Next Generation manufacturers in the U.S. have a once-in-a-generation opportunity to boost their revenues and market share even higher.
How? By taking advantage of renewed interest in (pick your favorite buzzword: re-shoring, in-shoring, in-sourcing). Whatever you call it, it means that big original equipment manufacturers or OEMs (think mega-car companies, etc.) are wondering if outsourcing most or all of their manufacturing to far-flung parts of the world is really such a great idea, and that maybe bringing production back to the U.S., whether managed by the company itself or by its suppliers, might be a good idea again. Why? Three reasons:
- Evaporating cost savings: In the old days (i.e., five years ago), companies would talk about “the China Price”: a magical cost savings of 30% that could be achieved by outsourcing production to China, or Vietnam, or wherever. The problem is that 30% savings often got eaten up by quality problems, shipping costs, inventory requirements, etc. Factor in the increasing currency risk that outsourcing to China entails (most economists believe China’s currency will continue to increase in a steady march to its real market value, and that inflation in China will remain above that of its global competitors, e.g., the U.S.), and suddenly sending production work thousands of miles away doesn’t seem quite so brainy.
- Supply chain risk: The devastating earthquake, tsunami and nuclear disaster in northern Japan is a human tragedy, with nearly 20,000 lives lost. It's also a global business calamity: In the auto industry alone, shutdowns at quake-affected suppliers interrupted production and sales not only among Japanese carmakers, but at plants around the world run by Volvo, GM and others. CEOs everywhere are reevaluating the wisdom of sole-source supply-chain management — and are looking to identify additional backup suppliers, preferably close to home.
- Proximity still counts: Everybody loves innovation. Yet creating great new products, services and value is less about eureka! moments and more about careful listening to customers, suppliers and partners — the kind of listening that’s more likely to happen when those partners can work closely together. That’s a lot easier to do when your suppliers are on the same continent.
How many of YOUR customers are ready to reshore?
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