Lisa Anderson, a supply chain expert and president of California-based LMA Consulting Group, says that the Chips Act “has spurred on certainly quite a bit of investment” in the US electric car sector. And Mexico is also booming through ‘friend shoring’.

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Read the full article at the BBC website. 

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Status of the Medical / Healthcare Supply Chain

The supply chain has calmed down since the height of the pandemic; however, smart manufacturers are thinking ahead to changing conditions. Geopolitical risks are at an all-time high. The Russia-Ukraine war rages on and Israel and Hamas are at war which has spilled over to the Iran-backed Houthis rebels attacking container ships in the Suez Canal, disrupting a major shipping lane.

Additionally, China continues to threaten Taiwan which produces 90% of the advanced computer chips for the world and an important component in medical devices. China is also being very aggressive in the region which could impact shipping lanes through the South China Seas, manufacturing in China and manufacturing in countries in the region. Since China dominates the medical device supply chain, this is concerning. Thus, proactive manufacturers are moving towards regional manufacturing. This trend started following the pandemic (refer to our quote in a MPO Medical Products Outsourcing article) and has been picking up steam.

Reshoring & Expanding Manufacturing Capabilities

According to Xometry’s Medical Industry Survey, medical device manufacturers are rapidly reshoring operations to strengthen their domestic supply chains. In fact, 67% of medical device manufacturers are in the process of reshoring operations within the next 12 months. There is a focused effort in rethinking supply chain strategies.

Although many companies are reshoring, executives remain concerned about the cost impact of expanding production in the USA. The good news is that labor costs have decreased as a percentage of total cost dramatically since the offshoring craze while other costs have increased, making reshoring more attractive. For example, transportation costs were heightened during the pandemic and have been impacted by the Panama Canal drought, the diversions of the Suez Canal, and other supply chain disruptions. The cost of capital has increased significantly with the increase in interest rates which has made the cost of carrying inventory much higher. And there are many other costs to consider in the total cost to produce. In fact, the total cost of product can be equivalent or even less in the USA in some non-commodity situations.

Many advancements have been made in manufacturing and technology. Companies are automating and digitizing their manufacturing and supply chain. For example, they are using 3D printing/ additive manufacturing, robotics, artificial intelligence with IoT, and other advanced technologies to improve efficiencies and enhance visibility. As manufacturers expand their manufacturing footprint, source new regional suppliers and reshore production, these advanced technologies maximize operational performance and minimize cost while maintaining and improving customer service levels with lower inventory levels. Thus, margin concerns are mitigated depending on the upgrades and improvements to the manufacturing process.

In the medical device industry, companies are starting to expand regional manufacturing in the USA. For example, Ascential Medical & Life Sciences is reshoring to Minnesota. Their new state-of-the-art facility has highly innovative automation solutions, making reshoring financially viable. Certainly, they are not alone. Companies are expanding operations in the USA.

Manufacturers are also nearshoring to the region. Mexico has expertise in medical devices and the ability to scale. Since customer requirements are significant in North America, the ability to scale in the US and Mexico is a relevant factor. The availability of advanced manufacturing and technical skills is also an important factor. Medical grade material supply can be sourced nearby, and the USA is ramping up computer chip manufacturing capabilities. For high labor component products, Mexico provides an excellent option because their labor rates are lower than China, and they benefit from the USMCA agreement between the two countries.

Although the USA and Mexico are great options with scale, there are additional medical device manufacturing hubs in other nearby countries. For example, Costa Rica has advanced skills, computer chip manufacturing, and therefore a thriving medical device manufacturing concentration. The Dominican Republic has medical device manufacturing, and Puerto Rico is known for pharmaceutical manufacturing.

Manufacturing Resurgence

There is no doubt that the successful companies will mitigate risk and manufacture regionally. Thus, the USA, Mexico and business friendly countries will experience a resurgence in manufacturing in the next decade. It will require investments in manufacturing, tooling, and other resources although there are opportunities to keep costs intact or even reduce total product cost.

The most successful companies will upgrade their processes, ERP systems, utilize advanced technologies, maximize customer and product profitability and proactively manage these opportunities with a SIOP (Sales Inventory Operations Planning) process. Assess your supply chain to learn how you stack up. Take our complimentary supply chain assessment. Upgrade, innovative, get ahead of the competition, and thrive.

