It’s time for U.S. manufacturers to get their act together and start building more domestic assembly lines.
I almost choked on one of my Cheetos the other day while perusing the daily onslaught of e-mail news releases. The following headline got my attention immediately: “Supply Chain Delays, Disruptions Make China Sourcing a Potential Strategic Risk.”
The press release highlighted the results of a recent report prepared by the Boston Consulting Group (Boston) entitled “Surviving the China Riptide: How to Profit from the Supply Chain Bottleneck.” It claims that many ports in the United States and Europe are “experiencing virtual gridlock.”
However, “the U.S. problems extend far beyond clogged ports,” the report points out. “Existing rail infrastructure to disperse the flood of goods from China is also being strained, with freight out of Los Angeles and Long Beach [America's busiest ports] already very near capacity. With no major projects to expand U.S. rail capacity currently on the drawing board, this problem will worsen over time.”
Among other things, the report says that American companies should “look closely at the effects transportation bottlenecks can have on their profits and reevaluate their manufacturing and distribution assumptions. With no solution in sight, many U.S. companies may be better off manufacturing in Mexico or at home, though labor and other costs are significantly higher than in China.”
In their rush to source from China, the report warns that "many companies are blindly walking into a strategic risk. The risk is thinking that sourcing from China will result in lower product costs, when in reality the supply chain dynamics will, in many cases, drive up overall costs and reduce profitability."
The Boston Consulting Group experts conducted a number of simulations and found that the China manufacturing “advantage” quickly disappears when companies have problems getting goods to market in a timely fashion. They urge corporate executives to take a “sober second look at their China sourcing and consider a variety of options.”
Guess what the No. 1 suggestion on their list is? BRING MANUFACTURING HOME.
After years of hearing about more and more production capacity moving offshore, this sure was refreshing to see.
So, what does all this mean? Are happy days here again? I think it’s time for U.S. manufacturers to get their act together and start building more domestic assembly lines.