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:
Jerry 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.
Quality:
Gregory 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.
Financial terms:
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:
Trevor 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.
Intellectual property:
Farouk 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.”
Innovation speed:
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.