If you are interested in reading more on this topic:
Why Manufacturing Matters and Will Thrive in the Next Decade

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Manufacturing Matters – Safety & Security

Manufacturing promotes safety and security and mitigates risk. Controlling your supply chain and mitigating geopolitical risk can become paramount overnight as geopolitical events occur, natural disasters emerge, and supply chain challenges arise (strikes, disruptions, shortages). These types of issues have been increasingly concerning with recent events.

For example, the war in the Middle East has caused disruptions in the Suez Canal. Container ships are being diverted and traveling around the southern tip of Africa, adding 10,000 miles and 7-10 days. This situation delays critical supplies and causes further inflation with increased costs. Additionally, the reason China has been threatening Taiwan is partially to gain control over 90% of the world’s advanced computer chips that go into everything from medical devices to critical infrastructure.

During the pandemic, the U.S. discovered it was dependent on China for critical supplies and everyday necessities. Not only can a worldwide pandemic cause disruptions of these supplies, but country specific policies can dictate whether your supply will be cut off. For example, China rolled out zero COVID policies, directly impacting production and shipping to the U.S. China could prioritize who received limited supplies.

China also wants to control the Red Sea and could decide to cut off supplies produced in other Asian countries in the region. Clearly China thinks manufacturing is essential to national security. For example, their shipbuilding capabilities are over 200 times greater than the U.S. According to the Maritime Executive, China produces more than half of all new tonnage in the world. These types of statistics are gravely concerning and the proactive will build capabilities.

Manufacturing Will Thrive in the Next Decade

As companies realize they must gain control over their supply chain to better support customers, reshoring and regional expansion of manufacturing capabilities will soar. Additionally, the cost has come into alignment for non-commodity products if you evaluate the total cost to produce, ship, store, protect, etc., China won’t have the advantage. Piles of inventory tying up cash unnecessarily are no longer acceptable, especially as customer needs change rapidly, increasing the risk of obsolescence. As interest rates soar, this situation is untenable.

Customers are not willing to accept prolonged periods of delays and stock outs. Thus, they are taking control of their supply chain and focusing on manufacturing capabilities. In addition, companies must prioritize customers and address proactively with strategic pricing and capacity decisions. Thus, smart companies are utilizing a SIOP (Sales Inventory Operations Planning) process to proactively navigate these changing circumstances to maintain high levels of customer service, profitability, and working capital results. SIOP will bring visibility to customer and product profitability, sourcing decisions, make vs buy alternatives, capacity bottlenecks and more.

The proactive will thrive and have more opportunities than ever expected. In fact, they will be in the catbird seat. The rest will continually struggle and weaken. With the significant skills gap (refer to our recent article on where the talent has gone), the proactive executives are hoarding the “best of the best” (employees, trusted advisors, suppliers, etc.). Are you prepared to thrive?

If you are interested in reading more on this topic:
SIOP/ S&OP: Proactive Approach to Maximizing Production Output and Capacity

The post Why Manufacturing Matters & Will Thrive in the Next Decade appeared first on LMA-Consulting Group, a supply chain consulting firm.

Made in the USA! Instead of fiddling around dipping our toes in the water, we should put a full court press on expanding manufacturing in the USA.

Why? Let’s just consider a few questions:

• Should we put our eggs in the China basket? Only if you enjoy substantial risk…
• Are shortages, delays, and extended lead times OK?
• Should we get control over manufacturing in industries related to national security?
• Should we get control over the production of healthcare products and pharmaceuticals?
• Are you OK with countries that use child labor?
• Are you interested in contributing to the economy? According to the National Association of Manufacturers, for every dollar manufactured, another $2.74 is added to the economy.
• Are you interested in cleaner energy? If you add the total carbon footprint of what is manufactured in China, transported, etc., you are likely to be horrified when you compare to the US with significant advances in cleaner energy.

Pick up the Pace of Reshoring

Progress is happening, but it is not enough. Let’s pick up the pace!

