Tag Archive: China

Manufacturing is on the Move

August 17th, 2019

 

Reshoring was at record levels in 2018! Manufacturers are starting to return as they see the total costs of offshoring combined with the rising costs in China and improved competitiveness of the U.S.

According to an Industry Week article by Harry Moser, almost 1400 companies announced the return of 145,000 jobs in the last year. This trend was starting to occur prior to the tariffs. Now, the tariffs are expediting the return. Manufacturers are also realizing they can gain a competitive edge with rapid customization close to their customer base.

Additionally, even in commodity products, companies are reevaluating how to remain competitive and diversified. Hasbro is the latest company to look at diversifying away from China. According to Industry Week, Hasbro, the largest toy maker globally, said that it planned to move from 75% to 50% production in China by the end of 2020. They are looking at Vietnam and India.

There is a transformation occurring. Executives are more concerned about relying on any one source of production (China), and are diversifying. Intel is reviewing its global supply chain.  And, there are rumblings that Apple and Amazon are working on a plan B.

What Should We Consider and/or What Impacts Could Arise?
Speed and agility are critical to thrive in today’s marketplace. Start thinking about how you can radically reduce lead times while accelerating cash flow (reducing inventory levels) and increasing profitability. It is no easy task . Yet, it is what is required to thrive in today’s Amazon-impacted world. What can you do to get ahead of this curve?

Like the big dogs from the Industry Week article, should you be thinking about diversification? Or should you be re-shoring? Or should you buck the trend and offshore while everyone else is re-shoring? There are many companies who would be in far better shape if they had taken that approach 10-20 years ago when every Board member wanted to see an increase in outsourcing. There are no perfect answers except to be thinking about these impacts on your industry, your supply chain partners and on your company so that you can take a proactive stance instead of a reactive one. What will you do to successfully navigate these waters?

Certainly, re-shoring, near-shoring and diversifying are topics related to creating a resilient supply chain. If you are interested in an assessment of your situation, contact us. You’ll find more information on these types of topics on our resilient supply chain series.



How Any U.S. Company Can Survive a Trade War with China

August 5th, 2019

 

With all that is going on with China in terms of trade wars, currencies, natural resources and more, it begs the question of what we should be thinking about doing business with China. Is it prudent?

Thanks to APICS Inland Empire and International Business Attorney and expert, John Tulac, we are sharing APICS-IE’s webinar on “How any Company Can Survive a Trade War with China”.

Note: The webinar is about 60 minutes.

What Should We Consider and/or What Impacts Could Arise?
We should be aware and considering potential impacts on our business. Think about any direct ties to China with supply as well as indirect ties with our extended supply chain. Undoubtedly, everyone has at least an indirect tie to China, and so we all better think about impacts and implications!

Stay on top of trends and highlights. Get involved with organizations such as APICS-IE to participate in events and network with resources. For example, make plans to join our semi-annual symposiums where we feature an  executive panel and networking opportunities.  Mark your calendar for our Fall 2019 Symposium on “Collaborating for Advanced Manufacturing & Supply Chain Success“.

Also, contact experts such as John Tulac to help navigate more complex situations. Remember, a penny saved that costs you thousands and hundreds of thousands down-the-line is by no means “a penny saved”.

Certainly, the topic of trade wars relates squarely in the resilient supply chain camp. If you are interested in a resilient supply chain assessment, contact us. You’ll find more information on these types of topics on our resilient supply chain series.

 



Are You Able to be Resilient in Your Decision Making?

November 12th, 2018

 

As we kick off our new series “The Resilient Supply Chain”, we are thinking about all the aspects of resiliency.  It is overwhelming as to the volatility of almost every aspect of the end-to-end supply chain. Just in the last month, there have been many events/ factors that have created disruption:

  • U.S. and Mexico reaching a trade agreement
  • U.S. and Canada still at an impasse with respect to trade negotiations
  • U.S. and China still imposing tariffs on each other
    • Ford cancelled plans to produce a small car in China based on these tariffs.
  • Fires have and are plaguing California – the worst in history
  • The Big Island in Hawaii is just starting to pick up the pieces after the volcano
    • We’ve heard about severe impacts on the businesses and customers in that areAnd earlier this week, although not serious (thank goodness), there was an earthquake in the next town over from our office

The Resilient Supply Chain
Instead of panicking as each of these events or disruptors occur, creating a resilient supply chain can provide a proactive approach to this current state market condition.  One of critical aspects of taking a proactive approach instead of a reactive one is to think about whether you are able to be resilient in your decision making.

Here are some considerations:
1.  People – Good decisions stem from good people.  Thus, it always makes sense to start there.  Do you have people in leadership positions and other key roles that you would want to make decisions in your absence?  (Just this past week, a potential client was killed by a drunk driver while he was on a motorcycle. We would certainly rather be prepared for winning the lottery but the question remains:  Are your people ready to make decisions?)

