May 25, 2020
I was on a panel of a webinar, The Future of Manufacturing with Andrew Zanelli, president of VCC, Michael Knight, president TTI Semiconductor Group, and Seth Denson, co-founder of GDP Advisors. It was a lot of fun, and we talked about the coronavirus, reshoring, cost leadership, innovation, and other topics. Are you interested in what the future might look like and how you can position your company and career successfully?
What Should We Consider and/or What Impacts Could Arise?
There is no doubt there is a renewed interest in reshoring and sourcing manufacturing closer to the customer. All panelists agreed that labor cost has reduced significantly in terms of relevant factors to consider in evaluating manufacturing and supply chain strategy.
- China’s labor costs have continually risen, leading progressive companies to move to Vietnam and other Asian countries to chase lower labor costs if labor is a significant factor in total cost of their products. Mexico is gaining steam as well as the latest statistics show their fully burdened labor costs are often lower than China.
- Advances in technology have reduced the labor component in the total cost of products, sped up the turnaround time and enabled greater customization on demand. Robotics, additive manufacturing, automated equipment, autonomous vehicles are just a few of the advances.
- The time component is increasing in importance in today’s environment where Amazon-like customer service is the norm. Lengthy lead times will lead to a loss in customer demand.
- Although cash is always king, during the pandemic, it has risen in importance. Product tied up in the supply chain which is typically 3 months minimum for Asian supply to the U.S. equates to dollars tied up that cannot be invested elsewhere.
- There is a higher likelihood of disruption the further away production is from customer demand and the more steps to the supply chain (such as ports, trucks, sailing through unfriendly waters).
Whatever was true last quarter or last month is no longer true. Continually reevaluate your end-to-end supply chain requirements. I’ve addressed this topic as well as your strategy, priorities, key trends, and your restart recipe for success in my eBook, Future-Proofing Manufacturing & Supply Chain Post COVID-19 . If you are interested in a rapid assessment, please contact us.