The decision of where to manufacture is extremely complex, with the
consideration of U.S. tariffs on goods produced in China and the Covid-19
pandemic this year, companies have increasingly evaluated their supply
chains to minimize risk. In this deliberation, many have shifted their
production from China to lower-cost locations, such as Thailand, India,
and the Philippines, for electronics manufacturing. Here are 3 reasons why
we may see this happen more in the future.
- Similar Quality
For decades, China has been the powerhouse in off-shore manufacturing
because it could deliver quality products in a large quantity and in a
short lead time. However for certain items, like a printed circuit board
assembly (PCBA), the quality and infrastructure from these lower-cost
production locations are comparable to the same product out of China.
Moreover, as countries begin competing for this manufacturing work, the
more tools and resources they are investing in creating stronger
infrastructure and quality control.
Additionally, domestic production in the United States can offer far
greater quality control, fewer language barriers, and high-quality
standards; this is especially the case if it is in-house, although U.S.
facilities often don’t have the resources of these other locations
designed to produce at a high quantity. This year Mars International has
increased our capability to do low-volume jobs in-house, which allows us
to compete on price and to ensure our customer is involved in the
production process.
- Short Lead Time
On average, China’s lead time is approximately 14-16 weeks now, while
other countries are more in the 8-12 weeks range. The turnaround time of a
U.S. facility can be even faster, especially for smaller jobs.
As mentioned, other countries have also started to increase their capacity
to manufacture U.S. items efficiently, aiding both quality and lead time.
Industries ranging from pharmaceutical companies and food and beverage to
electronics and PCB manufacturing are beginning to diversify their supply
chain to keep up with continuing demands and secure their manufacturing
capabilities. Countries looking to satisfy U.S. manufacturing demands are
optimizing their lead times to compete with China’s.
- Fewer Tariffs
China used to be the lowest-cost option, but that’s not always the case
anymore. The U.S. China Trade War is one of the main reasons companies
started looking elsewhere to produce their goods initially. Given current
geopolitical trends and global supply chain movements, it seems these
tariffs are here to stay for a while.
The current tariff is 25% on China-produced goods. Considering the high
tax, production runs in other countries that were previously seen as more
expensive essentially come to the same final cost. Not to mention,
diversification allows for less risk of financial ruin should something
disrupt the currently relied-upon location.
Is it time to move your supply chain?
It might be. In addition to the geopolitical shifts, China’s economy is
changing. While China is still a viable manufacturing spot, it’s an
important time for supply-chain managers to evaluate potential emerging
production locations.
We know it can be daunting to shift your supply chain. At Mars
International, our supply chain team has experience working with and
transitioning companies to different offshore manufactures.
Takeaways
Offshore manufacturers in Southeast Asia and other countries have
significantly grown in popularity as of late due to the U.S. trade war
with China. They can offer:
Similar Quality
Shorter Lead Time
Fewer Tariffs for U.S. manufacturing
Contact Us
Are you considering moving production out of China to a lower-cost
production location? Mars International can help. We build out of emerging
markets like Thailand, India, and the Philippines, we have the expertise
in engineering and project management to help make the transition as
smooth as possible. Contact us to determine how we can save you time and
money and deliver a quality, reliable, and flexible project.