By Kevin Meyer
Mike Collins has penned an article in Product Design and Development that does a good job of showing how more and more companies are waking up to the realities of offshore outsourcing… and are returning home. His factors are right on target, and he cites some real examples.
Supply chain delays:
Hoopman of Amfor Electronics is a contract manufacturer in Oregon that
builds a wide range of cable assemblies for other OEMs. Many of these
assemblies are made in China, but Amfor has been having trouble
guaranteeing their customers accurate delivery dates because of
unforeseen delays in the supply chain.
Price is founder of Oregon Small Wind Energy Association and works with
manufacturers of small wind energy systems. He says that many of these
small companies have tried to reduce costs by sending parts to Asia. Many
orders for key parts in the turbine are either damaged in shipment or
do not pass the quality test when they are received. This causes
problems for the manufacturer in terms of promised delivery dates and
after service problems after the system is installed.
Four Northern California companies have reshored products from China to Wright Engineered Plastics.
The CEO Barbara Roberts says, “Chinese manufacturers won’t ship until
the product is completely paid for, and then transportation could add
another 30 days or more. That’s a double whammy.”
Supply chain cost:
Dunthorne, Vice President of Operations for All-Clad Metalcrafters in
Canonsville, PA knows a lot about the long supply chains from Asia.
All-Clad Metalcrafters manufactures very high-end cookware that Trevor
says is the best cookware in the world. The
Chinese supplier does a good job of manufacturing the lids. The quality
is very high and within the standards of the other cookware. But
Trevor was concerned with the very long supply chain and the risks
involved. He says, “If you can reduce the length of the supply chain,
you can reduce the cost of capital. This frees up cash flow that can be
used in the company on other projects.
Shami has built a $1 billion manufacturing company to make hair irons
and other handheld appliances. He is moving all of his production from
China back to Texas. He
cites loss of control over production and distribution as the primary
reasons, but he also says, “the company spends $500,000 per month
fighting counterfeits, most of which originate in China.”
NCR is bringing all of its production of ATM machines back to a facility in Columbus, GA. The
senior managers concluded that to really achieve innovation they had to
be closer to their innovation center in Duluth — and closer to
Universities and vendors. Part of the reason is that they want to be able to customize some products and get to the market quickly.
Once again, if you can get past the barriers of traditional accounting and back into the real world, the only valid reason to move offshore is to get closer to offshore customers.