CHICAGO While the return of manufacturing capacity to North America is shortening supply chains that used to stretch to Asia, it is also beginning to highlight the inefficiency of transportation and logistics even among North American Free Trade Agreement (Nafta) countries.
That is a key challenge facing precision metalformers ahead of the New Year.
"There has been consolidation among metalforming assets. Five major high-volume stampers in Cleveland are gone. They got bought up, moved, consolidated. Some of the capacity is going to Mexico. Mexico is exploding," according to Steve Peplin, chief executive officer of Talan Products Inc.
Cleveland-based Talan is among a host of American companies shipping automotive, electrical equipment and myriad other parts to major U.S. manufacturers Mexican plants, Peplin said.
Robert Hurst, president of Bamberg, S.C.-based Phoenix Specialty Manufacturing Co., agreed.
"Companies are looking (to streamline) the entire supply chain, but there are some insanities. A parts guy in Chicago sends stuff down to Mexicoand its not even labor intensive like assembling wire harnessesto have it worked on, and then sends it back to Michigan. Then its put into Ford pickups," he said.
"You see how spread out the supply chain is. That makes us vulnerable, and the logistics costs have not been paid strict attention. It isnt just transportation," Hurst said.
"(Companies) have raw and in-process inventory all over the place, and it multiplies at each sub-supplier," he added.
Some stamp, press, tool and die and fabricating shops are switching from cell manufacturing to line manufacturing to improve efficiencies, according to Hurst. A part enters the line, moves a few feet at a time to the next process, and then its complete. "There are no buckets of inventory all over the shop floor," he said.
Reshoring addresses the same thing. "The machine shop is no longer making this widget and putting the product here, then there. Rather, he finds a common place, reducing the total cost," Hurst said.
Another way to reduce inventory and related costs, Peplin said, is to share market intelligence.
"We do commodities metal management for customers. In a rising market, we buy forward. In a declining market, we buy short," he said.
Customers get the right price either way and "our material cost as a percentage of sales stays the same," he added.