BY BOB KILL
Like the saying goes, a recession is a terrible opportunity to miss.
Could it be that after two or three hard years there are some positive shifts beginning to shake out? I think so -- and we need look no further than your supply chain.
For years, savvy manufacturers have prepared for the time when OEMs would sour on doing business with cheap labor behemoths like China and India and bring their business closer to home. It looks like that time has come. (My analysis of these opportunities appears in an article
on page 14 of this magazine.)
These manufacturers realize that nothing exposes a problem better than a challenging time. They knew that there would be opportunities as the recession forced their customers to tighten their supply chains. And they were right. Most OEMs used the recession to streamline their
supply chains. They pursued deeper relationships with their highest-performing and nearest suppliers. It became obvious that working out those details was much easier when the preferred supplier is located just a short distance away.
Some OEMs re-evaluated their off-shore partnerships. Just as a homeowner might refinance his loan to reflect new circumstances, OEMs have found less of a financial advantage in working with offshore suppliers. For example, the Chinese government is no longer propping up
smaller manufacturers, making them far less competitive. When that's coupled with regulatory changes, higher wages and higher shipping costs, as well as the obstacles of distance, the benefits of off-shore relationships shrink even more.
OEMs have been home-shoring in a variety of ways, including obtaining single-source parts that are highly specialized and more difficult to find. I have seen many large equipment manufacturers shrink their component suppliers from three vendors to one, picking the vendor that
has superior quality and speed.
Most frequently companies are home-shoring critical components or subassemblies. That's especially true when OEMs need to solve vexing problems or the product requires a dose of Minnesota's well-regarded precision manufacturing. Yet manufacturers aren't re-shoring every aspect
of their products. Some components are just naturally high-volume and low-value add; manufacturers likely will continue to source those from other parts of the country or overseas.
There are other examples as well. The good news is that manufacturers who have prepared for this day are well-positioned to take advantage of the new business opportunities.
The better news is that it is not too late to prepare.