It’s time to take a practical look at your extended supply chain
The global pandemic. Manufacturing shutdowns. The Texas superstorm. A sudden demand spike. Labor shortages. Shipping and transportation bottlenecks. The emergence of new COVID variants. The war in Ukraine. Lately, manufacturers have faced one disruption after another. When will things return to normal?
Perhaps never, offers New Berlin Plastics Vice President of Sales Joseph Mechery. “It’s time to adopt to a new ‘normal,’” he cautions.
“OEMs need to be prepared for an extended period of geopolitical instability. Whether that takes the form of tariffs, sanctions, or governments deciding to throttle exports, manufacturers are at greater risk of supply chain disruptions than ever before. Plus, it doesn’t look like COVID-19, and the way different countries handle outbreaks, is going to be resolved any time soon,” he explains.
Mechery cites the massive disruptions caused by the Russia-Ukraine war as an example of what’s at risk. Although it hasn’t affected North American manufacturers very much, a similar, extended disruption in Asia could cause a lot of pain for North American OEMs.
In short, this is not the time for domestic manufacturers to take a wait-and-see attitude about their extended supply chains. “I’m not pessimistic. But I do urge our customers to be realistic. Now is an excellent time to take a fresh look at your overseas supply chain – so you can identify emerging risks and pinpoint opportunities for selective reshoring,” he suggests.
A practical approach to risk mitigation
Mechery recommends several practical strategies that OEMs can employ to manage their overseas supply chain risk:
“Obviously, you can’t reshore everything. Cost objectives still need to be met. Look for those parts that are less labor-intensive and have longer production runs. A domestic molder with a lot of experience in automation can help you to close the gap between the domestic and overseas labor costs required to produce them,” he points out.
Large parts are another natural for reshoring. “As fuel costs rise, so do shipping costs. From a logistics and transportation standpoint, it may make sense to move them closer to home.”
A blended approach to parts sourcing can also help OEMs manage risk. “Reshoring some of the production of key parts gives manufacturers greater flexibility. In today’s uncertain environment, dual sourcing parts is quickly becoming a must,” Mechery adds.
Death to JIT overseas manufacturing
At one time, just-in-time manufacturing was a powerful way to cut manufacturing costs and minimize expensive inventory. The production pipeline was stable and reliable. But in today’s uncertain times, it’s becoming a riskier proposition.
Today, manufacturers need to increase their safety stock or consider dual-sourcing parts to ensure that they can withstand any unforeseen supply chain shocks.
Building strong relationships with your channel partners is also a must in today’s environment, Mechery emphasizes:
“For certain types of resins and inserts, we’re seeing lead times of up to a year. That makes it imperative to develop strong supplier relationships that can help you solve problems when disruptions do happen.”
A case in point: When a superstorm knocked out petrochemical plants in Texas in the spring of 2021, it was NBP’s strong relationships with resin suppliers that helped them keep customers’ parts in production.
NBP created a team to collaborate with customers to identify equivalent resins and provided support to have those equivalents added to part specifications, so they are no longer locked in to one material. “That gives them an extra layer of security against shortages or sudden pricing pressures,” he stresses.
Mechery also cautions that OEMs need to align themselves with strong, financially stable molders. The current trend is longer and longer lead times largely due to transportation shortages and port congestion. A partner that is able to sensibly minimize risk on their customers’ behalf by increasing order sizes and balancing resources such as resins, inserts, labor is best suited to help OEMs keep their production lines running.
“You’re asking your molder to take on a big part of that inventory risk. A weak or highly leveraged molder may not be able to line up the financing to do that.”
NBP: A savvy partner for uncertain times
During times like these, OEMs need to partner with a well-managed, financially stable molder that has a very good track record of production management.
“We have processes in place to forecast our needs, identify bottlenecks, and address limitations,” Mechery indicates. This proactive approach has enabled NBP to stay several steps ahead of demand, thrive despite disruptions, and meet the growing needs of its new and existing customers.
“We’ve made significant investments in additional presses, automation, warehouse space, a new building, upgrading our onboarding and retention processes, and much more,” he adds.
But the infrastructure of the molder is only part of the picture. What is also needed are the processes, expertise, and project management capabilities to help efficiently and effectively move tools into NBP when the need arises.
“We’ve done this many times. That means we know what to look for and the right questions to ask to help ensure that the reshoring and tool transfer process goes smoothly,” Mechery assures.
It’s time to reduce your risk
As the world becomes a less stable and predictable place, hope is no longer an effective strategy.
“Waiting until the last minute and hoping that something will change is like walking on a tight rope without a net. It’s very risky,” Mechery concludes. “We can help you to assess and manage your supply chain risks and offer an honest recommendation as to what approach makes the most sense.”
Contact us today to discuss your injection molding and supply chain needs.