Our Empire Precision representatives had a fantastic time at 2020 SHOT Show and Photonics West trade shows. We always love talking to everyone stopping by the booth and being able to keep our ears to the ground about what is going on in the industry. After hearing many of the concerns of those at the show, we felt it was important to give a summary of those concerns as they are likely to impact businesses across almost every industry. Now, possibly more than ever before, it is imperative that companies look at their supply chain risks and make sure that they are prepared for government and global changes that can throw a wrench in business efforts.
Companies are still focused on the development of new programs, but the approach seems to be changing a little. These programs tend to be centered on one of the following:
– Change because of new regulations
– Redesign of products to add new features or increase performance due to competitive pressures
– Upgrading to reduce overall cost
– Modification or creation of new product offerings to increase market share
How programs are developed and delivered by their suppliers seems to be a point of emphasis. There is a growing awareness of the risks involved. These risks are typically driven around:
– Operational Risk – Loss due to external events, improper process implementation or failed system (Coronavirus).
– Infrastructure Risk – Loss due to disruptions in infrastructure.
– Schedule Risk – Loss due to not being able to hit a specific timeline
– Information Security Risk – Security of information, IP, business data etc.
– Programmatic Risk – Specifically Government rules changes (Tariffs)
Significant discussion was driven around the impact of the exposure to supply disruption because so much of their supply base is in China. The Coronavirus epidemic has companies concerned about their supplier ability to deliver product on schedule plus overall concern regarding the broader public health risks to China and nearby developing nations.
The impact of “Phase 1” agreement that leaves in place a 25% tariff on most of what the US buys from China, including components used in JIT manufacturing processes. This along with the Coronavirus is causing many companies to reevaluate their China-centric supply chains.
Companies have become increasingly concerned about China’s lack of respect for intellectual property protection and contract law which increases important product across a vast array of product type. The extended freight times associated with manufactured products will likely be compounded as the Coronavirus is forcing China’s ports to a standstill. There is risk that the entire China based supply chain could grind to a halt. According to Plastics News, “In Wuhan, roads are blocked, factories are closed and the whole of China is affected.” They also report that some material suppliers have had to close factories and institute force majeure.
If your company is affected by these concerns, it will be imperative to revisit your supply chain to mitigate any risk you are experiencing. Here are a few questions you can ask yourself to determine if your supply chain can be improved:
– Are any of our supplied parts subject to tariffs?
– Are there any domestic suppliers that can provide these parts without the tariffs?
– Has my supply chain been affected by the Coronavirus in China?
– Are there domestic suppliers that can make our parts to avoid slowdowns due to disease?
– What are the opportunity costs involved with keeping the current supply chain vs making changes?
– Will freedom from tariffs and slowdowns due to Coronavirus offset the cost of producing domestically?
Asking yourself these questions will aid in determining whether or not you should be making changes to your supply chain management in the short term and long term to limit your risk exposure and ensure market share stability going forward.