Leveraging Americas’ Last Competitive Advantage
Manufacturers in the United States face many disadvantages. Compared to China, India, South Korea, Indonesia, Central and South America, etc. …
1) Our direct labor costs are higher.
2) Our purchased raw materials and components are more expensive. Even when we buy them from overseas suppliers, we incur additional freight and administrative costs.
3) Our management and overhead costs are higher.
4) Our plant and equipment are more expensive.
5) And, in general, we face more rules, restrictions, regulations, and taxes.
So what, exactly, IS our competitive advantage? In a word, …
While the United States is certainly facing some challenges, we are still the world’s biggest marketplace.
Americans are impatient people. We want it NOW. And proximity can provide a much needed differentiator in delivery performance.
Product life times are also shrinking, and a long manufacturing and distribution pipeline increases the risk of obsolescence. Proximity allows for a short pipeline, and therefore, shrinks our risk of obsolescence and our inventory risks as well.
In addition, domestic producers are not faced with the lot size pressures that plague overseas suppliers, such as shipping by container. We can produce just what the customer wants, just when he/she wants it!
That’s the good news.
The bad news is that most domestic manufacturers, and their supply and distribution chains, have negated this advantage through excessive inventory policies, long lead times, lack of flexibility, and unreliable delivery performance.
We met with a domestic management team recently that was quoting an eight (8) week lead time. Their value-add time was a couple days. No wonder they were losing share to their overseas competitors!
Here’s a question for you: Where in the world could you NOT produce such a product and still serve the American marketplace? In 56 days you could produce and transport this product from darned near anywhere in the world!
Not that long ago, about the best one could hope for in shipping time from the Far East was 4-6 weeks. And the foreign suppliers were quoting inflated lead times as well.
But that is rapidly changing. As an example, I recently read about a new fast-freight service operating between Shanghai and Los Angeles: Transit time? Eleven days! It’s only sixteen days, total transit time, between Shanghai and Dallas!
The world is shrinking. Overseas transit times are compressing. And foreign producers are now adopting Lean principles. Their manufacturing lead times are now becoming competitive with lean companies anywhere in the world.
Our one last remaining competitive advantage is rapidly shrinking.
The solution is obvious. American manufacturers MUST get lean, get flexible, get responsive, and get 100% committed to customer service. We must also shrink new product development cycles, and increase innovation.
And we must do it NOW!
There are a host of articles on this web site that address the mechanisms needed to drive down your response times, increase flexibility, and get your delivery performance to near perfect. NOW is the time to leverage this advantage!
We can help. Give us a call for a no-risk on-site Lean Assessment.