The Attraction of Local Manufacture during periods of high Exchange Rates

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The attraction of Local Manufacture during periods of high Exchange Rates

  A key part of any purchaser’s job is to ensure that their place of employment remains competitive at all times, which leads to negotiation with suppliers in order to drive down purchase prices. It is not uncommon for companies to be attracted to the relatively low cost of imported, complete cable assemblies because, on the face of it, this always presents itself as an area where cost savings can be achieved. Add to this the relatively high cost of RF cables assemblies and, if managed correctly, it would seem that massive cost savings can be achieved. But does this perception hold true during times of a weakening Rand, or, indeed, at all?

  The answer to this conundrum is more complicated than merely a quick, courtesy glance at a Dollar Price multiplied by an exchange rate. Firstly, one thing which catches out many less experienced companies, is the import duty of 15% applicable to imported RF cable assemblies. So all of the input costs to the completed assembly, being the raw materials (RF connectors, heatshrink and cable), plus the labor content are all effectively  increased by this duty.  Secondly there is the added freight. Unless one has the luxury of catering for a 12 week component lead-time, air freight is usually selected, and this adds significant cost to cable assemblies, easily a further 20-30% onto the cost price.

  All of the above costs are of course 100% linked to the exchange rate, meaning that during a period of a weakening Rand, as we experienced over August / September this year, landed cost of any imported products begins to spiral upwards very quickly.

  As a comparison, the input costs for locally manufactured assemblies carry some stark differences. Firstly, the duty on the imported connectors is 5%, not 15 % as is the case for a complete, imported assembly. The physical RF Cable itself still carries a 15% duty, and the goods themselves still have to be transported to South Africa, but this is normally done in bulk, via sea freight, which yields a far lower landed cost price for the materials vs air freight. The labor content for the completed assembly is a local Rand input cost, unaffected by the exchange rate.

   The complexity of the input costs can be summarized as follows – particularly when the Rand is weak,  local pricing and relatively fast turnaround time are both hugely attractive to customers. This is why we continue to support the local market with locally manufactured cables. Not only do we feel strongly about preserving and growing local jobs, but when managed correctly, local manufacture can be a highly attractive source of supply for local companies.

  Our Operators are trained to IPC/WHMA-A-620 standards, which is an international standard, ensuring that the quality of the work remains of a high standard regardless of the choice of connector (SMA, BNC, N-TPE, MCX, MMCX, SMA and U-FL being the common choices). We make use of semi-automated coaxial strippers, which ensures that consistency is maintained  across multiple batches of assemblies, irrespective whether a client has elected to use RG58, RG174, RG316, LMR195, LMR200, LMR400 or even 1.13mm coaxial cable. In addition, as an ISO9001:2015 company, all our test and manufacturing equipment is calibrated regularly, ensuring that when customers require test certificates, these are provided with confidence in the accuracy of the information being presented.

  For further information on our local RF Cabling capabilities, , contact Chris Viveiros on 011 791 1033 / chris@otto.co.za or via Skype at christopher.viveiros.

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