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Published in Manufacturing

Manufacturers ramp up reshoring to avoid supply chain setbacks

BY Sunday, May 08, 2022 06:00pm

Facing widespread supply chain disruptions over the past two years, manufacturers across the U.S. are increasingly sourcing components closer to home to bolster resilience and ensure product reliability.

This strategy rang true at Norton Shores-based Smart Vision Lights LLC, which manufacturers lighting products for machine vision systems and had maintained a supplier base in both China and Taiwan. 

Even before the COVID-19 pandemic struck, President Dave Spaulding said he and his team noticed potential weaknesses in the company’s supply chain and decided to bring production not just stateside, but also within its own walls.

“We just started to see a lot of signs — some of it was Taiwan and China were starting to not play so nice,” Spaulding said. “This was before the (micro)chip shortage, but even before that, we started to see freight (prices) creep up a little bit.”

Reliability issues also surfaced outside of Smart Vision’s international suppliers. Spaulding said lead times on certain components were growing even among its Michigan-based suppliers. This was a major problem for a company that created a niche out of quick turnaround times — a factor that has helped Smart Vision to win business and gain market share.

‘Smart’ thinking

As a solution, Smart Vision began a 30,000-square-foot expansion just before the pandemic hit in 2020. The space would be used to add both a surface mount technology (SMT) assembly line and a machine shop. Handling these production jobs in-house eliminated the risk of relying on international, or even domestic, suppliers.

At the same time, Spaulding said his company doubled its orders from overseas so that it could build up an inventory of components worth millions of dollars.

These measures were almost perfectly orchestrated ahead of the pandemic. Smart Vision burnt through its excess inventory and, by later in 2020, was able to jump start operations at its machine shop and SMT line.

“We’re in a much better situation now,” Spaulding said. “But we’re still not out of the woods on the (micro)chips. Most of the rest of the components are in good shape — some of them just have longer lead times. But we’re planning way better for them and every day seems like it has a new challenge attached to it. We’re vertically integrating and it has saved us money.”

With these new lines of business, Smart Lights also has benefited from connecting with other manufacturers that are on the same quest to find reliable suppliers closer to home.

“Our No. 1 concern was to take care of ourselves first and make sure we had the components and so forth to operate our business,” Spaulding explained. “Once we had that under control, then we opened up the floodgates to business outside and we’ve been very fortunate to pull in some business with large companies with the niche of fast turnaround and availability to machine. That’s been good.” 

Welcome back

“Reshoring,” or sourcing components domestically instead of internationally, has become an often-used manufacturing buzzword during the pandemic as supply chain disruptions continue to frustrate companies of all sizes and industries.

The pandemic has proven to be a catalyst in sparking a new reshoring movement. Industry veteran Harry Moser is on the front lines of those efforts as founder of the Reshoring Initiative, an organization that helps manufacturers nationwide to reshore their supply chains and, in doing so, bring accompanying manufacturing jobs back to the U.S. 

According to the Reshoring Initiative, 160,649 jobs were created because of reshoring in 2020. Numbers from both this year and last are poised to show the COVID-induced acceleration of these numbers. Moser said around 260,000 new jobs were announced in 2021 based on reshoring, which is expected to balloon up to 400,000 this year.

“Has (reshoring) accelerated with COVID and the Russia-Ukraine war and the risk of China breaking off trade relations with us? Yes,” Moser said. “But has it made pretty good steady progress over all the years? Also yes.”

In 2020, the most-cited benefits for sourcing domestically included proximity to customers, government incentives and availability of a skilled workforce. Manufacturers’ biggest gripes with working with international suppliers included quality of the finished product, freight costs and supply chain interruptions.

Transportation equipment, medical equipment and chemicals were the top three industries to reel jobs back to the United States in 2020.

However, Moser has been sounding the alarm to reshore long before COVID-19, beginning his efforts with the Reshoring Initiative back in 2010. While the pandemic highlighted supply chain resiliency, or the lack thereof, it’s always been an issue for manufacturers, according to Moser.

“All along, our argument has been the total cost of ownership, which says: Do not just look at the factory price, look at all the relevant costs and risks. That’s our argument then and our argument now. The thing is, the argument is a lot more credible now,” Moser said.

Even without the pandemic, other issues would still be threatening supply chains. Moser identified one explicitly.

“The thing driving people right now is China,” he said.

Opportunity awaits

Laurie Harbour, president and CEO of Southfield-based consulting group Harbour Results Inc., has noticed both temporary and permanent forms of reshoring. Not all manufacturers are striving for permanent change like the investment made by Smart Vision Lights.

Harbour, who works with mid-market manufacturers across the country, highlighted one of her clients that supplies the automotive industry. The company had to find a new supplier of components after previously sourcing them from the Ukraine. Despite the pivot, the move is unlikely to make any permanent changes to its supply chain.

“True reshoring is making a part over there in China, India or wherever, and I decide to bring it back and have it made in the U.S. and have contracts in place for a period of time,” Harbour said. “That’s different than: ‘I’m not going to make that tool in China, I’m going to make it in the U.S., but next program I’ll make it in China.’”

However, Moser said that even temporary reshoring efforts can benefit the United States.

“Temporary will turn permanent if the conditions stay the same,” he said. “Whatever is driving them to it now, if the risk doesn’t go away, it will become permanent.”

The current supply chain challenges also present opportunities for new business in the U.S.

“There are all kinds of opportunities and your salespeople need to be looking for them and talking to customers,” Harbour said. “They need to be saying: ‘What are you looking to reshore?’ or ‘Hey, I can make that commodity.’ It’s going to come down to who can launch quickly and do the things that have to be done. There is a lot of opportunity, but it’s not going to fall in your lap.” 

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Read 534 times Last modified on Monday, 09 May 2022 13:20
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