The work we do is becoming more specialized as each day passes. Countries need to focus as well, and they are investing heavily in the development of specific sectors to stay competitive in the global market. This is causing a surge in the creation of specialized industrial hubs. These hubs increase productivity, keep costs low, allow small businesses to get started, and can even play a central role in reducing the environmental impact of manufacturing.
Industrial hubs can help your business too. Sourcing products from industrial hubs can keep your prices low while stabilizing your supply chain. Let’s take a look at how.
What is a global industrial hub?
Industrial hubs are regions that have focused their production around a specific sector. There are different kinds of industrial hubs, including small startup incubators, technology parks, industrial districts, special economic zones (SEZs), and export-processing zones. Larger industrial districts and SEZs can have massive infrastructure integrated to support manufacturing and trade, ranging from harbors and airports to resource refineries and waste-processing facilities.
“There are around 6,000 industrial hubs spread across 147 countries, with a high concentration in emerging and developing economies, particularly in Asia.” (Source: Industrial Hubs and Economic Development: An Introduction)
The size of a hub can range from small groupings of businesses in technology or industrial parks, all the way up to cities and provinces. Silicon Valley is probably the most universally-known industrial hub for technological innovation, but industrial hubs go back to the 1950s when Detroit’s hold on auto manufacturing earned it the title of “Motor City.”
Why are industrial hubs important for manufacturing?
Industrial hubs come with a unique set of benefits for both companies and employees in the industrial parks, and for the companies and consumers that purchase products created in these hubs. Let’s look at 5 ways that industrial hubs improve production processes and foster innovation.
- Industrial hubs break down barriers to innovation
Industrial hubs are inherently communal. By having a large proportion of people employed in a given area in the same sector, there is a higher chance that ideas and information will circulate between different businesses. This sharing of information helps promote innovation and keeps businesses creating what is actually in demand.
- Industrial hubs encourage competition
Businesses don’t invest in improving their products or services if they don’t have to, but when there are more players in the market, improvement becomes a matter of survival. Industrial hubs dial competition way up. It’s easy for companies to not only see how many competitors are around, but also what they charge and what they’re doing to improve their offerings. This market knowledge helps increase the value companies provide to buyers, who could easily take their business elsewhere.
- Industrial hubs stabilize supply chains
Often, industrial hubs will be centered around specific resources that are common in the area. Pakistan, for instance, has a large cotton agricultural industry. Having this raw resource allowed other companies to add more value by converting cotton into fabrics, and these fabrics helped support the growth of apparel manufacturing. The ability to manage the entire supply chain within its borders reduces transportation costs, customs duties, and operational overhead – which means they can pass these savings on to make their products more competitive. This highly-integrated supply chain quickly converted what was a mostly agricultural country into one that provides high-value clothing globally at truly competitive prices.
- Industrial hubs foster high-tech manufacturing
As companies gather together in industrial hubs and focus their efforts around similar sectors, the local market typically becomes more technical as it grows. As companies group together, whole new markets begin to arise and improve the efficiency of their production processes. New companies start designing and selling industrial equipment, and as factories buy in, others follow suit – increasing their capacity to create higher-quality products at scale. Industrial hubs at their core are “incubators of industrialization, productive and technological capability, and innovation” (Source: Industrial Hubs and Economic Development: An Introduction).
- Industrial hubs help combat climate change
One of the most inspiring benefits being provided by industrial hubs is their efforts to making manufacturing more sustainable. Since they are usually planned in advance and built with government support, there can be a high level of eco-friendly technology and sustainable materials and systems integrated into the infrastructure and resource management in these “eco-parks.”
“China has been particularly successful in developing such eco-parks, proving that the environmental footprint can be reduced even though productivity is increased.13 For example, one of its heavy-metal industrial parks achieved a water reuse rate of 97 percent through industrial symbiosis. A study involving 34 Chinese eco-parks found that their ecological performance increased through industrial symbiosis by nearly 90 percent between 2007 and 2010, while their industrial value added grew by more than 60 percent.” (Source: United Nations Industrial Development Organization)
How sourcing from industrial hubs can help your business
If you are sourcing internationally, working with companies from industrial hubs can help you get better deals on higher-quality products. Suppliers from these areas tend to have more technical manufacturing processes that can help them scale their production more reliably to meet your demand without sacrificing quality in the process. So, it’s worth checking if the suppliers you are looking to work with are based in an industrial hub.
Alibaba.com regularly highlights the benefits of these focused industrial hubs by grouping products around regional specialties and global industrial hubs.
Look for regional specialties when sourcing in China
Regional specialties gather products from specific cities or provinces in China that excel at manufacturing a particular type of product. Christmas gifts aren’t made in the North Pole: “up to 80 percent of all the world’s Christmas products are made in China, and about 80 percent of those are manufactured in Yiwu” (Source: Xinhua News).
But if you really want to understand the significant impact industrial hubs can have, look no further than China’s key electronics industrial hub, Shenzhen. It was home to fewer than 50,000 people 50 years ago, but now boasts over 12.5 million inhabitants and produced CN ¥2.7 trillion yuan worth of electronics in 2020 alone (Source: SCIO). Now, over 90% of all electronics will include components sourced from Shenzhen (Source: Wendover Productions).
Diversifying supply chains with global industrial hubs
The majority of products on Alibaba.com come from China, but many people don’t know we have suppliers based all over the world. Many are leading businesses in specialized industrial hubs and have strong advantages worth considering when sourcing. Whether it’s finding affordable clothing made in Southeast Asia, traditionally crafted folded steel knives from Japan, fine wines from the vineyards of Southern France, or high-grade automotive parts and accessories from Germany, the selections from global industrial hubs on Alibaba.com give you a world of options to choose from.
We group similar products that come from global industrial hubs to make it easy to see what products are coming from that particular area. If you want to find products from a specific region or source locally to avoid paying customs duties, this is a great way to see what a specific country has to offer.
