Discussion Highlights: Nearshoring the Supply Chain
11.2.22 Executive Roundtable
The roundtable theme was lessons learned from shortening supply chains through supplier nearshoring. Prior to roundtable discussions, APD shared a list of commodities that we have recently helped clients identify suppliers for (primarily in Mexico) including:
- Aluminum castings/machining
- Aluminum extrusions
- Castings
- Copper tubes
- Corrugated packaging
- EPDM/rubber seals
- Exhaust tips
- Fabrications
- Forgings
- Injection moldings
- Machined parts
- PVC sheets
- Stampings
- Steel tanks
Highlights of the roundtable discussion are summarized below:
- Vice President of Procurement for a hatcheries manufacturer shared that continuity of supply and cost competitiveness have been the main drivers of their nearshoring efforts. They shared that they’ve had success nearshoring metal components, plastics, and electronics manufacturing services, primarily in Mexico.
- President of an automotive accessories manufacturer shared that they have been working to move supply from China to Taiwan due to the 7% tariff currently being paid for electronic goods imported from China, but are finding that manufacturing costs are 5% higher in Taiwan, offsetting much of the tariff advantage. They commented that there aren’t viable alternatives to these two countries for the electronic components they buy. They also commented that Taiwanese industry does not appear to be as concerned about geopolitical tensions with China as we are in the U.S.
- Director of Indirect Sourcing and Major Programs for a fork truck manufacturer shared that supply resiliency is the major driver of their nearshoring efforts, particularly out of China. They shared that they have had success nearshoring plastics and wire harnesses, mainly in Mexico, but are concerned that Mexican suppliers are running into labor constraints as production has been ramping up with North American nearshoring initiatives.
- Director of Enterprise Sourcing for medical devices manufacturer shared that their interests in nearshoring have been primarily cost reduction and shorter lead times. They also cited IP protection, primarily in Asian countries, and requirements for local sourcing in some countries including India and China.
- Director of Sourcing for a garage door opener manufacturer shared that tariff and freight costs initially drove their nearshoring efforts, but with Pacific ocean freight costs returning to pre-covid levels, the focus is on supply risk related to local covid-related shutdowns in China. They shared that they have had success using plastic moldings suppliers in both the U.S. and Mexico.
- Director of Commodity Management for a CNC machinery supplier shared that their main motivation for nearshoring is reducing costs. They are still encountering significant supplier price increases even though most commodity indexes are moving downward (with the exception of energy). They have been able avoid some cost increases by analyzing foreign exchange impacts and addressing in supplier negotiations. Also, they pointed to the opportunity to bring in competitive suppliers, citing a recent 15% cost reduction for suppliers the same materials.
- Associate Director of Mechanical Commodities Procurement for a consumer audio products manufacturer shared that risk mitigation is driving their nearshoring efforts. They are concerned with the reliability of getting materials out of Asia, citing geopolitical risks. They have had success nearshoring plastic components (U.S. and Mexican suppliers), and shared their biggest challenge has been finding suppliers that can support their high mix/low volume business.