Jason Busch is the bloggist extraordinaire and mastermind behind the top sourcing, procurement and spend management blog SpendMatters. Jason's been in the space for years, and he works with the top global manufacturing organizations that manage supply chains. Jason brings valuable insight into what your customers and prospects are thinking, and advice on how to interact with them today.
MFGMojo sat with Jason to get his take on what buyers are thinking these days, and how manufacturers should capitalize to get business. SMMs - take note.
MFG.com Mojo: How prevalent is near- or in-shoring today?
JB: Look at why it's a question now - many OEMs and other buying enterprises moved offshore for what appeared to be substantial savings. The total cost and significant risks were unforeseen when they made their initial moves. Still despite this, many finished goods were totally off-shored.
I do see movement closer to the US – to Mexico and even North America where excess capacity exists. But I'm not seeing any real buy American movement - the only significant action there is tied to stimulus dollars. What should have happened originally was more scrutiny, to have kept stuff onshore that shouldn't have gone in the first place - now, length of time and distance are adding to risks for many buyers. Inventory management is more important now, too. Outsourcing isn't dead, particularly where consumer markets are developing and US companies are looking to sell globally. But commodity pricing for steel, aluminum and copper can be higher overseas, so North American suppliers can tout that as an advantage if they know where they stand regarding their overall cost structure.
Geographic positioning, flexibility and transparency are advantages that North American small- and medium-sized manufacturers should use as leverage. This is where savings can be strongly represented to their customers. Financial health is especially important in sourcing decisions today. Flexible capacity - the ability to bring mothballed capacity online quickly to respond to buyer needs - is gaining some attention from buyers I talk with. Agility is seen as a valuable strength to buyers to mitigate risks.
MFG.com Mojo: What about carbon credits? What potential impact do you see from such a system on extended supply chains?
JB: Green is open to definition. Cap & Trade isn't likely to pass anytime soon, at least as I see it (and hope). However, if you believe we will have it in 2 or 3 years, then it all depends on how credits are calculated. If calculations make costs (taxes) too high, it may cause more near-sourcing. But it's not likely to pass during the current administration in it’s current form - too many companies are adamantly against it and the economy can’t afford a new tax.
MFG.com Mojo: Supply chain risk – how should prospective suppliers see this? As opportunity?
JB: Naturally, there is a greater awareness of risk among buyers. Trade finance is becoming harder to come by for foreign suppliers (witness the CIT bankruptcy filing). Also, companies are questioning whether suppliers overseas be able to ramp up quickly during a rebound? Also, in tough times many suppliers will embellish their qualifications and capabilities. They might also push the ethical and legal limits (e.g., limiting insurance certifications lapse or not paying payroll taxes) because of their financial position. When buyers find that suppliers can't perform, they must react swiftly to compensate or minimize supply chain disruptions.
MFG.com Mojo: Do North American SMMs have a future? How can they become more competitive? Is exporting to emerging consumer markets a viable solution?
JB: Absolutely, there’s a future - but only by being hyper-competitive and hyper-efficient. But there can't be a feeling of entitlement in this evolving era. They should be as efficient as they can. This includes learning and adopting lean, building flexibility into the organization, perhaps even moving some of their own manufacturing offshore via a partnership to meet a range of customer requirements, from low cost to rapid fulfillment – and everything in between. As for exporting, this requires skill, experience, and a different mindset than a traditional machining or manufacturing supplier brings to the table -- it looks great on paper, but it's difficult to pull off. They must position themselves in front of buyers as healthy and in it for the long-haul with the ability to stay in business even if things take a turn for the worse again.