Have you considered geographic footprint in your engineering and outsourcing manufacturing strategy?
While evaluating outside vendors to engineer or manufacture a product, one of the most obvious needs to be considered is whether they have the capabilities required to build it. This can include metal machining capabilities, PCB design and assembly capabilities, aftermarket service capabilities, and much more. But when the federal government is your customer, one must be careful also to consider whether your potential vendors have the suitable geographic footprint to support upcoming and unpredictable product and business needs over the lifetime of your device.
Geographic Sourcing Strategies become Critical
The combination of trade wars, trade bloc dissolutions (Brexit), and pandemic-related supply chain issues has caused OEMs to re-prioritize what factors go into selecting the point of manufacture for electronic devices. In years past, the answer may have been simple: shifting from onshore manufacturing to lower-cost offshore manufacturing was a safe decision when international trade wasn't as fraught with risk as it is in 2022. Now, however, security of supply – being able to receive the products you expect – can be held at a premium over cost.
What geographic shift might you experience?
Let's dive into some specific use cases.
Offshore → Onshore
Of the top five approaches that will fuel growth for industrial companies during the recovery, McKinsey lists "increasing resilience of the supply chain and procurement" as #3. The most obvious answer to many companies considering such goals is a shift from offshore to onshore manufacturing, known as reshoring. Considerations about whether or not this approach may work for all or a part of your product profile may center around the type of product being made.
For product type, considering the volume and diversity of production is critical. Low mix, high volume electronics will be more likely to encounter issues in meeting cost requirements. One primary example would be laptops – when manufacturing laptops for U.S. domestic preference laws, it wouldn't be too prudent to move production completely onshore. The supply chain for that product doesn't exist in the U.S., and it will be costly to set up. So it makes sense that most I.T. products currently receive blanket U.S. domestic preference waivers.
However, low volume high mix products are a different story. Some types of higher-end surveillance cameras or drones can be made in the United States at an acceptable level of cost. We find that American manufacturers and EMS companies will invest in certain types of flexible and high-precision automation tools like cobots within a manufacturing cell.
Offshore → Nearshore/TAA Offshore
Mexico can be a good option for manufacturing for Federal grants and procurements. For particularly cost-sensitive products that are targeting U.S. government procurement or grants, the Trade Agreements Act (TAA) provides an avenue for waiving domestic-preference requirements in federal procurement for end products of certain "designated countries" – including a large amount of South, Central, and North American countries along with European companies and even South Korea and Israel.
For Mexican manufacturing locations, the ability to utilize land freight (as opposed to ocean or air freight) is a significant opportunity for companies worried about port traffic jams slowing supply chain issues.
Engineering and manufacturing services firms with comprehensive nearshoring capabilities may be able to offer you production options that let you enjoy internationally available lower costs while also allowing you access to know-how and production facilities with the certifications necessary for your unique use case. Nearshoring also offers the opportunity for your subject matter experts to more quickly and easily visit a site to verify that the manufacturing environment and techniques meet your company's needs. If you don't know how valuable or frequent manufacturing site visits might be to you, consider that Benchmark has customers who regularly visit sites multiple times in a month and often maintain a list of planned customer site visits that extends months in advance. Having a manufacturing and engineering partner that can adequately and concisely address your concerns is critically valuable to feeling confident in your organization's ability to pin their hopes of growth on a newly introduced product.
Looking for manufacturing partners with a significant footprint in Mexico or other TAA-designated countries could be an opportunity to leverage a lower-cost locale with the expertise of a global manufacturer and without learning the intricacies of Mexico site setup yourself. Even if you are not considering producing product within Mexico at this time, production site transfers are made easier working with organizations who have a global footprint – start production in the U.S. or low-cost Asia regions and transfer seamlessly when you think it's right.
Finding the Right Partner
All told, while you may have an idea about what geographic transition will be necessary in the future, it is unlikely you can predict with complete certainty. Working with a manufacturing and engineering partner with a global footprint to adapt to your changing needs is a critical consideration when outsourcing these capabilities.
Going beyond the map
It is crucial to 'go beyond the map' and have deep conversations about what engineering and manufacturing capabilities overlap by site. This may not be immediately evident on the website, and they may not be comparably scalable in terms of manufacturing quantity. EMS companies frequently expand their geographic scope through acquisition, and it's essential to learn how deeply integrated the processes between those sites have become post-acquisition. Put simply, some engineering and manufacturing services firms haven't gone through the efforts necessary to integrate sites.
After considering footprint and capability sharing, we still must go even deeper; do you have access to the listed capabilities of a particular vendor? Some EMS providers with large geographic footprints may not have the willingness or ability to invest the money and attention required to see your product go from prototyping to full production. Some vendors require manufacturing minimums before you start getting the type of support you'd like, while others shy away from complex products as defined by technical or regulatory requirements.
Benchmark prides itself on our global network of design, engineering, and manufacturing facilities that span across three continents. Benchmark maintains one of the largest North American EMS footprints, with major production facilities in California, Minnesota, Arizona, Guadalajara, and Tijuana. We also offer locations in Europe-located TAA-designated countries like The Netherlands and Romania. Our worldwide facilities offer comprehensive capabilities and regulatory certifications strategically located to provide an intimate level of support to our customers regionally while allowing them to scale globally. Our customers operate in highly-regulated industries where quality and reliability don't just matter—they determine a company's future. That's why we incorporate the most demanding manufacturing execution and testing automation systems for our customers. Our management system certifications and registrations demonstrate our commitment to customer satisfaction, quality, safety, and the environment. To learn more about why Benchmark is the perfect partner for your restoring opportunities, connect with us.
