Tag Archive: tariffs

U.S., China Sign Historic Phase One Trade Deal

February 3rd, 2020

According to the National Association of Manufacturers press release, the U.S and China trade deal is an unprecedented phase one win for manufacturers.  Previously the NAM CEO lamented that “China has proven one of the most troubling markets in the world for manufacturers, due to its lack of commitment to free markets, fair competition and reform.” Thus, this statement was high praise for the deal, “It is a remarkable turning point for manufacturers, with the unprecedented and enforceable commitments on critical intellectual property protections to which China has agreed.

There are a myraid of issues in trade with China for manufacturing, and there is debate whether “phase one” went far enough or too far (as both extremes exist); however, according to my recent discussions with international business attorney and China expert John Tulac on future-proofing your manufacturing supply chain, there is quite a bit of risk in China to navigate.

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

Certainly this trade deal relates back to tariffs. Of course, the U.S. agreed to cut tariffs of $120 billion in Chinese goods by half. They also held off on tariffs in December with expectation of the trade deal. Not surprisingly, economists expect this to positively impact growth.

According to a Wall Street Journal article, China agreed to ramp up purchases of U.S. goods and services by $200 billion over the next 2 years. Agricultural products will go up by $32 billion over that period, and China agreed to steps that will provide market access for dairy products, poultry, beef and more.

Most importantly to many manufacturers, there is strong language preventing thefts of trade secrets. That is certainly a huge frustration to manufacturers! We definitely aren’t too comfortable relying upon this but it can be seen as progress and eases some concerns. There is also agreement to create a dispute resolution office as well as to not manipulate currency. The bottom line is there is a host of positive outcomes and progress which provides a base to build upon.

By no means should we jump on expanding manufacturing in China as there are plenty of issues of concern. With that said, this trade deal might provide time for you to evaluate what will make the most sense for your business objectives while reducing negative impacts of tariffs. As costs have gone up in China and working capital increases in importance, manufacturers are starting to look at moving operations closer to customers to support quick turnarounds and a superior customer experience. Technology might provide a strategic advantage with 3D printing, AI, IoT, robotics and more. Commodity products with minimal freight costs are moving to other low cost countries. For example, Vietnam loves manufacturing and is rapidly expanding. There are plenty of options to ponder.

At a minimum, continually re-evaluate your supply chain road map and think through related impacts. These topics certainly relate to our new LMA-i, LMA-Intelligence series including the Amazon Effect, the Resilient Supply Chain and Future-Proofing and contact us if you’d like an assessment path-forward plan to accelerate your bottom line and customer performance.

 

 

 



Is Vietnam the New China?

December 23rd, 2019

Possibly, and “it depends”! China has been moving factories to Vietnam since the early 2000’s, so it is certainly a place to consider. With the tariffs, global uncertainty, rising wages in China and social/political implications, Vietnam can provide a viable alternative especially for certain industries. Vietnam has lower wages, multiple ports, is friendly and has a growing and advancing manufacturing base. Of course, there are always challenges to navigate as well such as a lesser developed infrastructure and less high skilled resources available. The bottom line is that you should at least have Vietnam on your radar.

Some of our clients are sourcing from Vietnam in addition to other countries including China, Mexico and N.A. Similar to China, there is a stark difference between those with money and those working diligently to get by. The picture of the nice looking building is part of the Sofitel Legend Metropole is a fabulous hotel (and happens to be where Donald Trump & Kim Jung-un met), and the other picture is one of Hanoi’s city streets. The vast majority of people cannot afford a car (which is quite expensive in Vietnam, $25,000 for the smallest hatchback) , so there are motorbikes all over the place, driving in seemingly organized chaos. In comparison to China’s wages of $27.50 per day, wages in Vietnam are $6.70 per day. Yes, a stark difference for labor-intensive industries. While Vietnam may not be right for everyone, you should at least be aware of what the country has to offer in terms of sourcing opportunities.