• According to Dodge Construction Network, construction of new manufacturing facilities soared 116% last year. (Bloomberg)
• According to the Reshoring Institute, reshoring and foreign direct investment (FDI) job announcements reached a record 261,000 in 2021.
• According to McKinsey, manufacturing contributes 30% of productivity growth.
• Several microchip factories are ramping up in Arizona, Texas, and other locations.
• According to an EY Industrial Supply Chain Survey, 53% of firms have already nearshored or reshored some of their supply chains since the beginning of the pandemic. 44% are planning more during the next 24 months.

Support US Manufacturers

In addition to reshoring, we should support US manufacturers with expansion. It is typically easier, quicker, and more effective to find a US manufacturer and expand operations instead of building new and starting from scratch. It leverages already existing resources and builds upon success. Expansion is possible without increasing headcount if you automate and digitize as you expand. Consider an ERP upgrade or use of technology to support your expansion plans. Upgrade your processes such as SIOP to support efficient expansion with superior service.

Support policies that will aid manufacturers. Encourage manufacturing professionals and engage students in opportunities in the manufacturing field. Support organizations that provide training, education, and mentoring for the manufacturing industry. For example, our Association for Supply Chain Management chapter is providing tailored classes on the fundamentals of production and inventory management and the end-to-end supply chain. Contact us to learn more.

Please keep us in the loop of your situation and how we can help your organization thrive during these times of volatility and disruption. There will be more winners created than at any other time than since emerging from the Great Depression. To gain additional ideas and insights on how to best navigate these volatile times and thrive, read our new eBook Thriving in 2022. Learning from Supply Chain Chaos. Download your complimentary copy.

The post The Case for US Manufacturing appeared first on LMA-Consulting Group, a supply chain consulting firm.

There will a resounding resurgence of manufacturing near-term. According to a new report from The Reshoring Initiative®, reshoring broke records in 2020 and exceeded foreign direct investment (FDI) for the first time since 2013. Not only did it beat FDI, but it beat it by nearly 100%! Also, according to the National Association of Manufacturers (NAM), the vast majority (88%) expect sales, production, and prices to increase next year despite the supply challenges. Clients across the board are experiencing these same trends. Thus, there will be organic growth as well as reshoring growth. Why has this resurgence taken off by leaps and bounds?

During COVID, clients and colleagues realized there was far too much risk in their supply chain. For example, a client in Europe thought they had a backup source of supply to their China supplier because they had a secondary source in India; however, when COVID hit, neither supplier could deliver the requested materials. Another client had identified a backup source; however, they did not utilize the backup source on an ongoing basis. Thus, when COVID created disruption in the supply chain, the backup source was busy and had to prioritize current clients. Additionally, even those with backup sources realized the length, complexity, and critical risk (IP, political, etc.) of their end-to-end supply chain. Thus, clients are reevaluating their supply chain and reshoring/ near-shoring at least a portion of their supply chain.

On the other hand, companies already manufacturing in the U.S. gained an advantage. Not only were the majority considered essential and so could continue producing during lockdown, but they were able to take advantage of opportunities to support companies that couldn’t get enough supply to satisfy their customers. Customers realized the importance of suppliers that were able to meet their needs and those that used creativity, innovation and unique partnerships to meet changing needs, and they rewarded them with increased sales. Additionally, as is occurring with a plastic injection molding client, volumes are increasing even further as companies decide they prefer a regional source of supply and want to make the transition rapidly. This plastic injection molder has more business than it can handle even though the company has continued to expand capacity.

Last but not least, the pandemic is separating the weak from the strong. The businesses with minimal cash reserves are going out of business or struggling mightily. Customers still want product and are shopping elsewhere. Additionally, COVID has spurred the early retirement and/or change of career and lifestyle of countless leaders. This is especially true with family-owned businesses. Multiple clients have sold and/or are in the process of selling so that they can enjoy retirement and slow down. Unfortunately, the personalized service is often not as robust with the company that takes over, transitioning additional volume to the proactive manufacturers willing to treat customers as they have become accustomed.   

