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Local Manufacturing for a Competitive Edge

The benefits of local manufacturing offers numerous advantages, such as making supply chains more reliable. This becomes particularly relevant when considering the risks associated with international manufacturing and supply chains, where unexpected closures of shipping lanes and ports can disrupt project timelines, as witnessed during the pandemic.

In this article, we’ll cover the advantages to embracing domestic supply chains, overcoming barriers to doing so, and the risks associated with utilizing international supply chains. 

Insight

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Man working in local manufacturing facility on lighting panel

International Supply Chains Expose Vulnerabilities For Businesses

International supply chains, especially those from distant regions like China, introduce inherent risks that can significantly impact North American businesses and customers. Waiting for products from overseas can put projects behind schedule, and this delay has a cascading effect on the schedules of their clientele. In addition to the logistical challenges, the reliance on foreign suppliers can necessitate the lengthening of credit terms for both businesses and customers. This, in turn, exposes them to exponential costs stemming from interest rates, and compounding late fees. A stark illustration of the potential consequences of relying too much on international supply chains is evident in a recent report by data analytics firm Dun & Bradstreet, which estimates that about 51,000 companies worldwide have one or more direct suppliers in central China. It also notes that, during the onset of the pandemic, around 5 million companies globally experienced disruptions due to lockdowns in the region, lasting approximately three months, which threw a wrench into many supply chains.

We witnessed the detrimental impact international production dependencies can have firsthand when it came to supplying essential goods during the pandemic, for example. A survey that Ernst & Young LLP (EY US) conducted in late 2020, showed that only 2% of companies who responded to the survey said they were fully prepared for the pandemic. Additionally, nearly two-thirds of American manufacturers are likely to bring production and sourcing back to their home continent to strengthen their supply chain network. During the pandemic, with the sudden surge in demand for Personal Protective Equipment (PPE), many supply needs were slow to arrive and expensive when they were met. Essentially, according to McGill University, there was more pressure on the Chinese economy because of its dominance in the production of PPE, which augmented the number of shipping routes that departed from China, but there were not enough workers or trucks to load and unload. This led to shipping companies navigating through routes that departed from the US, which had the highest fare on the market, making shipping exponentially expensive and slow. There are other factors that also make supply chains less reliable aside from the pandemic. In fact, according to SAP Insights, in the SAP 2022 Supply Chain Survey, geopolitical unrest was the top supply chain issue according to business leaders (58%) followed by lack of raw materials (44%). 

Disruptions, like these, underscore the vulnerability of businesses tethered to international supply chains, emphasizing the need for a more resilient and locally anchored approach. 

Man working with light fixture in manufacturing facility

Using Local Manufacturing To Protect North American Businesses

Utilizing local manufacturing or supply chains is often associated with higher costs due to a couple of common assumptions. The first assumption is that domestic products are more expensive, and the second is that there are not enough truly North American suppliers in the market to meet demand. However, these assumptions aren’t entirely true, and the many benefits of local manufacturing and supply chains tend to outweigh the disadvantages.  

6 Benefits to Local Manufacturing

1. Domestic shipping is cheaper

First, let’s talk about shipping. It may be the most obvious advantage to local manufacturing. According to the Global Container Freight Index, the average global value of transporting a container went from $1,362 USD in November 2019, to $9,628 in February 2022. According to this Index the most expensive routes are from China/East Asia to the North American East Coast ($16,893 USD) and from China/East Asia to the North American West Coast ($15,218 USD). Therefore, producers and consumers that rely on China and are based in Canada, the United States, and Mexico may be experiencing some of the greatest financial strains.    

2. Local manufacturing offers faster and more reliable turnaround times

When businesses opt for domestic or local manufacturing, they benefit from proximity, and not having to ship across country borders. This can allow for quicker communication, simpler logistics and reduced turnaround times for prototyping and shipping. Not to mention, shorter travel distances for delivery vehicles results in less carbon emissions. 

