As the pandemic continues to be a catalyst, interest in relocation and close relocation has increased in recent years. Companies face emerging prices to obtain and produce goods in China and other Asian regions. services and delays in the chain exacerbated by port congestion and even domestic transport problems. These points have encouraged brands to move closer to the source of entry: the United States.
Rosemary Coates, executive director of the Rehoring Institute, said the pandemic and the chaos it has created have awakened businesses to the risks they face.
“Not fulfilling orders or wasting a supplier without backup, seeing other [supply] constraints that didn’t exist before,” he said, describing some of the challenges. “Suddenly [supply chains] have become a much bigger decision, with many more variables and new dangers introduced. “
China is no longer the cheapest option for U. S. manufacturers, Coates said. One option he saw is for corporations to adopt a “China plus one or two” strategy. such as Vietnam, Malaysia or Thailand, up to a third of the costs. A variation of this theme involves corporations moving their production from Asia and sourcing along the U. S. -Mexico border.
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“Chinese corporations are there by the hundreds,” he said of the factories that are springing up on the U. S. -China border. In the U. S. and Mexico, and even in the interior of Mexico. For U. S. corporations, sourcing and production in Mexico also has a tariff advantage. be subject to a customs duty of 25%. So if you manufacture in Mexico instead of China, you save 25% on costs,” he said. Convention]. “
Coates gave two examples of corporations choosing to expand into the U. S. Instead of going abroad, or they regained production: One was a major coffee shop that once bought ceramic coffee cups from an Ohio factory. Another was a British manufacturer of water purification systems for airports and grocery shopping malls, with production in China. Since EE. UU. es a major expansion market, they chose to build a plant in Dallas near the airport, particularly to serve the U. S. market. Instead of expanding production capacity in China.
The trend is shown in the 2021 State of North American Manufacturing Report, which is produced annually through the Thomasnet. com research and publishing company. The report found that it is “likely” or “extremely likely” that 83% of brands will relocate by adding North American suppliers, up from 54% in March 2020. The studies also cited a potentially dramatic effect of increased relocation, noting that if four out of five U. S. brands were not more likely to be relocated. If the U. S. were to incorporate a new single-contract domestic supplier, it would inject $443 billion into the U. S. U. S. economy.
Rosemary Coates, Relocation Institute
A similar trend toward supply chain rebalancing was also cited in the 27th Annual Third-Party Logistics Study, a collaboration between the Council of Supply Chain Management Professionals, Pennsylvania State University’s Smeal School of Business, NTT DATA and Penske. The report, published last month at the CSCMP annual conference, found that 80% of shippers surveyed have taken or plan to take steps to “rebalance production sites to move to more regional or national product networks. “
John Janson, senior director of global logistics at bespoke apparel maker SanMar, said the pandemic “has revealed so many bumps in our industry. “SanMar operates in 25 countries and added several in Asia. The purpose of minimizing disruptions, reducing prices and speeding up time to market. Among the regions he analyzed was Latin America, which eventually settled on Honduras.
“There is not enough labor for the amount of product we need” in the U. S. SanMar has a plant in Tennessee that produces the company’s “made in the USA” brands. However, its largest production plant is in Honduras.
As an example of proximity, SanMar ships unfired fabrics, such as yarn, from the United States to Honduras, where they are transformed into clothing and reimported into the United States. In addition to the benefits, Janson says the proximity strategy has saved a lot of time — transit discounts, reduced transportation prices and reduced price lists on clothing thanks to the Central American Free Trade Agreement. It also has a giant shipping capacity Puerto Cortés in Honduras.
Some corporations target their supply chains by bringing production and distribution closer to consumers. (GXO Logistics)
“This is our largest outbound shipping site,” Janson said. “It’s 3-4 days of transit to Florida, where I can cross the docks to my distribution centers, either through trucks or intermodal trains. Or Houston, where I can get to the Midwest quickly. »
The operation in Honduras has a bioenergy plant and the largest rooftop solar panel of any SanMar site. However, Janson said corporations are careful when applying a proximity strategy.
“You have to go through with your eyes wide open. It is still a rising country and there is infrastructure and other demanding situations that have to be faced,” he said, pointing to problems such as the design and construction of buildings to face hurricanes.
Mark Manduca, chief investment officer at global third-party logistics company GXO Logistics, said COVID is making supply chains longer, slower and more complicated. It will have to be discounted, reducing margins. Customers cite the desire to diversify sourcing and manufacturing, cash flow, decrease stock obsolescence, and bring last-mile products closer to the customer, and faster, as drivers of relocation and proximity.
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It’s an investigation of the dangers and overall cargo of goods sold, adding prices from long global transportation cycles, capacity, delays, supplier disruptions and declining margins on expired delivered goods that want to be sold at a discount, he said. These considerations are taken into account in decisions on the origin of production.
“Instead of generating thousands [of products] in China and bringing them ashore, you can manufacture them onshore [or near the coast] and customize them,” Manduca said, citing a developing trend among customers. “Customers need the opportunity to be closer to the consumer. “
Supply chains take a long time to rebalance, Manduca said, noting there may be marginal shifts toward more regional sourcing and production. well suited for relocation or proximity methods that push production and distribution as close to the customer as possible.
“The customization procedure is very vital. This is developing and is a wonderful direct-to-consumer channel for the twenty-first century,” Manduca said. “Understanding your business nodes, the desire for direct-to-consumer delivery, fast delivery of products to [customers] rather than 10,000 miles away is a vital component of the journey. That’s the merit of diversification. “
Mark Manduca, GXO Logistics
One detail of a relocation or proximity resolution that can’t be is how it affects the entire supporting infrastructure that underpins manufacturing, such as supplier bases, warehousing, local hard work and distribution resources, said Rock Magnan, president of RK Logistics Group, a Silicon Valley-based 3PL that caters to consumers in retail fields. Automotive, high-tech and semiconductor manufacturing.
“We’re a lagging industry,” Magnan said of 3PL services. “We track the decisions our consumers make and where they need to manufacture and source products. “
As corporations figure out how to get closer to their customers, he continued, they also want to know how to reassess the incoming materials supply chain.
“Conceptually, it’s easy to move production from Asia to the U. S. “We are using the U. S. or Mexico as part of a relocation movement,” Magnan said. or technite them too. »
Magnan explained that once those decisions are made, 3PL will have to react and secure the garage infrastructure for the move.
Rock Magnan, RK Logistics Group
With today’s tight market for the garage area, “that’s where the challenge lies,” he summarized. “Do we seek to be proactive and gain space before the consumer moves?Or are we more receptive? All at the point of threat you need to take and how to manage or mitigate it.
Many of the markets in the U. S. , such as Phoenix and Austin, Texas, face capacity constraints, he said. “As new corporations establish themselves and establish themselves in already compressed markets, this will put more pressure on 3PLs to locate the right mix. “of space, staff and facilities to assist a relocation movement. “
Ultimately, a close relocation or offshoring resolution is a long-term strategy that is based on a consistent era of 3 to 5 years or more.
“You have to stick to it,” said Satish Jindel, president of knowledge consulting and analytics firm ShipMatrix. “Don’t replace management because of a slowdown or short-term crisis. Crisis management is smart for any business.
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