In the Summer of 2021, we were contacted by a company in the electrical systems business about fabricating some of their products. Since their company’s founding in the mid-2000s, they had sourced their entire product line to China. But COVID had now brought international shipping to a halt, and being solely reliant on Chinese manufacturers had dealt a devastating blow to their business.
Customers were needing their products but this company had literally nothing to sell. They could not even get repair parts to help previous customers. After months waiting on parts to show up, they decided to investigate having their products made in America. As they told us, “It’s hard to stay in business if you don’t have any product to sell.”
Truth be told, even before the crisis caused by the COVID shutdown, they had been facing significant issues with overseas manufacturing. Because of the extra time needed for shipping across the ocean, forecasting was difficult and inventory levels had to be kept artificially elevated to make sure they always had product in stock. They also had experienced issues with inconsistent quality and shipping damage.
The company put together a list of potential suppliers and set-up times for their team to visit each facility. When they came to us, we spent a lot of time with their team reviewing the goals for their product line, then we toured our facility showing them our processes and quality standards. They had visited several other fabrication companies but, in the end, felt that we had the systems in place to ensure the product quality and on-time delivery they needed.
We began producing parts for them in the fall of 2021 and it has developed into a great working relationship. The company no longer has to hold a large inventory of products and, with our reasonable lead times, they have been able to decrease their inventory and increase their cash flow. They also don’t have to order extra parts anymore to make up for fallout due to quality issues. Of course, our pricing is higher than they were paying to have the items produced in China, but they are happy to pay a little more to have a much better sourcing experience and actually have products to sell.
Many U.S. manufacturers have a global supply chain and that can certainly appear to have advantages in terms of pricing. However, many of them are learning the hard way that the overall cost to the company of having items produced overseas can be much higher than the initial savings.
If you are interested in learning more about the benefits of reshoring, please visit the Reshoring Initiative and be sure to try the TCO Estimator!
