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Poland Set to be Beneficiary of Rising Mainland Production Costs

East European country claims relocated manufacturing windfall as mainland labour costs continue to soar.

Photo: Jysk: The Danish home-furnishings company leading the production relocation charge to Poland.
Jysk: The Danish home-furnishings company leading the production relocation charge to Poland.
Photo: Jysk: The Danish home-furnishings company leading the production relocation charge to Poland.
Jysk: The Danish home-furnishings company leading the production relocation charge to Poland.

Poland is claiming to be one of the beneficiaries of rising labour costs in China, with a number of businesses said to have relocated their production facilities to the country. Among those to have already made the move are Jysk, the Danish home-furnishings giant, and Jabil, the Florida-headquartered electronics manufacturer.

Jysk has long-sourced much of its garden furniture range from factories in Hangzhou and Wuhan. Now, however, it has announced plans to relocate its production to Eastern Europe, with Poland expected to be the preferred location for a number of its products. It is believed that the country's low cost base and proximity to many of Jysk's key export destinations have been the deciding factors in the move.

Jabil, too, has cited rising production costs as a key factor. At present, the company has production facilities in a number of locations across China, including Yantai, Wuhan and Chengdu, but it has now shifted much of its manufacture of automotive components to Kwidzyn, with several hundred jobs said to have been created in this northern Polish town.

While this trend seems to be accelerating, production work has actually been shifting from China to Poland for several years. In 2013, Prochnik, one of Poland's leading manufacturers of men's fashion wear, brought its production back to its base in Lodz, Poland's third-largest city, after outsourcing it to China seven years earlier. Explaining the move, the company said that, while once it was 70% cheaper to manufacture in China than Poland, the difference had now dropped to less than 10%.

In the wake of Prochnik's decision, a number of other Polish clothing companies looked to follow suit, including LPP, the Gdansk-based owner of the Reserved, Mohito and Cropp brands. While the company has maintained a manufacturing presence in China, its growing line of fast-fashion items is now manufactured in Poland. Although the company is said to be committed to producing more of its range in its home country, it has been hampered by the comparatively small capacity of many Polish clothing factories.

Among the other companies to have made the move out of China are Espersen, the Danish frozen-fish business, and the Baby Design Group, a Warsaw-based pram manufacturer. In the case of Espersen, it is now also looking to close its processing facilities in Demark and centralise all of it production in Koszalin, a city in Poland's northwest region. Faced with rising costs in China, the Baby Design Group, meanwhile has switched much of its production to a purpose-built plant within the Katowice Special Economic Zone, a site that is already home to more than 250 businesses, collectively employing some 65,000 staff.

Not every business relocating to Poland, however, is doing so solely on cost grounds. eSmoking World, a subsidiary of the Shanghai-headquartered Chic Group and one of the world's largest manufacturers of e-cigarettes, has shifted much of its production to the town of Ostrzeszow, citing quality control as the key reason. It is believed that much of the output of its China plants has been falling short of the stringent quality standards the EU applies to the sector.

Anna Dowgiallo, Warsaw Consultant

Content provided by Picture: HKTDC Research
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