Current supply chain disruptions and backed-up ports have left many companies without needed components and products. It has also refueled the debate on whether or not American companies should onshore their sheet metal manufacturing.
Although many Americans feel strongly about “made in America” products, there are times when offshoring makes sense. What is important is that you compare costs, evaluate your risks and the additional costs associated with those risks, and know the level of risk you are willing to take on.
Here are some things to consider when choosing the right sheet metal manufacturer, whether onshore or offshore.
Costs are generally the primary consideration when deciding whether to find an offshore or domestic manufacturer. When determining cost, you must look at total landed costs. Often companies will look at only the cost of the product, duty, and freight costs. But this is only part of the equation.
There are other ways that costs creep in. Consider costs associated with long lead time and late deliveries, including inventory carrying costs, out of stocks, upset customers. Take into consideration travel costs if you need to visit the manufacturing facility. Also, domestic and overseas packaging costs may vary – ocean freight may need additional packaging and corrosion may be an issue if not packaged properly.
Another consideration that can impact costs but may be harder to quantify is communication. How well the company communicates is paramount to ensuring your component or product meets your expectations. If there are language barriers or poor communication, you may have delays, reworks, or other issues that can add to your costs. Extreme time zone differences can add to frustration if you can’t reach someone during your regular business hours. And if you need an order rushed, the cost of airfreight from an offshore manufacturer will be much higher than overnighting it domestically.
Delivery is a factor in costs, as discussed previously. Offshore delivery can be unpredictable, as we have seen, resulting from backed up ports and worker shortages. Just-in-time (JIT) manufacturing has increased efficiency and decreased costs for many who manufacture on shore. However, because of the extended delivery times and the unpredictability of offshore, many gains made with just-in-time manufacturing will be lost if manufacturing is moved offshore. In addition, you will require warehouse space, staff to manage inventory, and costs from obsolete parts you no longer use. Depending on how many parts you have, this could have a significant impact. Conversely, moving from offshore manufacturing to onshore and implementing JIT can decrease delivery risks.
Time to market should be considered if you are introducing a new product or a product with high demand. If your brand is in a competitive space, you don’t want to be replaced by a competitors’ product because you couldn’t get your product to market fast enough.
Supply Chain Risk
Today, you’re more likely competing with other supply chains rather than other companies. External factors, such as supply and demand, global economy, politics, outsourced manufacturers facilities, and weather, can directly impact your supply chain, as can internal factors, including your business processes, planning, and financial stability. You can’t eliminate all supply chain risks, but you should have a strategy for identifying potential risks, your risk aversion level, controls, and avoidance measures. Mitigating supply chain risks by choosing the right sheet metal manufacturer will keep the flow of your products moving to market.
When evaluating your supply chain risks for domestic and offshore vendors, consider risks associated with reliability, quality, ability to develop long-term relationships, capabilities, and vertical integration. If the risks you are taking with your supply chain will impact customer relationships, time, quality, or efficiency, you are also impacting your costs.
It doesn’t have to be an all-or-nothing proposition when deciding whether to onshore your sheet metal manufacturing. Having a secondary source is often a great compromise. You may choose to offshore cheaper, less critical components and use domestic sourcing for more complicated components.
When considering this option, be aware of some downfalls of having multiple suppliers. When your product volume is divided amongst manufacturers, you have less bargaining power and higher transactional costs. With reduced volumes, there is a risk that your manufacturer may not consider your business a key account and prioritize it lower. And finally, of course, there are additional time and resources (costs) associated with communicating with and managing multiple suppliers.
Consider Tusco For Your Sheet Metal Needs
We are a precision sheet metal fabrication leader, handling all aspects of product manufacturing, from design through shipping. There are many benefits of trusting us with your sheet metal projects.
- Our state-of-the-art equipment and automation allow us to optimize production flow to meet our customers’ needs.
- Our wide range of in-house capabilities reduce our customers’ procurement time and sourcing management, eliminate product travel time between vendors, and increase speed time to market.
- We have certification to UL 948 For Wire Harness and Cable Assemblies, which many others do not.
- We have a Packsize EM6-50 packaging machine that allows us to optimize packaging to reduce materials and increase product protection.
While deciding if your project is best suited for US or offshore manufacturing, contact our experts today. With our in-house capabilities, fast turnarounds, and connections with domestic and offshore manufacturers and suppliers, we will ensure your project is done right, cost-effective, and delivered when you need it. Connect with one of our experts today ar 716-250-7813.