2.  Data – Although good people can make up for a lot, you also need the “right” information and relevant background to make key decisions.  Do your systems allow you to retrieve meaningful data for decision making? Every single ERP selection client prioritizes business intelligence/dashboard reporting tools as high on their list of priorities for good reason!

3.  Input – Although this can be considered part of people and data, it’s worth calling out on its own.  Do you gain input from trusted sources (colleagues, customers, suppliers, trade association colleagues, industry groups and more)?  Recently, our APICS-IE instructors had an issue arise with updated learning materials – in essence, they were not set up for learning to occur.  Clearly a BIG issue for an education and value-focused organization! Fortunately, after 3 or 4 calls, we had several ideas on how to dramatically improve the process and overcome the obstacle.  In another example that occurred recently for a client project, we had a significant challenge in explaining a complex concept that was critical to success. If we didn’t get past that barrier, results would NOT follow.  It took 5 or 6 calls with excellent input from all as well as testing out ideas before we came up with the ideal way to convey the concept, and it “worked”!

4.  Speed – Slow decision making is worse than no decision making.  In today’s Amazonian marketplace, your customers will be LONG gone if you are slow to make decisions.  I’ve noticed that I am a LOT less tolerant of slow responsiveness even in my own business (and for things I would have been fine with a year ago).  I have to be to remain viable, and so do you! Thus, as it relates to having the ‘right’ people with the ‘right’ data and ‘right’ input, you must also have them at the ‘right’ time.

Have you put thought into your decision-making process before decisions must occur?  Ponder these critical elements, put them in place and you’ll be prepared to successfully navigate the volatility of today’s business decisions.    

 



Steel Imports at the Lowest Two-Year Level Since 2002-2003

November 30th, 2017

Steel Imports at the Lowest Two Year Level Since 2002-2003

According to Industry Week, steel imports from 2016-17 are on track to be the lowest in almost 15 years!  What is more remarkable is that Obama and Trump both proactively limited steel imports.   Obama’s administration passed import tariffs which started the decline, and Trump ordered an investigation into whether steel imports threatened national security which might have spurred China’s recent decision to eliminate dirty capacity in an environmental crackdown.  China’s crackdown has already impacted a few of my clients.  Their manufacturing facilities shut down without notice, creating inventory shortages and service issues.  Are you thinking ahead as to what is likely to happen in your industry?  Or impact your industry or business?

What Should We Consider and/or What Impacts Could Arise?
How many business owners and executives impacted by the environmental crackdown in China were prepared?   I bet not nearly as many as those who wished they were!  In today’s Amazon-impacted world, service issues are unacceptable – not only will customers complain (if you are lucky), but they will also find another source (whether immediate or down-the-line, it has a high likelihood to occur).  How costly is it to lose a customer?  Unimaginably high for my clients!

Certainly the environmental crackdown isn’t the only impact of this situation.  The steel suppliers most likely had a bump in sales.  Were they ready to take on the new business or distracted with saving their pennies in a cutback mentality with declining sales and missed the opportunity?   As my consulting colleague said recently, the millennial generation wants to quickly share information especially if it promotes a higher purpose.  I see the same theme here….SPEED is paramount!  Are you planning for success or your worse case?  It seems obvious yet I run across many executives with the first thought to plan for worst case, thus realizing their “worst case” instead of success.  What are you planning to achieve?

 



Are You Reshoring?

October 5th, 2017
reshoring and manufacturing

Many U.S. companies active in China have moved some operations out of the country – 38% relocated to North America.

My APICS Inland Empire Chapter hosted a program on “Changing Trade Policies and its Effect on Reshoring” with Michele Nash-Hoff, author of “Rebuild Manufacturing – the key to American Prosperity”. And, interestingly, the Institute of Management Accountants (IMA) Orange County chose “Onshoring Profits: Manufacturing is Not Dead Yet” from a long list of topics and asked that I speak on its impact. Thus, it seems only appropriate to discuss a few common themes:

  1. U.S. firms are leaving China as conditions worsen. Actually, 25% of U.S. companies active in China have moved some operations out of the country.  38% relocated to North America.
  2. In 2014/2015, parity was reached between offshoring & returning jobs.
  3. 7 industries have reached the tipping point of returning to the U.S. and these sectors account for 70% of U.S. imports. For example, computer electronics, electrical equipment, and furniture make the list.
  4. Using purchase price or landed cost do NOT capture total cost of ownership and can lead to incorrect sourcing decisions from a financial viewpoint.
  5. 70% of executives are thinking about reshoring.

Where are you sourcing from currently? Don’t just jump on the new bandwagon of reshoring – but you should give your total cost of ownership a second look as well as dig into your customers’ expectations and sourcing impacts. You might just be surprised as to what this new view tells you!

 

Did you like this article? Continue reading: Reshoring Gains 

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