A Publication of WTVP

Small/medium-sized manufacturing companies continue to play a significant and critical role in the supply chains for the larger U.S.-based manufacturers. They provide jobs, drive innovation and contribute to our communities. However, it’s no secret that their viability and health has been seriously challenged by global competition.

The original business drivers that compelled multi-nationals to source components from off-shore suppliers centered primarily on a desire to achieve lower purchased-part costs, while freeing up internal capacity. Many firms saw outsourcing as a means to achieve a global “presence” in key markets, expand their operating footprint and develop trading/business relationships.

And yet, many U.S. small/medium-sized manufacturers have adjusted successfully to the global challenge and can now deliver competitively against the foreign sourcing options. Is it time for some multi-nationals to look again and reconsider buying more from domestic suppliers?

The Rest of the Story

For some firms, the downsides of global sourcing are beginning to emerge as we get a more complete view of the total costs involved. Some of the new challenges and developing concerns with the offshore approach are beginning to outweigh the original anticipated benefits, including:

In Our Own Backyard

Fortunately, there now appears to be a developing awareness and fresh appreciation of the overall advantages of using a domestic supply base. Small and mid-sized producers are successfully reacting to global challenges, becoming lean, producing higher quality at production volume levels, embedding the same operating standards as the larger firms, becoming highly flexible in their capacity and adapting to the more complex strategic relationships with their large customers.
The strategic advantages of domestic sourcing improve if the large firm also considers logistics and lead time risk, security issues, use of common standards and ways, IP protection, legal infrastructure for contract enforcement, long-term relationship orientation, local/regional proximity, and dealing with a known and viable entity. Also, for U.S.-based multinational firms and other large national/federal organizations, global issues in their supply base introduce additional logistics, complexity risks, vulnerability in currency rates, multi-national politics and another level of security exposures.

Just Plain Good Business

We are fortunate to have capable small/medium manufacturers right here in Illinois who are playing major roles in the supply chains of some very strong firms, many of which are also headquartered in our state. Many of these large firms, to their credit and insight, have developed strategies and commitments to invest in and help develop more strategic relationships with their suppliers…a move that provides fresh opportunity for these suppliers that have adapted well to the new challenges. The near-term results of these supplier-manufacturer collaborations have already been great. The longer-term prospects are even better. So it makes sense to “bring it back home!” It’s good for business and good for America. IBI