01/29/21 4:18 pm Mars International
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.
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.
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.
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.
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.
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:
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.