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Supply Chain Management
As the COVID-19 crisis disrupts the world of manufacturing and supply chain, it challenges our perception of globalization. Governments around the world are acting to reduce dependency on China, with a bill in the United States and Japan providing billions in incentives to move supply chains. What does that mean for manufacturing, and what could a post-COVID new world order look like?
In this week’s Bunker, two expert guests from the CNC and Product Development and Prototyping world, Danny Yorke and Gregg Miner, joined Philip and me to explore manufacturing in the U.S. and discuss what a shorter, more regionalized supply chain might look like. It was a joy to explore the huge breadth and depth of manufacturing expertise available in the U.S. with two guests with so much experience and passion for manufacturing.
In the debate around globalization and a return to full U.S. manufacturing capacity, our panel agreed upon a few things. First, there is a demand to reduce manufacturing and supply chain dependency on China. Second, a resurgence in U.S. manufacturing and a more regionalized supply chain is desirable. Third, consumers and brands do not want to pay more. Finally, digital transformation and automation can level the playing field and reduce dependence on low-cost labor.
Both Danny and Gregg underlined the need to understand the total cost of ownership when selecting manufacturing geographies and partners. Many decision-makers look at price and do not factor in all the hidden costs around travel and liaison, not to mention the lost time, thanks to slower iteration cycles right now. Shorter supply chains, particularly during the launch, ramp and bridge phases of a product produce a lot of additional value that is often overlooked.
Danny explained that a Chinese machinist might cost as little as one eighteenth of the cost of a U.S. machinist, but thanks to automation and robotic handling systems, he can have a single machinist manage more than four CNC lathes. He is also able to do all the programming offline, freeing up machine and operator time, to deploy more effectively and on higher value projects. Danny’s team has been running 24/7 to help their customers deliver products in these challenging times.
Gregg agrees that automation can increase the volumes that can be practically and economically manufactured in the U.S., adding a note of caution against trying to build China in the U.S.
The panelists were all adamant that the single-minded and almost lemming-like rush to China has been counterproductive, and supply chain diversity is needed as a correction. In fact, on earnings calls, questions around moving manufacturing from China and creating supply chain agility and resilience are being regularly tabled.
One concern raised in the Bunker is that of skill shortages and how they could impact the ability to ramp production capacity in the U.S. and elsewhere fast enough. And capacity is a real issue. While we talk about shifting manufacturing from China, we should remember they have a capacity that is north of $4 trillion, and while we talk about other options like Vietnam, their $40 billion manufacturing capacity represents a mere 1% of China’s.