Reducing Supply Chain RisksThrough Nearshoring Manufacturing Suppliers
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Reducing Supply Chain Risks
Through Nearshoring Manufacturing Suppliers
Procurement and logistics teams are working remotely to assess how to minimize supply chain disruptions due to quarantines and shelter-in-place mandates while many OEMs are panicked about maintaining production.
The Road to Economic Recovery is Uncertain
How long will it take for the world economy to recover from this pandemic? That’s the billion-dollar question. Reuters polled more than 50 economists, and their predictions range from a 6% reduction to 0.7% growth by the end of 2020.
Whether the recovery is a quick snap, slow burn, or even a double-dip, companies all over the world can’t wait to see what happens before re-evaluating their current operations and supply chains.
Post-Pandemic Life Will Look Different in Many Ways
How we live and work will be forever changed by this pandemic in many ways. Some of the biggest potential impacts for manufacturing include:
Supply chain visibility, inventory and, sustainability
In-facility safety measures
- Social distancing
- PPE for workers
- Alternating shifts
- Partitions at assembly lines and breakroom tables
- Extensive cleaning practices
Painful Lessons Learned from COVID-19
Pre-pandemic, the key drivers for choosing a manufacturing partner were:
Cost, quality, and delivery will always be at the top of the list. Going forward performance metrics will also include the 3Rs of supply chain risk management:
by understanding where and how all aspects of your product from concept to delivery can provide insight into where improvements can be made and where hidden vulnerabilities may lie. Many OEMs had hidden weaknesses in their supply chain, brought to light by coronavirus.
Restarting (and Rethinking) Global Supply Chains
Companies are exploring ways to restart global supply chains, and more will move offshore operations back to their own factories, or at least their own continents.
Nearshoring is sure to be a key to the future of U.S. manufacturing, and VCC’s CEO was recently featured on a panel to discuss COVID-19’s impact on the nearshoring trend.
Rebuilding Supply Chain Resilience
Because China has become the epicenter of production for components, raw and processed materials, major subsystems to OEMs, the disruption to the supply chain has cut deep across the globe.
From automotive and electronics to consumer goods, industries that make the world go ‘round have come to a halt along with Chinese production. A perfect storm of parts shortages, laborers who are sheltering in place and a shortage of protective gear and measures for workers are all leaving manufacturing OEMs in a lurch no one could’ve seen coming.
Some companies that thought they were safe with outside-China operations found they were exposed to hidden risks due to lower-tier suppliers.
According to the World Economic Forum, “Many global manufacturing OEMs have been scrambling to find alternative solutions, including quickly shifting orders to secondary or tertiary suppliers to make up the missed delivery from their primary suppliers, and moving some core businesses back to their own factories.”
Diversify, Diversify, Diversify
You never know what could happen in one region of the world that could drive costly delays for your production.
The old adage was to dual source vendors for parts and components. Now, experts recommend having at least three tier suppliers.
At VCC, we’ve seen a shift in the BOMs that come through our door for versatile LED indicators to support medical and consumer electronics industries. We’re now the first supplier instead of the second. The same trend is happening on the component side, where orders are peaking due to us being the second source.
Companies with key suppliers in China and Europe could also consider adding or reprioritizing North American manufacturing partners to enhance reliability.
COVID-19’s Impact In One Industry
(That Can Apply to Yours)
There will be a series of impacts that can be felt now, and years into the future. OEMs in other industries can expect similar effects in their respective markets:
- Short-term – the next six months will present demand shocks, where emergency-related items are needed and those for more elective procedures will drop off. Those manufacturers that can quickly reconfigure production to create in-demand PPE and other products will fare far better than those who cannot.
- Mid-term – the coming year or so will be where the financial effects are felt, with OEMs facing cash flow shortages and some, unfortunately, bankruptcies. Difficult decisions will need to be made to free up cash and reduce debt.
- Long-term – one of the most pressing and lasting impacts for OEMs will be how to strategically shift their supply chain and vendor relationships to prevent something like this from happening again. Smaller suppliers may lose out to larger, more financially stable ones with multiple production sites.
Total Cost of Ownership Will Drive Supply Chain Changes
Tariffs, customs, duties
Freight and packaging costs
Inventory carrying costs
Why is nearshoring the potential solution for weaknesses in a manufacturer’s supply chain? Keeping your production close to your operations provides the advantages required to remain competitive, pandemic or not:
- Faster, more reliable delivery
- Streamlined supply chain
- High-quality products
- Shorter lead times
- Reduced production and transportation costs
- Enhanced IP protection
- Flexibility during uncertain times
Whether the impetus is minimizing risks to your supply chain or simply reducing production times and costs, nearshoring can help you achieve your goals. However, having the right nearshoring partner is also crucial to your ultimate success.
The Right Supplier Can Strengthen Your Supply Chain
From Screeching Halt to Turnkey Production Partner in Less Than a Week
A distributor told the company about VCC, and once the traffic signal manufacturer reached out, our team quickly assessed their needs, toured the facility, and created a plan for seamless transition in less than a week. VCC provided
Quality assurance and testing
Streamlined Supply Chain for Medical Supplier
Leveraging VCC for multiple aspects of production shortened lead times and the number of suppliers while increasing reliability and quality. Solutions provided include:
- LED and other components
- Integrated card-reader technology
- Molded plastics
- PCB assembly
- Wire harnesses
- Quality assurance and inspections
Upgrading Quality and Speed In Addition to Technology
- Custom LED board/light engine design
- Cable assembly
- Plastics manufacturing
- Quality assurance and inspection
While most OEMs are struggling to address the immediate impacts this pandemic is wreaking on their supply chain, the effects of how companies operate and produce goods will be forever changed.
At VCC, we have the expertise to help you bring your offshore electronic component manufacturing processes back to North America as efficiently as possible, so you can take advantage of: