The United States and its North American neighbors are battling a global war on the COVID-19 pandemic that has revealed the downside of offshored supply chains. For decades companies have been shifting production offshore, negatively impacting U.S. manufacturing capabilities, jobs and the environment through higher carbon emissions and other pollution from China and other developing countries and from long distance transport. The disruptions from the COVID-19 pandemic have exposed our overdependence on imports and underscored the need to shorten supply chains to reduce risk and increase resiliency.
While the United States remains a global leader in the creation of new products, drugs, and medical supplies, much of the manufacturing capabilities have moved offshore. The time has come to launch a manufacturing renaissance to revitalize domestic supply chains and advanced manufacturing capabilities.
The practice of unconditionally offshoring manufacturing to save money has changed with the post-pandemic economy. Even prior to the pandemic, sourcing costs in China were rising. Companies are discovering that when they analyze the total cost of offshoring, many times it makes more economic sense to keep supply chains local. Business leaders are finding that through TCO (Total Cost of Ownership) analysis reshoring can actually reduce costs while making supply chains more resilient.
Harry Moser, founder and CEO of the Reshoring Initiative, has been educating manufacturers on the benefits of “local for local” production. To make informed business decisions companies should consider using the Total Cost of Ownership Estimator® (TCOE) to objectively quantify, forecast and minimize total cost.
Reshoring focuses on quantifying the “hidden” costs and risks associated with offshoring, typically 15% to 25% of Ex Works price. By adopting lean shoring practices, organizations can reduce domestic manufacturing cost by eliminating waste in their current processes, i.e. anything that does not provide value to the end customer, while driving an enterprise wide continuous improvement process. The key to lean shoring is doing a total cost analysis and then using lean practices – as opposed to using the same wasteful practices that allowed the work to be offshored, in the first place. If lean shoring can produce an additional 10% savings, 40% of what is now offshored can be profitably reshored, 50% if 15% Trump tariffs also apply.
To help businesses become more competitive the Association for Manufacturing g Excellence (AME) has a network of North American Consortiums which are clusters of local companies (20 +/-) that collaborate for broad, deep, accelerated lean-continuous improvement processes that are better, faster, cheaper, and easier than they can do it alone. These dynamic practitioner-to-practitioner networks are designed to support small to mid-size companies in an effort to sustain and refine their continuous improvement journey.
Sen. Marsha Blackburn (R-Tenn.) and Sen. Tom Cotton (R-Ark.) echoed fears from experts that America is too dependent on China to produce crucial medicine and said the COVID-19 pandemic has threatened critical supply chains. “We need to end Chinese control over our health and wellness in this pharmaceutical supply chain,” Blackburn said on the floor of the Senate, calling for an increase in domestic production.
The Way Forward
As a strategy, more companies are shortening their supply chain, which reduces cost, risk, and delivery times. By working together, their actions will provide companies and their communities with a distinct competitive advantage; together they can boost their productivity and improve their sustainable resilience in this fast-changing competitive world.
Harry Moser, founder of the Reshoring Initiative, is collaborating with the Association for Manufacturing Excellence to promote leanshoring as part of its “Manufacturing Renaissance” initiative. “We are committed to changing the sourcing paradigm from “offshored is cheaper” to “local reduces the total cost of ownership” said Moser.
The San Antonio Manufacturing Association (SAMA) and Association for Manufacturing Excellence (AME) are learning together how to reduce operational wastes, supply chain disruptions and to reskill their workforce to improve their ability to compete and win on the world stage. With the US Mexico & Canada (USMCA) Trade Agreement in effect. The time is now.
Glenn Marshall, Newport News Shipbuilding Career Pathways (retire) and Douglas Carlberg, President M2 Global Inc are both members of the Association for Manufacturing Excellence (AME) Management Team initiative for leading a “Manufacturing Renaissance” and the Jobs Creators Network . For more information contact email@example.com and firstname.lastname@example.org or go to www.ame.org