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.
There are many risks when it comes to selecting OEM suppliers. Understanding them is essential to running a successful business. In our new white paper, we’ll examine three strategic areas to include in your supplier selection process: Cost, Scheduling, and Compliance.
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.
In the 1900s, the United States was booming. Companies set up shop on American soil and hired well-educated, motivated American workers to manufacture and sell their products. More recently, free trade and an ever-globalizing economy have encouraged American businesses to move their manufacturing facilities overseas, where they can employ less expensive labor with fewer regulations and ultimately sell their products to the end consumer at a lower price. At first glance, lower prices appear to be a good thing, a way of getting more products into the hands of more people more rapidly. However, a closer look reveals there are still many benefits of manufacturing in the U.S. vs. overseas.
There has been a great deal of fanfare over the growth in American Manufacturing. The reasons for this change are varied. Many point to the narrowing gap in foreign pricing, higher transportation costs and lack of intellectual property protection in foreign countries. One of the most egregious offenders in this category is China, where we have also seen a great rise in wages and other related costs.
In today's competitive marketplace, where consumer response time is as important as cost of goods sold, you must take into account all of the factors that can impact supply chain decisions.
Holding suppliers accountable to ethical employment standards and working conditions has become an important touch point for many retailers and brands. The factory fire in Bangladesh, which killed over 100 people last year, was a glaring example of the safety negligence that takes place in many manufacturing facilities around the world. Child labor, unpaid workers and hazardous work conditions underscore the need for retailers to demand that suppliers meet and comply with a higher set of standards.
Since, we first published this post, there has been continued worker unrest particularly in Bangladesh after several factory disasters and wage disputes.