This article is sponsored by the MEP National Network, which helps small and medium-sized manufacturers grow, make operational improvements and reduce risk.
We are in the most dynamic period for the domestic supply chain in recent memory as many original equipment manufacturers (OEMs) and large manufacturers are adopting risk mitigation strategies and prioritizing efforts to reshore and build regional networks. These companies are increasingly prioritizing supply chain resiliency, which means they are bringing manufacturing closer to home to reduce risks and improve responsiveness.
The most obvious driver of this reshoring shift is the global supply chain vulnerabilities that were exposed throughout the pandemic. The many disruptions – shipping delays, material shortages, supplier instability – have led businesses to re-evaluate their sourcing and manufacturing locations.
For small or medium-sized manufacturers (SMMs), never has supply chain design and strategy been more directly impactful to achieving business goals. This is a great time for SMMs to explore how they can take advantage of these trends to find new business opportunities.
Here at the Purdue MEP, which is part of the MEP National Network, we work with SMMs to help them take advantage of these reshoring dynamics. In this article, we’ll look at some of the forces that are changing our supply chain landscape and how SMMs can find and prepare for emerging opportunities.
Forces Behind Reshoring and Regionalization
One trend driving reshoring and regionalization is a boom in the construction of large manufacturing facilities. This is being driven in part by federal investments, such as the Bipartisan Infrastructure Law and the CHIPS and Science Act, both of which contain stipulations regarding the production and procurement of U.S.-made products and components. Government incentives – tax breaks, grants, and more – are not just for makers of semiconductors, electric vehicles, and lithium batteries. Opportunities from this growth will trickle down through Tier 2 and 3 suppliers to small and medium-sized manufacturers in machining, stamping, casting, fabrication, and other legacy specialties that dominate the SMM landscape.
Top-tier manufacturers are seeking more visibility into their supply chains.
Another trend driving reshoring and regionalization is how OEMs and large manufacturers are demanding more visibility farther down in their supply chain to mitigate risks. According to Deloitte, approximately 25 percent of the supply-side disruptions occur at the Tier 2 supply level or lower, which makes it critical to understand and illuminate risks well in advance. Big companies do not want to be removed from factors that impact their performance.
Steps Smaller Manufacturers Should Take to Become a Preferred Supplier
There is great potential for manufacturers looking to become preferred suppliers to larger companies that are localizing their supply chains. Now is the time to prepare for potential new business opportunities. Here are five areas to address:
- Evaluate Current Supply Chain Risks: Conduct an assessment of your current supply chain to identify vulnerabilities, risks, and opportunities. Create strong relationships with key suppliers. Leveraging supplier relationship management (SRM) can speed up innovation and lower costs.
- Invest in Digital Tools and Technology: If you are not already doing so, evaluate where it makes sense to invest in technology to improve supply chain visibility, enhance forecasting, and manage supplier relationships. Companies that are looking to build stronger regional networks will be attracted to suppliers leveraging technology in this way.
- Build Strong Local and Regional Partnerships: Get to know your region, as a lot of business opportunities come from networking with local suppliers, logistics providers, and industry networks. For example, we worked with one client that was not utilizing their stamping and punching equipment anywhere close to its capacity to find new customers. They were not aware of how the MEP could help them find more business for that capability.
- Upskill Your Workforce: Ensure employees are trained in digital tools, supply chain management, and emerging technologies to manage new supply chain processes. Build internal expertise in managing regional supply networks.
- Leverage Government Incentives and Industry Resources: Explore the various government programs, tax breaks, and grants available for reshoring or localizing production. Your local MEP Center has access to a vast network of regional manufacturing stakeholders, from state-wide resources to economic development agencies, as well as local workforce boards.
Your local MEP Center can also help you assess ways to become supplier-ready by leveraging your core capabilities, closing gaps in other capabilities, and acquiring certifications. The MEP supplier scouting program is able to connect U.S. manufacturers that have relevant production capabilities and capacities with other manufacturers, enabling them to fulfill current market needs.
Leverage Agility and Location to Become Part of the Reshoring Effort
As an SMM, you have two advantages over competitors reliant on global networks. One is agility. You can respond faster than overseas suppliers in almost all situations. You also have opportunities to differentiate your company from global suppliers through:
- Craftsmanship and Quality Control: Reshoring companies are looking for proven quality work.
- Customization: Many SMMs already operate in a high-mix, low volume (HMLV) environment and are doing precision, custom work.
- Sustainability: The industry has a growing focus on sustainable manufacturing practices. Large companies are increasingly requiring suppliers to adopt sustainable and ethical practices in their supply chain management. Brand reputation is important to protect; a lack of trust in a brand can cause a supply chain disruption.
The other organic advantage is location. Geographic risk is perhaps the least predictable of supply chain considerations, because of geopolitical instability, trade restrictions, and the many potential causes of disruptions in long-distance shipping.
When agility is combined with shorter supply chains, you are in a position to build strategic partnerships to help the customer create a more resilient and efficient supply chain.
Your Local MEP Center Can Connect You With Reshoring Opportunities
The vast majority of manufacturers in the U.S.have 20 or fewer employees and may not have the expertise to understand how they best fit into this emerging supply chain ecosystem and opportunities for reshoring and regionalization.
Learn more about your local MEP Center, which can help you assess and implement regionalization strategies to stay competitive and resilient.
