Global procurement leaders are focusing more and more on balancing the off-shore and on-shore manufactured content within their equipment or manufactured products. With China’s admission into the World Trade Organization in 2001, the United States saw a shift of production into China as companies chased lower cost sourcing options. Since 2001, much has changed, and today, best practices in procurement demands a more holistic view of sourcing where the cost of speed, cost of oversight, impact of poor quality, and value of advanced supply-chain communications techniques are more properly considered.
With the election of Donald J. Trump as the 45th President of the United States, forward looking supply- chain executives are thinking ahead as to how to reorient their supply-chains’ center-of-gravity to ensure their company is managing risk effectively as they continue to compete in the global marketplace.
Before you dive into an on-shoring initiative, it is prudent to take a measure twice, cut once approach. In order to make a compelling case for on-shoring, your boss wants you to take the following 6 things into consideration:
1. Speed to Market – It’s clearer every day that end customers demand what they need, when they need it, and will not tolerate anything less. Understanding how your customer’s value this speed (and are therefore willing to pay for it) allows supply-chain managers to price this value into their on-shoring analysis.
2. Lower Working Capital Requirements – With a less sprawling, more agile US-based supply-chain, a company will no longer need to tie up as much money in inventory, thus freeing up cash.
3. Some Reengineering Required – Whether the product or parts to be on-shored were developed abroad or shipped over in the mid-2000s, they have likely morphed since then and have been supported with labor intensive manufacturing processes that are appropriate for low-skill, low-wage countries like China. As this work is on-shored, reviewing all drawings and looking at how to use a combination of DFM and automation to ensure excellent value is provided by your US- based supplier is an essential step in the process and one that companies cannot afford to overlook.
4. Quality Expectations Can Be Increased – While Chinese suppliers vary in their ability to deliver quality products to print, it’s fair to say that on average, their quality is inferior to that of American suppliers. Therefore, it is imperative that these American suppliers are held to a higher set of expectations in terms of delivering parts in conformance so that you as the supply- chain manager can realize savings accrued from a supply-chain capable of delivering higher quality. You’re now working with suppliers that are able to deliver more – demand it from them.
5. Communication is King – With shared language and culture, much more can happen much more efficiently. A supply-chain executive must force the realization of this value by pushing for team conference calls, design reviews, forecast sharing and other rapid response and resolution business processes. There is value to your company in enabling higher-level communications within your supply chain, don’t treat this as a theoretical goal, but take action to ensure the impact is realized in your company’s bottom-line.
6. Focus on Doing More – Having capable, high-quality, and responsive suppliers providing your company with excellent performance allows you to spend more of your time managing continuous improvement efforts. You will not need to spend as much time fighting fires 12 time zones away in Mandarin Chinese. Time is the scarcest resource you have – use it wisely to provide your customers with more value!
About the Author:
Andy Mulkerin (General Manager of APX York Sheet Metal) has 20 years of experience leading advanced technology development programs and overseeing global manufacturing operations. He has managed production/operations within the chemical processing, electronics, and commercial nuclear industries. He has worked on multi-billion-dollar investment and infrastructure deals, as well as spent more than a decade advising US companies on how to successfully navigate the Chinese energy market. Andy led initiatives setting up fabrication operations in China to produce equipment to the ASME NQA-1 and NNSA’s HAF604 specifications.
Andy has successfully driven technology transfer initiatives for dozens of Western energy companies including Babcock & Wilcox, Bechtel, Thermo Fisher Scientific, Energy Solutions and TerraPower. Andy is a recognized global leader in the field of US-China nuclear energy strategy and has been cited by the Wall Street Journal and the New York Times. Andy has collaborated on numerous initiatives with the US Department of Commerce and Department of Energy related to maximizing commercial opportunities for US companies in China. Additionally, Andy also was part of the core Blu-ray strategy team for Sony in Tokyo, Japan.
Andy has a BS in Chemical Engineering from Columbia University and an MBA from Harvard Business School.