SAN ANTONIO, TX - Even before the Coronavirus pandemic turned much of the manufacturing sector on its ear, a growing number of North American companies were already reviewing contract manufacturing in China and other distant supply locations.
Triggering this re-examination were the U.S.- China tariff war and concerns about political transparency, according to Doug Donahue, founder of Strategic Footprint, a business consultancy. The trend was sufficiently pronounced that in 2019, domestic U.S. manufacturing owned a significantly greater share of global output compared to low-cost Asian competitors, Donahue says, citing that year’s AT Kearney Manufacturing Index, which showed a sharp decline in U.S. manufacturing imports from China and other Asian countries.
“In addition to traditional risks with contract manufacturing in China, there are also more recent threats, such as the US-China tariff war, ever-rising landed costs of products made in China and an uncertain geopolitical climate, making subcontracting there less appealing than ever,” Donahue says.
Quality issues, delivery delays and intellectual property theft are among other risk factors manufacturers face when working with subcontractors based in China, according to Donahue. His firm helps companies explore options to exert more control over production and brand image. Included in the analysis is an evaluation of the costs and risks of sourcing product from subcontractors in China.
Donohue’s firm guides companies in evaluating the strategic advantages of building its own products in North America, as a replacement for subcontracting in China. Donohue and his partner at Strategic Footprint, Bob Penicka, can also lead companies through the entire transition to in-house production, step by step. Penicka, a former COO of Callaway Golf, moved production from subcontracted manufacturing in Asia (once from China, once from Taiwan) to North America production for the industry-leading, U.S.-based sporting goods brand.
“I've learned over the years when you run a product-based business, there is a big benefit to controlling the manufacturer of that product,” Penicka says. “Twice I guided companies in making that shift away from subcontracting, and they gained shorter production lead times, better flow of product and, maybe most importantly, protection of their designs.” www.strategicfootprint.com.