What Automotive Supply Chain Leaders Need To Understand Before Reshoring

What Automotive Supply Chain Leaders Need To Understand Before Reshoring

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The U.S. trade war with China is in full swing, and automotive supply chain leaders are considering their next moves.

With the Uyghur Forced Labor Prevention Act (UFLPA) now signed into law and preventing imports from areas using forced labor in manufacturing, companies are setting their sights on alternative markets including India, Mexico and Africa.

The Reshoring Institute’s executive director, Rosemary Coates, returns to Auto Supply Chain Prophets with insights into why automotive supply chain leaders need to ensure that any reshoring plans encompass proper planning and plenty of supplier analysis.

“You have to go out there and look at your supply chain,” the author of The Reshoring Guidebook says. This proactive approach is critical to adapting to the way supply chain is done in the 21st century.

Themes discussed in this episode:

  • The Uyghur Forced Labor Prevention Act (UFLPA) is draconian, but was signed into law for good reason.
  • Positive, proactive control over supply chains is essential for automotive leadership today.
  • Between employment contracts and permits, reshoring from China is no easy feat.
  • Africa needs time to develop as an alternative to China, and India isn’t as attractive as it might look.
  • Europe lacks what the U.S. has: Consumer demand, manufacturing support and governmental support.
  • The top two things supply chain executives intending to reshore need to consider are: Proper planning and supplier analysis.

Featured on this Episode  

Name: Rosemary Coates

Title: Executive director and founder of The Reshoring Institute

About: As a supply chain professional with many talents, Rosemary provides insight and expertise into automotive supply chain management and the growing trend of reshoring. 

Connect: LinkedIn | Twitter 

Episode Highlights

Timestamped inflection points from the show

[1:39] UFLPA shielding: The U.S. has come down hard on imports from labor camps powered by the Uyghur ethnic minority in China.

[4:24] Positive control: Supply chain leaders need positive and proactive control over supply chains by (surprise) visiting factories making their products — not just any product. This limits the likelihood that suppliers are using slave or child labor.

[6:20] Forbidden words: Jan pins down the “two words that every supply chain purchasing professional never wants to hear.” Thankfully, Rosemary provides guidance on a solid total acquisition cost model and where it needs to come from.

[9:37] Goodbye, China: Companies intending to reshore manufacturing won’t find it easy. Chinese employment contracts make layoffs very expensive. Then there are the permits: If a company just leaves, they might never be allowed back in again. And they can forget about getting molds and tools back.

[13:01] Africa: The next frontier: A low-cost labor intensive market like Africa could be the perfect place to move. But it’ll take time for China’s investment into its Belt and Road Initiative to really kick in over the next 25 years.

[15:30] The Indian wildcard?: While it has an inexpensive labor market, India isn’t without its issues. Power cuts and poor infrastructure are rife compared to the modernity and efficiency in China. Mexico might be a better bet — especially as it’s located just across the border.

[18:21] Around the world in half an hour: Unlike the U.S., Europe isn’t in the middle of a trade war and is still on good terms with China. Reshoring within the EU through economic development work is common, especially in Eastern Europe. But the U.S. also has consumer demand, manufacturing support and government support — which Europe lacks.

[20:35] Local for local means global: Manufacturers have to think with a 21st century mindset, which encompasses strategizing globally while managing different localities. It takes time to reshore and redevelop.

[22:08] Reskilling and upskilling: Gone are the days of grease under the fingernails defining manufacturing. Engineering now requires communication and IT skills.

[24:38] The top two things: “There’s no substitute for planning,” Rosemary says, which is driven by strong project management leadership. Secondly, you need to “do a deep dive analysis on your suppliers,” to understand — in detail — where you’re vulnerable.

Top quotes

[4:31] Rosemary: “We've been preaching this for a while: You can't just expect everybody to mind all the laws and do all the right things. You have to go out there and look at your supply chain. And that means not just once a year having a meeting in a conference room going over what business you've done together, but [that] you need to go out to the factory and have a look. It means that you're not only having a look at the factory from time to time when you tell them you're coming, but also surprise visits. And you also want to be there at the factory when they're making your product — not just any product.”

[5:55] Rosemary: “It's not like you can just snap your fingers and have enough personnel to be flying around the world to look at things. But you better know where those things are coming from, who's making them [and] what the content [is]. Are they being outsourced? Are there subcontractors involved? All these things should be in your purview as the buyer of products.” 

[6:44] Jan: “We can talk all day long about the ethical supply chain, [the fact that] it's the right thing to do, vulnerability — we can talk about all these things and they all have value. But at the end of the day in automotive, purchasing people are judged — rightly or wrongly — by the cost of that product. And in all my decades in automotive supply chain, I never actually saw a company that had a really good handle around total acquisition cost.”

[20:36] Cathy: “That's a very important message for global manufacturers — [which] the automotive industry has consistently aspired to be: This idea of local for local means that they have to really be on their game — from a supply chain perspective — to be able to manage those different localities and optimize their supply chains globally as well.”

[21:01] Rosemary: “We tell our clients, you can't just snap your finger and redevelop your supply base. [If] you're bringing manufacturing back to the U.S. you’ve got to expect it's going to be 18 months before you redevelop your suppliers here. Because as manufacturing went offshore to China, all the suppliers went with them — you have to redevelop all of that, and that's not a trivial task. We tell people it's [going to be] 12 to 18 months before you can really feel comfortable that you've made a good dent in sourcing locally in the U.S.”


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Keep in touch with Auto Supply Chain Prophet's co-hosts Terry Onica and Jan Griffiths on LinkedIn.


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