Updated: Jun 19, 2020
How can manufacturers rethink supply chain resilience?
“I believe that manufacturers and OEMs are doing some deep thinking about shortening and strengthening their supply chains,” said Michael Tamasi, owner and CEO of AccuRounds, a Massachusetts precision machining company that makes custom cylindrical components.
The current tariff policy and the COVID-19 pandemic have exposed supply chain risks in manufacturing. This spring, with the shortage of ventilators, medicines, and personal protection equipment (PPE) for healthcare workers, the media has reported that manufacturers and OEM’s are looking to build greater resiliency by shortening their supply chains. When manufacturers source closer to home the probability of on-time delivery of a quality product increases.
“The result will be less single-sourced products overseas, especially for critical medical, defense, and aerospace components,” says Tamasi. “At a minimum, more dual-sourcing will result with some U.S. presence.”
In addition, “Some companies may choose to sole source in North America to minimize risk. The overseas cost advantage is not what most people think it to be. When total cost of ownership is considered, many times sourcing domestically is the most cost-effective.”
For the past decade, the not-for-profit Reshoring Initiative® has been helping manufacturers, like AccuRounds and its customers, evaluate the true cost of sourcing overseas versus in North America. The Initiative does that by documenting the success of the reshoring and near shoring trend, providing calculation tools, and offering other resources to accelerate the trend.
Longtime manufacturer and the Reshoring Initiative’s founder Harry Moser explains, “The perceived offshore cost savings is a result of prevailing business school philosophy, which encourages businesses to focus on their core competencies: innovation, design, marketing, and finance, but not manufacturing. Many companies miss 20 percent of costs related to factors such as inventory carrying cost, travel to check on suppliers, intellectual property risks, shipping, tariffs, and natural disasters such as COVID-19.”
Mike Tamasi knows from experience. He has used the Reshoring Initiative tools to present data to customers and negotiate price. He’s even used the information to persuade customers to keep their business with AccuRounds, which has contributed to doubling the company’s revenue in the past 10 years.
The Reshoring Initiative Tools & Programs 1. Total Cost of Ownership Estimator®: A free online calculator to help companies account for all relevant offshoring costs. When companies make offshore sourcing decisions based solely on price, there is typically a 15 to 25 percent understatement of actual costs. “This helps buyers to buy smarter and sellers to sell smarter,” says Moser.
2. Import Substitution Program: Identifies major importers and helps American suppliers convince importing companies to source from them.
3. Supply Chain Gaps Program: Identifies products with high imports and no domestic sources so that American companies can become the only U.S. producer.
Rebuilding the Supply Chain Whether you are an advanced manufacturer, job shop owner, or OEM, you are in the midst of your own supply chain challenges, uncertainties, and questions. In an extraordinary effort to support you, AMT and IMTS are dedicating signiﬁcant staff and ﬁnancial resources to help you rethink, reengage, and reestablish supply chains. Visit www.IMTS.com/SupplyChain to learn more!