Re-Shoring or Near-Shoring Concepts Should be Strongly Considered
In this paper, there is an examination of what actual cost components should be included in a landed cost analysis.
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Authored By:
Brian Graham
Kimball Electronics
Summary
The old tactic of outsourcing to a low cost geography simply to deliver lowest cost direct and indirect labor was never a panacea supply chain solution. In fact, when evaluating solutions for lower volume and higher mix products typically found in the medical, industrial and public safety segments of the OEM market, IL & DL costs are only one subset of the total cost to land the product and service the ultimate customer.
In this paper, there will be examination of what actual cost components should be included in a landed cost analysis, the soft costs that an OEM should consider to deliver outstanding performance in quality, logistics and delivery management of the supply chain solution. A detailed comparison using a "case study" will be presented to demonstrate a total landed cost option versus one that is focused on IL/DL cost. In addition, near-shoring options have developed over recent years initially for consumer oriented products such as cellular phones and printers with the goal of optimization of landed cost in the end use market.
There will be shared a few case studies which demonstrate an optimum approach for total landed cost, ease of communication and avoidance of the typical issues that make an outsourcing only approach problematic. These include: different language and culture, long distances and different time zones, investing time and effort on establishing trust and the complexity these elements contribute to the development of long term relationships between an OEM and EMS partner. In summary, Near-shoring, when developed in partnership between the OEM and EMS provider can be a marketing differentiator for those clients who wish to set themselves apart by servicing their customers in the market close to "home".
Conclusions
In almost all cases there are options for near shoring which when implemented to a high level of regionalization in the local supply chain can provide better end to end service and a more responsive solution for the ultimate consumer at a fair profit margin to the OEM and EMS provider.
Initially Published in the IPC Proceedings
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