What Should We Consider and/or What Impacts Could Arise?
Countless numbers of organizations outsourced to China 20 years ago.  Many have discovered it wasn’t the smartest decision. Perhaps labor intensity wasn’t high. Perhaps lead time requirements were quick and critical. Perhaps product was delayed at ports or the risks associated with the South China Sea are too great. Perhaps it never came out much ahead when looking at the total cost or perhaps it has evolved to more of a parity. In non-labor intensive industries, I’ve heard several executives re-think the decision. At larger companies with global business, they reoriented the China facilities to supply the Asian markets. In smaller companies, they were stuck for a period of time because they invested heavily including in capital intensive machinery and equipment. And in some cases, it was a brilliant decision.

Whether you have outsourced to China, Vietnam or anywhere else is not relevant. The key question to think about is the impact your decisions have on your customer, your skills requirements, your cost structure, your risk profile and more. So long as you are going into these decisions with your eyes wide open, you’ll be successful.

Perhaps you should also be thinking about backup plans and deliberately creating redundancy and diversifying your manufacturing base. Even if you don’t consider switching part of your base because you aren’t prepared to make this transition successfully, you should at least think about how you are sourcing growth and expansion. Should you build skills close to your customers? If you are in a labor-intensive industry such as apparel and home textiles (which are #1 and #2 in Vietnam), perhaps you should consider Vietnam. And, why not get ahead of the curve? Samsung is producing several phones in Vietnam.  There may be something to be said about being first to the party of using higher-skilled talent.

At a minimum, re-evaluate your end-to-end supply chain in order to future-proof your manufacturing operations and related supply chain components. Check out our new LMA-i, LMA-Intelligence series including Future-Proofing and contact us if you’d like an assessment path-forward plan to accelerate your bottom line and customer performance.



Manufacturing Expert, Lisa Anderson, Confirms Manufacturers Focused on Customer Experience Drivers

December 21st, 2019

Manufacturing Expert, Lisa Anderson, Confirms Manufacturers Focused on
Customer Experience Drivers

 CLAREMONT, CALIFORNIA – December 19, 2019 –  Manufacturing and Supply Chain Expert,  Lisa Anderson, MBA, CSCP, CLTD, president of LMA Consulting Group Inc., confirms that manufacturers are flexible and responsive to changing customer needs and demands. LMA Consulting Group works with manufacturers and distributors on strategy and end-to-end supply chain transformation to maximize the customer experience and enable profitable, scalable, dramatic business growth.

“2019 has been a pivotal year for manufacturers.  As turbulence with tariffs, the need to provide immediate response to customer needs and demands and improvements in automation have required capital investments, manufacturers that have responded are coming out ahead. They are near-shoring, reshoring, customizing and focusing on sales forecasting almost to the point of being predictive of demand. And, they are leading in their respective industries,” Ms. Anderson commented.  Nimble response has not traditionally been a term associated with manufacturing.  Artificial intelligence, robots, IoT and 3-D printing have become more mainstream and allow manufacturers to make immediate improvements and reduce lead times.  “We see manufacturers excited about future adaptations of their products, processes and services as well as their collaborations with their extended supply chain to create innovations and make a greater impact,” she said.

The customer experience drivers, awareness of the Amazon effect and the need for a resilient supply chain are messages that Ms. Anderson focuses on when working with clients.  “It’s about differentiating the customer experience while enabling profitability and growth. It may seem that these are diametrically opposed.  Yet, when a collaborative focus with a commitment towards innovation takes place in an organization, great things happen.  Our clients are feeling the impact. Recently, we worked with a client to help them initiate a vendor managed inventory program for their customers, managing the inventory and ordering process.  This allowed for better insight into the extended supply chain which helped them proactively position inventory and build more agile capabilities.  The result was better response to changing customer demand patterns, establishing resiliency in the supply chain and, most importantly, achieving bottom line performance, ” she concluded.

