Tag Archive: in-sourcing

Manufacturing is HOT!

February 19th, 2018

Supply Chain Briefing

In the last week, not only have there been several articles about the positive strides manufacturing is making but it also has come up in several presentations we’ve attended such as the Inland Empire Economic Forecast.  

Here is a compilation of just a few of the HOT topics and trends:

  • There are plenty of customers and consumers are in the U.S. – with the Amazon Effect (customers expecting rapid deliveries, customized product and 24/7 accessibility), locating closer to the customer is advantageous.
  • Automation and technology are gaining rapidly – the more technology that makes sense in our factories, the less lower-skilled people required.  That makes U.S. factories more competitive!
  • High-tech resources are in the U.S. – the more technology and automation, the higher skill level required.  Those folks are close by.
  • According to Industry Week, the NAM Manufacturers’ Outlook Survey, 95% of manufacturers are are optimistic at their company’s prospects.
  • According to an economic forecast I attended by a professor at Claremont McKenna, manufacturing is vital to the economy and  jobs since it pays well, similarly to construction.  Clients are hiring.
  • Deregulation and tax reform are definitely positive for manufacturers and improve manufacturers’ competitiveness vs. other countries.
  • Harvey Mudd (the #1 engineering school in the U.S.) has seen a significant increase in the popularity of manufacturing careers.

    Manufacturing is attractive once again….

Are you ready to grow your manufacturing presence?

What Should We Consider and/or What Impacts Could Arise?
Let’s sum this up with the following question:  Are you ready to achieve scalable, profitable growth?  

There are many aspects to consider in answering this question:  

1) Are your people prepared?  Do they have the appropriate skills, education and experiences?  Are they cross-trained?  Are they prepared for growth?  Do you have enough people?
 2) Will your processes support 25% growth before hitting the wall?  50%?  100%?  How agile are you?  Would you have to throw people at it (typically because you haven’t prepared in advance) or can you address with a combination of people, processes and technology?
3) Will your systems and technology infrastructure support your growth?  This is one of the most challenging as it can appear overwhelming in terms of the cost to upgrade your system; however, it can also become pennies in the scheme of things if you cannot keep up and service suffers, let alone margins suffer.  Also, are you considering new technologies and automation to keep your costs in line?
4) Are you thinking through in-sourcing, outsourcing, near-sourcing and keeping all of your options open?  It is rare that I run across a client considering both in-sourcing and out-sourcing simultaneously but it just might make sense….
5) Are your finances in order to support growth?
6) Are your supply chain partners and trusted advisors ready for growth?

Gather your team and start discussing these topics because it is coming!


Manufacturing Expands at Fastest Rate Since 2010

February 15th, 2017

According to the Institute for Supply Management’s Manufacturing Purchasing Managers’ Index, manufacturing is on an upswing. The composite index rose in January, making it the fifth straight monthly expansion. New orders and production grew strongly! And the Dallas Federal Reserve Bank reported that manufacturing activity expanded at its fastest pace since April 2010 — more importantly, leaders are positive about the next six months. In fact, the forward-looking outlook measure jumped to a level not seen in 12 years! Are you ready?

manufacturing growth

What Should We Consider and/or What Impacts Could Arise?

Although this is great news for manufacturing, we should make sure we are prepared for success. Do we have the capacity and staffing to meet our customer requirements? Do we have the skills and talent to grow successfully? And, are we building agility and flexibility into our systems? According to my recent outsourcing research, 70% of executives are considering near-sourcing and in-sourcing strategies. Thus, I expect these numbers to continue to grow.

Many of my clients struggle to find, retain and train talent. Thus, I have dusted off my Skills Gap research from late 2013 and am refreshing it. I’d appreciate your feedback and insights for my research. I’ll keep you in the loop on the results.

In the interim, start thinking about the skills gap. Are you partnering with community colleges? Trade associations like APICS? Other local companies? Even competitors? Consider involving top notch executive recruiters, partnering with temporary agencies and supplementing with consultants and contractors. Success will come to those companies ready to serve the customer when the customer wants it! We cannot afford to delay.


Outsourcing, Insourcing or Near-Sourcing?

November 8th, 2016
outsourcing near-sourcing insourcing

Whether outsourcing, insourcing or near-sourcing or a combination of all three, manufacturers need to reassess their strategies to measure risk and ROI.

We are managing in an Amazon-impacted world. Customers expect rapid deliveries, 24/7 accessibility and products and services tailored to their needs. Customers are not willing to wait. In fact, they prefer same-day delivery.

Our manufacturing clients are experiencing lead time reduction requests from their customers. Some are requests; many are required to maintain the business. It is wide spread. Building products that clients ship within a day. Food clients ship rapidly — within a day or a week at most. Optics, industrial equipment, consumer products — across-the-board requests for shorter lead times. And even clients such as aerospace with traditionally long lead times have slashed lead times by 50%.These provide extreme challenges with extended supply chains.

If customer expectations weren’t enough, labor costs in China and other outsourced manufacturing geographies are increasing. Other costs including sometimes hidden costs are high as well. The bottom line is that for non-commodity products, the total costs of outsourcing are rising to parity with North America sources.

And, risks abound. Natural disasters, political conflict, port strikes, bankruptcies and more. Thus, executives are reacting to these factors and re-thinking their strategies about outsourcing, insourcing and near-sourcing.

Please help contribute to our research study. If you have outsourced, insourced or near-sourced or if you have thought about and/or evaluated any of these options or plan to in the future, we’d appreciate your input. Complete the survey and help others facing the same decisions make better decisions. Also, please register if you are interested in receiving the results.

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Outsourcing, In-sourcing, Near-sourcing?

June 10th, 2014
American businesses may have miscalculated costs and benefits when they joined the outsourcing bandwagon. With the tide rolling back, what direction should you take?

American businesses may have miscalculated costs and benefits when they joined the outsourcing bandwagon. With the tide rolling back, what direction should you take?

For many years, companies outsourced as a natural course of activity. Unfortunately, often times, they didn’t even perform an analysis of the total benefit; instead, everyone else was outsourcing and so CEOs, Board of Directors and the like expected it to occur. Now, I host executive discussions and the topic arises in reverse. Let’s bring back manufacturing to the U.S. Even Walmart is promoting their investment into U.S. manufacturing….

Of course, I advocate looking at the facts. It is not so easy to move factories, equipment and people all around. Take stock of what you are doing and consider the following factors:

1. Customer requirements – Many of the reasons folks are considering in-sourcing or near-sourcing is because customer requirements were missed in the initial assessment. How quickly must you respond?  With R&D? Customer deliveries? Answers? Is your process set up to succeed?

2. Total cost – I doubt anyone who outsourced thought it would become a cost detriment to do so; however, in many cases, it has! Consider ALL costs – transportation, IP, inventory carrying cost, rising wages, etc.  We have gotten to the point where the total cost for value-add products is close to equal.

3. Cost driver – Consider the costs that matter in your business. Don’t bother even thinking about in-sourcing if you produce a small, light-weight commodity product with a high labor component. Of course it will make sense to produce somewhere else. With that said, which country could change as labor and other costs change? On the other hand, if your product is value-add, bulky, heavy and has stringent customer expectations (across the world), I imagine you wonder why you outsourced in the first place.

4. Strategic – What differentiates you from the competition? Your product? Your service? Your R&D? Keep what is strategic and core to your business within your control.

5. Options – Go back to the beginning. Why are you even considering this topic? What do you want to accomplish? Reduce cost? Get rid of a non-core process? Are there other ways to achieve that same goal? Shouldn’t all options be considered? 

Did you like this article?  Continue reading on this topic:

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