As we've seen in the news lately, more U.S. companies are looking to near-shore or re-shore their manufacturing, whether it be in response to recent trends or to efficiently introduce new products to market. There are many benefits to moving production to the United States. While planning for this new year (and beyond), consider taking these seven benefits into account.
There are many risks involved in selecting an OEM suppliers. Understanding them is essential to running a successful business. In our white paper "Hidden Risks in Your Offshore Supply Chain", we’ll examine three strategic areas to include in your supplier selection process: Cost, Scheduling, and Compliance.
Cost
Cost is not just the final price you pay for a part. Cost also includes shipping, time to market delays, quality control checks as well as labor. Cheap foreign labor is becoming more expensive. Offshore suppliers face a more demanding workforce. And, today’s consumers are demanding that suppliers provide improved working conditions and pay. All of this is driving up the unit cost of goods sold.
Regulatory compliance has become a focus in recent years. Products from other countries, particularly China, face additional scrutiny. From car seats to dog treats, there have been numerous safety problems.
There are many risks when it comes to selecting OEM suppliers. Understanding them is essential to running a successful business. In this article, we’ll examine the factors that impact scheduling and time-to-market when using an offshore supplier.
There are many factors that impact the total cost of goods purchased. On the surface, some offshore suppliers may seem cheaper. However, the true delivered cost is impacted by many variables. Using this overview, you should be able to better compare all of your supplier choices.
Shipping - This cost must be calculated accurately to determine the true “Cost of Ownership”.
Many companies fail to understand the full cost of shipping from China and other low wage countries. Depending on the contract, importers may be responsible for picking the goods up at the factory door. Many foreign manufacturers will include FOB (Free on board) shipping.
Factors to consider include:
FOB – This is the price paid by the manufacturer to get the goods to port. Depending on the contract this may be an inland port. Once on the carrier, the purchasing company pays for the remainder of the shipping costs to the final destination (s) as well as import duties and taxes. All of these charges need to be considered to assess total shipping costs. Having a FOB contract and terms will guarantee all parties know the extent of their financial responsibilities.
Time to market – There is also a cost to any delays that occur in receiving goods for sale. When commitments and time lines are not met, profit is lost. Once a delay occurs, to get merchandise to market in time, some manufacturers have used air freight to expedite the shipping. Air freight can be 10x more expensive than shipping by container which can erode margins quickly.
In the past, many businesses operated on the assumption that their vendors were in compliance with the latest rules and regulations regarding their industry.Technology and materials were limited, so buyers worked with manufacturers who could produce the best product often without clearly defined quality guidelines or parameters.
This article written by Al Veres, the VP of Operations at SFEG, originally appeared on the SFEG.com website on January 9, 2015
Back in the late 70’s and early 80’s, the big push was to move manufacturing to Mexico. Then in the late 80’s and early 90’s, Asia became the new home for manufacturing. In each of these phases mega companies like GE, Siemens, GM, Ford were the early pioneers making the moves to manufacture outside the US. Smaller companies lagged behind and never felt the full benefits of being able to capitalize on low labor costs and having the advantage of beating their competitors.
All this has changed with the rising labor costs in China and high shipping costs that drive extreme lead times, coupled with large inventory carrying costs. I recall my boss, President of a large corporation, telling us that one day the pendulum will swing back in our direction. Here we are in 2015 and the pendulum is here. The flood gates have not opened entirely but the trickle effect is starting to happen.
This article written by the Reshoring Initiative Editorial Team originally appeared on the Reshore Now blog on October 15, 2014
It is no secret that the last decade has brought a surge in demand for products made in the USA. But it was only recently we realized how much the “Buy American” movement has evolved.
In a recent survey conducted by American Certified, 1500 people across the nation were asked the question, “Other than price/ quality, what factor is most important to you when purchasing a product?”
A few weeks ago in our blog, we introduced our newest white paper "Hidden Risks in Your Offshore Supply Chain". In the infographic below, we highlight the 3 primary areas we focus on throughout the white paper that should be included in your strategic decision making process. When you take all of the factors into account that can impact the cost, scheduling and quality of your manufactured part, you can make a more informed decision about your supplier selection.
On Friday February 13th, there was a line of 27 container ships anchored at the ports of Los Angeles and Long Beach wanting to be offloaded. By Saturday, Valentine’s Day, that number had grown to 32. This bottleneck is primarily the result of a nine-month labor contract dispute between the union representing the longshoremen and the ship owners. The ship owners are accusing the union of work slowdowns. To retaliate, the PMA (a trade group representing the ship owners) has canceled night and weekend shifts to avoid paying overtime to the workers. It is estimated that the economic cost of one day of a lockout could cost $1 billion dollars. If the dispute is allowed to escalate, shutting down all 29 west coast ports, the economic consequences could be substantial. These ports handle approximately $1 trillion worth of cargo each year. Los Angeles and Long Beach are the largest, handling 40% of all incoming cargo containers.