By Bob Williamson, CMRP, CPMM, MIAM, Editor
I've written this column on the heels of Manufacturing Day, October 1, 2021. Despite the event having already come and gone, in recognition of this day, I'm prompted to investigate what’s shaping the future of this powerful segment of the global economy.
But first, we need to recognize that over the past generation or two, the U.S. and other industrialized nations moved from mostly independent manufacturing powerhouses with a global marketplace to codependent ecosystems with a global presence. What does that mean?
The global post-WWII economy belonged to the United States, which reveled in that fact through the early 1970s. In the 1970s and 1980s, Japan came roaring into the global manufactured-products marketplace, followed, more recently by China. Manufacturers soon learned that profit margins could be increased by engaging these two manufacturing “partners,” no matter how different they were.
Accordingly, purchasing managers sought out low-cost materials, components, and sub-assemblies. (And from that point on, we saw more and more “Made in the USA with Globally Sourced Materials” labels on U.S.-manufactured goods.)
Since manufacturing efficiency was considered as cost per unit produced, the PIECE PRICES of materials were the major basis for outsourcing. China won that race with its extremely low labor costs. This began changing over time, as China’s labor costs escalated and purchasing managers looked to outsource from other low-cost producers.
Today, there are two related conditions poised to fundamentally change manufacturing ecosystem models: supply-chain issues and shipping costs.
First, the global supply chain is stressed and broken in some segments, largely because of COVID-related issues. Manufacturing sectors and individual operations shut down for various periods of time, as they dealt with employee health concerns and virus outbreaks. This also contributed to escalating and unpredictable labor shortages in the U.S., as well as in other manufacturing economies worldwide.
Second, shipping costs have jumped to staggering levels in the past 18 months. According to numerous sources, prices for shipping containers from China to the U.S. East or West coasts rose from about $1,600 to $20,000 (or more) in September 2021 (which was up from nearly $11,000 in July of this year).
Some cite a “chronic shortage" of these containers,” while others point to labor shortages (and costs) at the ports. Now, add to that the increased delays and costs for ground transportation (truck and rail). The picture is bleak.
These days, many company financial officers are no longer looking at prices of outsourced pieces as much as they look at TOTAL COST of globally sourced materials.
Shipping costs, shipping delays, interruptions in what should be an uninterrupted flow, and rate of quality all affect the total cost and availability of outsourced materials and, eventually, costs to end-users. Regardless, the pandemic and post-pandemic challenges have taught manufacturing economists, companies, suppliers, and consumers alike that “this cannot continue.”
Now is the time when "live or "die" business decisions are being made. Do we remain codependent or independent in our critical manufacturing supply chains? Do we build more a robust manufacturing ecosystem?
While there’s no single answer to today’s challenges in manufacturing, supply chains, and skills and talent, there is one concept that should prevail above all: RELIABILITY.
Let’s think outside our equipment-reliability box and apply the same principles and thought processes to ensure that every variable impacts our respective businesses' performance as intended. First time, every time.
