ReEngaging the Supply Chain: What Can Job Shops Do?
Category: Supply Chain • Jun 23, 2020
By Kathy Keyes Webster, AMT Exhibitions Content Manager – Correspondence
With the coronavirus pandemic exposing fragility in long and complex supply chains, manufacturers and OEMs are looking to build greater resiliency by shortening their supply chains.
“When manufacturers source closer to home the probability of on-time delivery of a quality product increases,” says Harry Moser, Founder of the not-for-profit Reshoring Initiative® and longtime manufacturer. “There is also less waste in packaging, fuel, and inventory carrying, so it’s better for the environment.”
Since 2010, Moser has helped nearly 250 job shop owners, precision manufacturers, and OEMs evaluate the true cost of sourcing along their supply chain. The Reshoring Initiative documents the success of the reshoring trend, provides calculation tools, and other programs to accelerate the trend. The Initiative reports that in the past decade, more than 700,000 jobs have been brought back from offshore, about half of the 1,400,000 manufacturing jobs needed for recovery.
“The lowest price is not always the lowest cost!” says Wright Engineered Plastics President and CEO Barbara Roberts.
When OEMs source farther from home, they miss about 20 percent of costs related to factors such as inventory carrying, travel to check on quality, shipping, and duties. Also impacting long supply chains are the unexpected catastrophes or black swan events like the current pandemic. Past black swans that impacted supply chains include the 2010 Icelandic volcano eruption, 2016 Fukushima earthquake and nuclear power plant catastrophe, and the 2015 Los Angeles longshoremen strike.
“In about 30 percent of cases, the actual total cost of production in North America is nearly equal or lower than production abroad when you factor in the rising costs of foreign labor, the 2018 tariffs, and dozens of other typically ignored costs,” says Moser. “When you add in risks associated with long supply chains, such as communication lags between engineering and production in different time zones, supplying close to the consumer makes sense.”
The following are a few examples of companies that have benefited from shortening supply chains.
- Lower energy prices in the United States and rising foreign wages drove a large OEM to use AccuRounds, a precision machining manufacturer of turned components, in Avon, Mass. The new work helped AccuRounds double in size.
- After dealing with challenging quality issues, Morey Corporation in Woodridge, Ill., decided to return its sourcing of housings to Illinois from overseas. The move resulted in a 94 percent inventory cut. Subsequently Morey won a $60 million order by using the TCO Estimator (more information below) to compete with a lower priced overseas competitor.
- Pequea, an agriculture machinery manufacturer, moved production from abroad to two sites: Bucks County, Penn., and Circle Gear, a machine shop in Illinois. The relocations improved quality and preserving jobs in Central Pennsylvania as well as made jobs for two other smaller companies.
Six actions you can take to help OEMs reengage within the domestic supply chain
- Add a “Supply Chain Solutions” section to your webpage. Promote the benefits of sourcing close to home in your capabilities, news, company blog, about us, or team sections. Below are examples of how some companies write about it:
- Ask OEMs about their environmental commitment. Long supply chains create more waste in overproduction, inventory, transport fuel, packaging supplies, and wait times. You can show them how sourcing through you can lessen their carbon footprint.
- Help OEMs calculate the true total cost of ownership. Use the Reshoring Initiative’s free online tool: the Total Cost of Ownership (TCO) Estimator®, which includes 30 cost factors. “The TCO Estimator helps buyers to buy smarter and sellers to sell smarter,” says Moser.
- Use the Reshoring Initiative’s Import Substitution Program to Identify major importers to help you convince importing companies to source from you. The Reshoring Initiative provides data on importers of products you produce or could produce.
- Help OEMs determine if you could help them meet “Made in America” specs. One way to do this is to use the Reshoring Initiative’s Supply Chain Gaps Program to identify products with high imports and no domestic sources so you can become the only U.S. producer and your customer can benefit from a “Made in America” label.
- Call on current and potential customers. Of course, nothing can replace relationships. Touch base with customers to let them know about your capabilities, your dedication to quality, new machines, digital manufacturing solutions, and commitment to your community.
Rebuilding the Supply Chain
Whether you are an advanced manufacturer, job shop owner, or OEM, you are in the midst of your own supply chain challenges, uncertainties, and questions. In an extraordinary effort to support you, AMT and IMTS are dedicating signiﬁcant staff and ﬁnancial resources to help you rethink, reengage, and reestablish supply chains. Visit www.IMTS.com/SupplyChain to learn more!
Have you helped an OEM or manufacturer source closer to production? Share your experience at IMTS.com/stories.