- Materials: production would calculate the input needs and costs required to produce the order
- Operations: production would calculate the need for operations and labour
- Resource: production asks finance for resources and cross checks its estimates, taking into account exchange rates and finance charges if applicable.
- Packing, marking and labelling the goods
- Inspecting the goods prior to shipment
- Placing the goods into a final shipper (container 6 or 12 metre) for international transportation and the preparation of shipping schedules and documentation, completes the requirements for "timely production"
It is most likely that SMEs will be competing on a basis of cost. Therefore, knowledge of your production costs and the ability to estimate the production costs of your competitors can be vital for your success. To know your own costs you will need a cost accounting systems and procedures that will give you an accurate estimate of both direct and indirect materials, labour and expense costs. It is advantageous to have information on your competitors' costs per unit. Once these estimates are available, you must take planned steps to ensure that you are on par with your competitors, or your only option would be to charge a higher price and justify this increase to your buyer on the basis of an appropriate positioning strategy.
The South African Government through the Department of Trade, Industry and Competition and the Department of Finance have made provisions in the Customs Act for several purposes under which imported goods may be entered into South Africa. For example, the importer may wish to store goods in a bonded warehouse without immediate payment of duty; or the goods may be destined for an importer who is a registered manufacturer under the provision of Schedule 3 (Industrial rebate store) or Schedule 4 (General rebate store) of the Customs Act allowing the products/inputs to enter into South Africa with full rebate or partial rebate of duty.
Rebates and Concessions
- Schedule 3 of the Customs Act enumerates certain goods used in certain industries (those identified by the Department of Trade and Industry), and provides that, when goods/inputs are imported for the approved use, the duty normally due upon them may be rebated either partially or totally. Any importer wishing to make use of any rebate under this Schedule can only do so if he is registered with Customs and Excise as a manufacturer entitled to obtain the goods under rebate. For more information on Schedule 3 contact The Receiver of Revenue Head office in Pretoria
- Schedule 4 provides for rebate of customs duty under the following circumstances: Part 1. Full rebate in respect of certain goods imported by, or for transfer to, certain specified persons. Part 2. Temporary rebate in respect of goods mentioned in items 460.01 onwards, either on production of the prescribed permits or according to the circumstances stipulated there on. Part 3. Temporary admission under rebate of duty of certain goods which will subsequently be re-exported.
- Schedule 5 provides for refunds or drawbacks of duty on certain goods under the following circumstances:
Part 1. Drawback of duty paid at time of importation on goods used in the manufacture of certain specified goods re-exported.
Part 2. Refund of duty on imported goods if they:
- are exported in the same state to a party other than the original seller or:
- do not conform to the indent, and in respect of which the supplier has agreed to take the goods back and to issue a full credit note or;
- in respect of an error in the assessment of duty, or the calculating of the amount thereof: if the goods have been damaged, destroyed or irrecoverably lost in circumstances beyond the importer's control prior to the release of the goods into the production process or: all or part of such goods having been short landed, short-shipped or short-packed or: in respect of the adjustment of any bill of entry (import) in terms of Section 40 (3) of the Customs and Excise Act of 1964
By offering new or unique products into an international market can give your company a competitive edge. However when introducing a new product into a new market, much more promotion and advertising would be required.
Product features can be categorised under the following headings:
- Physical features of the product/s intended for export (size, colour, presentation - packaging, weight etc)
- Extended features and benefits
- Price (high/low price)
- Image (country, company, product)
- Distribution (exclusive, non-exclusive, fast, direct, after sales service, warrantees)
- Generic Features (the needs, and wants that this product satisfies).
Foreign markets differ in various ways to that of your domestic market to the extent that your product may not be readily accepted by that market. Factors that may effect how your product is marketed include:
- Seasonal consideration
- Cultural differences
- Income levels
- Technical standards
- Business practices
- Legal Environment
- Bilateral and multilateral trade agreements