Things are different today compared to the start of this year. Before COVID-19, OEM design engineers, and the purchasing people who support them, mostly focused on getting the lowest piece-part price from their suppliers. Rightfully so. It’s their job.
The designers and buyers may consider it a “nice-to-have” when sourcing product manufacturing in the United States. U.S. suppliers often provide better quality products because of the access to a larger pool of skilled labor. Cost for this labor is higher, which can drive up product costs.
Following the COVID-19 outbreak, purchasers and design engineers had trouble getting product because their suppliers shut down. International borders closed and many companies had no alternative U.S. resources. When the pandemic revealed these supply chain hazards, buyers and designers realized the need to rethink their purchasing decisions to lower the risk of undelivered product.
Given the potential implications for consumers, “Made in the USA” declarations, along with increasing awareness of where U.S. companies manufacture their products, are much bigger considerations today.
As consumers pay closer attention to what is made in the USA, their purchasing decisions will likely change. Our new normal may end up being a large paradigm shift, providing value that did not exist before.
Etched in our minds, the negative impact of the pandemic on our lives is convincing many U.S. consumers they may have to pay a little more, because they have a better understanding of what drives product prices.
Consumers are learning that low-cost labor and material, combined with foreign government subsidies, allow overseas suppliers to sell products below market value. They are learning that these choices can hurt American consumers. They are beginning to understand why it makes sense to purchase items slightly higher in price, if they want products made in the USA.
Cost of Risk
Consumers did not foresee the major supply chain shortages that came with the pandemic. “Cheap” products from overseas may no longer be as attractive. This understanding gives U.S. suppliers the opportunity to reclaim manufacturing capacity offshored to low-cost countries over the past few decades.
If your organization was one of many who struggled to get component shipments, you know your company incurred additional costs and it slowed your revenue stream. Can you afford to continue on this path and leave yourself open to future chances of similar risks? Now that you have experienced governments closing their borders, it may be worth reconsidering supplier location and the ways this can influence your supply.
Responding To Increased Costs
If you decide now is the time to make your products in the U.S., make sure the suppliers you select help put your organization in the best possible position for the future. It is crucial you choose U.S. suppliers who are willing to work with you hand-in-hand to assure you they will produce your products as cost-effectively as possible.
The following steps provide guidance to move forward with this new but normal supply chain strategy.
Step 1. Start with understanding the location where a supplier will manufacture your products. If your goal is to be able to claim that your product is “Made in America,” you need to be sure it’s true.
Step 2. Adjust your thinking about higher-priced components. It is important to understand a supplier’s ideas to remove costs from your product. This will assure you that your product will be in a better position compared to the competition who continues purchasing from other countries.
- Do not discredit the supplier’s recommendations on ways to remove costs from the manufacturing of your component designs. Instead, carefully consider the suggestions and anticipated ROI.
- Do not leave cost-containment initiatives only up to the supplier. Some responsibility lies in your organization’s hands. Be sure to choose a supplier “partner” who is willing to provide guidance and recommendations. If they don’t do this, don’t wait. Ask.
Step 3. Select the right U.S. supplier.
- Choose a supplier who helps you get ahead of your competition (first to launch) by collaborating with you early in your product development process, and facilitating any necessary product redesigns. These initiatives will reduce the time needed to make your products.
- Find ways to leverage the advantages of the higher skilled labor throughout the organization. Meet the people responsible for making your parts. Ask for their ideas to do it better. Their answers may surprise you.
- Select a supplier who invests in workforce training, indicating they continuously strive to innovate and gain knowledge.
- Select a supplier who is willing to educate you and your team. Look to them for information that will help you understand the details in how different manufacturing processes work, and how they work together. This will give you opportunities to build a better product, while moving from point A to point B, faster.
- Evaluate the amount of robotics, automation technology and advanced manufacturing methods a supplier has, and select suppliers that plan continued growth in these areas.
- Pay attention to the added benefits of receiving innovative and advanced product manufacturing solutions that generate higher quality products, faster. This can garner positive notice by your peers and leadership.
Step 4. Lower your risk of another major supply chain disruption by choosing U.S. suppliers to ensure product fulfillment without having to cross borders. Your competition is considering it. Don’t let them be the first ones selling competitive products made in America before you.
This is the time. Take full advantage of the paradigm shift with U.S. consumers’ growing awareness of what “Made in the USA” truly means for them and for all Americans. Be sure you consider all of your business needs. As awareness grows about where products are coming from, now is the time to reclaim the manufacturing capacity you have offshored for decades and bring it back to the United States. Then you can say your products are made in the USA.
By Jim Sartell, Director of Business Development, Alexandria Industries.
Alexandria Industries is a multifaceted manufacturing supplier. We use advanced technology and a skilled workforce to create extruded aluminum products, precision machining, heatsinks, finishing, plastic injection and foam molding, welding and assemblies.
Note: This article is Part III of a three-part article series that talks about how consumers are seeing greater value and choosing products made in the USA: Will American Made be more Important Following COVID-19?
Part I, Manufacturers Must be Careful During the COVID-19 Crisis, outlines ways to evaluate your manufacturing suppliers’ financial health.
Part II, Will Your Suppliers Meet Your Manufacturing Needs in the New Normal – Post COVID-19?, discusses other key criteria product manufacturers can look for in their suppliers to determine business health and longevity during the COVID-19 pandemic.