As the calendar rolls to 2020, customers will continue to become more sophisticated and demanding.  The recent squabble between FedEx and Amazon is proof that even the largest of client relationships can change.   In 2020,  future proofing manufacturing operations and the supply chain will fast-track proactive manufacturers to stand ahead of the competition.  Initiatives to position manufacturing are underway, especially in Inland Southern California where Ms. Anderson is involved with the Inland Empire Economic Partnership which is developing a consortium for advanced manufacturing and logistics success. She is also active with the Manufacturing Council of the Inland Empire where she heads the Innovation Awards for the Annual Summit.  “Manufacturing remains a core industry in the U.S. The time is right, and the time is now to focus on future-proofing manufacturing and the supply chain for success” she concluded.

About LMA Consulting Group – Lisa Anderson, MBA, CSCP, CLTD

Lisa Anderson is the founder and president of LMA Consulting Group, Inc., a consulting firm that specializes in manufacturing strategy and end-to-end supply chain transformation.  She focuses on maximizing the customer experience and enabling profitable, scalable, dramatic business growth. Ms. Anderson is a recognized Supply Chain thought leader by SelectHub, named a Top 40 B2B Tech Influencer by arketi group, 50 ERP Influencer by Washington-Frank, a top 46 most influential in Supply Chain by SAP and named a top woman influencer by Solutions Review. She recently published, I’ve Been Thinking, 101 strategies for creating bold customer promises and profits. A regular content contributor on topics including a superior customer experience with SIOP, advancing innovation and making the supply chain resilient, Ms. Anderson is regularly interviewed and quoted by publications such as Industry Week, tED magazine and the Wall Street Journal.  For information, to sign up for her Profit Through PeopleTM Newsletter or for a copy of her book, visit LMA-ConsultingGroup.com.           

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Media Contact Kathleen McEntee | Kathleen McEntee & Associates, Ltd. | p. (760) 262 – 4080 | KMcEntee@KMcEnteeAssoc.com                                                 

 



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.



Do You Have a Resilient Supply Chain?

August 11th, 2019

supply chain strategyThere is extreme volatility in today’s end-to-end supply chain.  Are you keeping up with all the changes?  For example, think about the following:

  • Tariffs & trade impacts
  • Data & security breaches
  • The Amazon Effect
  • New technologies such as 3D printing
  • Natural disasters, port strikes and more

The Resilient Supply Chain
Instead of allowing each of these incidents to impact you, we must create a resilient supply chain.  Are you proactively thinking about these topics?

  1. Agility– Instead of seeing agile as an IT or project management concept, we should be thinking about how to incorporate agility into every step / every piece of our end-to-end supply chain.  If a customer changes his mind, are we flexible enough to handle it?
  2. Speed – Is your supply chain set up for speed?  Customers are unwilling to wait.  I’ve found that I’m unwilling to wait anymore.  If I wait for a trusted advisor, service provider, subcontractor or even a client, it delays LMA Consulting. For us to be on the leading edge with clients, we must be ahead of the curve; not waiting for something that will be obsolete before we get it!  That is one thing we appreciate about our webmaster; he is speedy and understands priorities which is how we are able to announce a major content upgrade (thanks Scott).
  3. Predictive – In today’s complex world, we must also be predictive so that we are prepared from an 80/20 standpoint for the most likely unexpected events, trends and bumps in the road.  Thinking three steps ahead can go a long way in creating resilience.
  4. Collaborative – One of key components to creating a resilient supply chain with multiple partners is to collaborate.  There is no time to establish relationships and find ways to navigate volatility together if you haven’t already set a collaborative tone.
  5. Adaptive team – No doubt; the core to resilience is having an adaptive team where each members understands where he/she is headed and feels empowered to handle obstacles as they arise.

Have you thought about each interrelated partner, piece or parameter in your end-to-end supply chain?  How can you set it up to be resilient?