Ann Marie Uetz, head of the coronavirus task force with the law firm of Foley & Lardner LLP, discusses the results of a pair of surveys about how executives are responding to supply-chain disruptions caused by the pandemic and rising geopolitical tensions.
Foley & Lardner recently conducted two surveys: a Global Supply Chain Disruption and Future Strategies Survey Report, and Accelerating Trends: Assessing the Supply Chain in a Post-Pandemic World. They reveal a shift by many manufacturers away from a supplier model based largely on controlling cost and minimizing inventory in the pipeline.
More than half of those surveyed said they have already withdrawn at least some operations from China. Uetz says the trend was already evident in Foley’s conversations with supplier clients. Call it right-shoring or near-shoring; either way it represents a significant break in thinking from years past.
The coronavirus pandemic has caused many manufacturers to place greater emphasis on stability and resilience in their supply chains, but other issues have also an impact. Labor costs in China have been on the rise for a number of years, narrowing if not erasing that country’s advantage over production in the U.S. But companies aren’t focused exclusively on a return to domestic operations. They’re also considering a move to Mexico and countries in Southeast Asia.
Transferring operations from one factory to another can be an enormously complex task. For parts that can be purchased off the shelf, the process can be completed in a relatively brief span of time. But for those subject to customer approvals or specialized tooling, it can take a year or more to secure a new location for making such parts. The complexity of global supply chains is also driving home a need for greater visibility with suppliers and buyers, Uetz says.
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