The business will be there if you jump into action, prepare to scale, and look for opportunities. You don’t have time to take the continuous improvement path if you want to leverage the opportunity. Instead, you must take on risk and pursue an aggressive path to grow and scale. Start with a rapid assessment of your market and differentiators, reconfigure your manufacturing footprint and extended supply chain to best support your future customer and market needs, and prioritize what’s essential to scale rapidly. Beyond these strategic priorities, the most successful clients are focusing attention on supply chain resilience, talent, and digitization/ data. Those that focus on these priorities will gain ground rapidly and will pull quickly ahead of the competition. There will not be another opportunity of this magnitude during our lifetime, similar to the period immediately following the Great Depression. Are you prepared to thrive?

Lisa Anderson

As originally published in Brushware Magazine on November-December 2021

The post Manufacturing Resurgence appeared first on LMA-Consulting Group, a supply chain consulting firm.

According to a recent National Association of Manufacturers (NAM) survey, the vast majority (88%) expect sales, production and prices to increase next year despite the supply challenges. In working with clients across multiple industries such as biotech, building and construction products, and food and beverage, there is no doubt that sales continue to rise (with a few fits and starts due to the extended supply chain disruption) and the focus and concern is on how to expand capacity and scale up successfully to serve customers while not losing control of EBITDA performance.

In addition, there is VAST concern about the risks exposed during the pandemic. This has been further heightened with the changing political landscape. There will be a rush to reshore, nearshore and reconfigure the end-to-end supply chain. Additionally, I expect there to be a transformation with the strongest thriving and growing and the weakest transitioning out. Are you ready for a resurgence?

What Should We Consider and/or What Impacts Could Arise?

• Think 3 steps ahead: How are you positioned to take advantage of this opportunity? Start thinking as if you were playing chess and think 3 steps ahead.
• Reconfigure your supply chain: Plan for what you need to leverage the opportunities successfully.
• Shore up your down-the-line weaknesses: As this transformation takes place, where will your weaknesses show up? Start overcoming them immediately and ignore what won’t become a bottleneck.
• Implement SIOP (Sales, Inventory, & Operations Planning): You must have a process in place to improve the predictability of your revenue plan and integrate the core processes within your business to scale and achieve financial results. See a client video on the impact of SIOP.
• Hoard talent: The most successful clients are hoarding talent. There is a severe shortage of talent. People have choices. Is your company compelling people to work for you?
• Digitize the supply chain: To thrive in the new world with the resurgence of manufacturing, you must digitize your supply chain. Start immediately. Ramp up even faster. Yet maintain a common sense view.

Please keep us in the loop of your situation and how we can help your organization successfully navigate the current volatility and emerge above and beyond. Several of these types of topics are included in our eBooks such as The Road Ahead: Business, Supply Chain & the World Order.

The post Are You Ready for a Resurgence in Manufacturing? appeared first on LMA-Consulting Group, a supply chain consulting firm.

The post Are Americans Willing to Pay More for Products Made in the U.S.A.? appeared first on LMA-Consulting Group, a supply chain consulting firm.

In thinking about the surge to local for an interview for an SAP Insights article “For Resilient Supply Chains, Think Local“, there is no doubt the pandemic has pushed manufacturers to re-think their extended supply chains. When they suddenly couldn’t support key customer needs, manufacturers and distributors went into triage mode. However, as one client described, they were willing to fly product to support customers; however, in order to get product from Asia to California, it was routed through Europe and got stuck in another pandemic delay. Thus, they spent considerably more yet the product was delayed longer than the original shipment was delayed.

On the other hand, another client had a local supply chain and was able to rapidly adjust and meet changing customer needs. It has certainly made executives think. These pandemic induced delays and disruption to customers has added fuel to the fire. As the Amazon Effect has been in full force the last several years, it was already making clients re-think the responsiveness of their supply chain to changing customer conditions. The tariffs added further fuel to the fire because the total cost of most value-add products is already in alignment between China and the U.S. (and lower in Mexico). Thus, the tariffs were starting to prompt executives to reevaluate capital investments to prepare for the future. The pandemic has flipped the equation on its head. Local is in vogue! Reshoring is on the rise.

What Should We Consider and/or What Impacts Could Arise? 

