Guest blog by Zeus Kerravala, Founder and Principal Analyst of ZK Research.
Mitel has announced it is relocating its IP phone production capabilities from China to Gigaset in Germany.
The shift in manufacturing capabilities aims to improve quality and create some stability in a world where there are a seemingly endless number of geopolitical issues.
If there is anything we have learned since the pandemic it's that the global supply chain, as we knew it, is a house of cards.
Most supply chains were built on a foundation of cost efficiency leaving them vulnerable to shipping issues, chip shortages and even a pandemic, which could leave businesses and channel partners stranded without the technology they need.
Mitel will manufacture approximately one million devices annually at their highly automated Bocholt facility in Germany. The first thing customers will notice is an improvement in quality.
Quality engineering
While Mitel devices have always been well made there is no comparison between Chinese manufacturing and German.
Germany is well known globally for precision manufacturing and everything it makes is top quality. Think of the differences between German cars and Chinese manufactured cars. Customers can expect fewer defects and an all-around better manufactured device.
For the CIO, this translates to predictable access to trusted products for a critical part of the communications infrastructure. It’s the peace of mind that comes from knowing an important component of an organization’s Unified Communications (UC) solution is sourced from a region known for its stability and quality control.
The only area where the car analogy does not hold is on price. Typically, German cars are premium priced over Chinese vehicles, but Mitel should save money by not having to ship products back and forth across continents keeping the costs flat or even a bit lower.
Benefits
Also, this should help Mitel lower its carbon footprint, which would then contribute to its customers sustainability initiatives. Given Mitel has a massive footprint in Europe, this will certainly add to the appeal of its products.
For European customers, the simplest and most obvious benefit is shortened lead times. When production moves closer to the end-user, the logistical pipeline shrinks, becoming less susceptible to the inconsistencies of global freight.
In-region customers will benefit from significantly faster delivery times, allowing partners to deploy solutions with a speed that was simply impossible when dealing with trans-continental shipping bottlenecks and port backlogs.
However, the value goes beyond Europe. The fact that Gigaset’s manufacturing processes are TAA-compliant (Trade Agreements Act) is big for US companies. For customers, particularly those dealing with federal contracts or regulated industries, TAA compliance is a necessary requirement.
By ensuring production is handled in a TAA-compliant geography like Germany, Mitel is shielding itself and its customers and partners from future sourcing headaches and compliance risks related to materials originating from non-designated countries.
While the news about phones may not headline grabbing, particularly in this era where everything revolves around AI, they are still critical infrastructure for many employees, particularly front-line workers. In its press release, Mitel highlighted that Frost & Sullivan has the IP phone market valued around $2 billion annually.
Mitel has the broadest set of phones which includes everything from basic handsets to advanced executive phones.
Shifting its IP phone manufacturing to Germany won’t grab the headlines like an AI announcement will, but for the thousands of Mitel customers that rely on phones as part of their communications strategy, this news should create some peace of mind knowing there is greater reliability with phones and won’t be held hostage to global logistic issues.