Certainly, since executives are not only reevaluating their extended supply chain but actively transitioning to a more local or regional supply chain, it will cause significant disruption to the status quo. Start thinking about your situation:

• How are your suppliers doing? Is their business likely to improve or decline?
• Should you transition a portion of your supply base to be local?
• What are your local and regional capabilities?
• What is your industry doing?
• How will these changes impact your transportation and logistics needs?
• How will your supply chain partners be impacted due to these types of changes?
• What moves should you make now given your current supply chain? How should these strategies change?

Quickly reassess your situation. Rapidly evolve to successfully navigate changing conditions and GET AHEAD of what’s coming so that you aren’t constantly playing defense. Instead, proactively being offense.

Read more about these types of topics in my eBook,  Future-Proofing Manufacturing & Supply Chain Post COVID-19. Gain ideas and strategies to reemerge in 2021 and thrive long-term. If you are interested in gaining an expert assessment and path forward tailored to your company, please contact us?

Please share your stories, challenges, ideas and successes.

The post The Need for Resilience is Driving a Local Surge of Manufacturing appeared first on LMA-Consulting Group, a supply chain consulting firm.

Made in China or made in the U.S.A.? There is a lot of talk about this critical, hot topic. Said another way, will reshoring increase? According to executive surveys, according to clients, according to top supply chain consultants, the answer is undoubtedly trending to MADE IN THE U.S.A.

A few noteworthy points on the topic overall (of course, it depends on your industry, company and unique situation; however, consider these from an 80/20 standpoint):

• COVID exposed risks: Suddenly, China manufacturing came to a screeching halt with COVID exposing the global risk in the supply chain. Establishing priorities were not necessarily the choice of your supply chain partner. How exposed is your supply chain?
• Amazon Effect: Customers expect immediate responsiveness, driving the need for speed and resilience in the supply chain. Were you able to respond?
• Labor is no longer noteworthy: Labor costs have decreased significantly in proportion to the total cost. Wages continue to rise in China. Productivity has increased. Technological advances have made labor less relevant. Did you stay too long in China due to inertia?
• IP theft: Executives are definitely concerned. What could be more important?
• Changing laws: China put a new law in place about a year ago that allows the government to see anything that comes across a server. Thus, everything sent to China will be widely known. Are you OK with competitors gaining access to your secrets?
• USMCA: This new agreement encourages increased collaboration in N.A. so that executives have more control over their costs, speed to market and flexibility and responsiveness to changing conditions. Have you explored new partnership opportunities?

What are your plans for manufacturing? Of course, many organizations moved manufacturing to Vietnam. However, is your Vietnam facility run by Vietnam or by China? You might have simply moved your issue. No one approach is always best. Instead, the key question is as follows: Are you minimally diversifying your supply chain? If not, jump on it. If you are interested in talking through these strategies further, contact us to discuss your situation and objectives.

Did you like this article? Continue reading on this topic:
Reshoring: Is it All Hype or Action?

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July 16, 2018

According to a new Brookings Institution report, the United States ranks near the top for overall manufacturing environment.  The report evaluated policies and regulations, taxes, costs, workforce quality and infrastructure and innovation.  The only two countries to rank higher are the United Kingdom (#1) and Switzerland (#2).  The high tax rate and healthcare costs and the lack of government grants/ loans kept the U.S. out of the top spot.

The study also measured manufacturing output and manufacturing employment.  China ranked #1 in manufacturing output with the U.S. just behind in second place whereas Poland ranked #1 in manufacturing employment (with 20.2% of its workforce in manufacturing) vs. the U.S. at number 16 (with 10.5% respectively).  Manufacturing contributed $2.17 trillion to the U.S. economy or 12.1% GDP.  Are you finding ways to leverage this unique advantage of U.S. manufacturing?

What Should We Consider and/or What Impacts Could Arise?

Manufacturing has been getting considerably more attention in the last few years yet we still hear skeptics asking if there is any manufacturing left.  If we have the third best environment for manufacturing, why aren’t we leveraging this opportunity?   

According to the report, there has been a resurgence of manufacturing in the U.S. the last few years. With a continued focus on innovation, education and workforce development, we can keep this trend going so long as it is supplemented with a focus on the appropriate technologies for our business (automation, artificial intelligence, big data), governance predictability and appropriate levels of infrastructure.  Have you put together plans to involve and educate your team on these concepts?  Start there as progress will start with your #1 asset – your employees.

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