Delivery times are already the fastest they’ve ever been, and the reverberations of this are felt in customer expectations. Project timelines are often based on the assumption that goods will arrive within 1 – 2 weeks, and if products do not arrive within that timeline, the entire project could be thrown off. Ordering from local manufacturers not only accelerates the production process but also facilitates more effective collaboration between manufacturers and businesses. In contrast, dealing with international manufacturers introduces complexities related to shipping delays, communication across time zones, customs processes, and potential disruptions, all of which can contribute to extended lead times. Additionally, local manufacturing enables businesses to respond promptly to changes in demand, market trends, or unforeseen challenges, fostering a more agile and adaptable production ecosystem. Swift and reliable turnaround times are key to maintaining a competitive edge, and partnering with local manufacturers achieves this. 

Image source: This graph shows that delivery times are faster than they've ever been, in general.

3. Local manufacturing enhances the dependability of supply chains

Localized supply chains and manufacturers offer enhanced reliability for businesses through several key mechanisms. One critical aspect is effective quality control facilitated by proximity to suppliers that must abide by the same standards and regulations. The ability to conduct frequent inspections ensures that products consistently meet the required standards, promoting a product that’s more compliant overall. Another factor contributing to reliability is the adherence to local regulations and legal standards. Localizing supply chains helps businesses comply with specific regulations, such as product safety, labor laws, and environmental standards, reducing the risk of non-compliance issues, penalties, and reputational damage. Additionally, localized supply chains contribute to improved risk management by minimizing vulnerability to external factors like geopolitical conflicts, natural disasters, trade disputes, and transportation issues that often disrupt global supply chains. This control and agility in responding to unforeseen events result in a more dependable and consistent supply chain.  

4. Companies that offer North American manufacturing also often offer domestic customer support

Companies that embrace local manufacturing not only prioritize North American supply chains, and their logistical benefits, but frequently extend this commitment to domestic customer support. This can also expedite the product development process, allowing for rapid prototyping and prompt revisions to product designs, based on customer feedback. Distant suppliers, on the other hand, are usually much more difficult to contact, and adding a couple units to an order can significantly lengthen lead times and can cause other complications. So, it’s much easier to adjust or change an order when suppliers are local or domestic.  

Another benefit to local customer service is that customers and customer service representatives are more likely to share the same first language, making communication simpler, and leading to higher customer satisfaction. Furthermore, companies that offer domestic customer service often work within the same, or similar, time zones as their clientele. This proximity results in more immediate and responsive assistance, reducing wait times and facilitating timely issue resolution. Swift prototyping, and shared languages and time zones, not only fosters a more personalized and efficient customer support experience, but also underscores the advantages of partnering with local suppliers and manufacturers.  

5. The USMCA Advantage

Another powerful advantage that local manufacturing provides is the significant trade/tariff benefit. Goods manufactured in North America don’t face the continued pressure and tariffs placed on items produced overseas. Even if companies source some components overseas, the United States-Mexico-Canada Agreement (USMCA) offers substantial benefits to goods manufactured locally. In addition, North American manufacturing shortens the lead time with dramatically reduced shipping time. While this is an advantage on time alone, it significantly improves cash flow in the B2B world.  

6. Buying from local manufacturers supports the North American economy

Opting for products from local manufacturers is a strategic choice that significantly bolsters domestic economies. When consumers choose locally manufactured goods, they directly support job creation, as well as technological and product quality advancement, which fosters economic growth and stability within North America. Furthermore, supporting local manufacturing promotes self-sufficiency and reduces dependence on imported goods from outside North America, thereby enhancing the domestic economy’s resilience. As you can see, purchasing from North American manufacturers is a direct investment in the prosperity and self-sufficiency of the local economy 

North American Suppliers: Are there enough local manufacturers in the lighting industry?

While some may express concerns about the perceived shortage of local manufacturers to meet the needs for business supply chains, the legislation and numbers are promising. Recent U.S. legislation, such as the Inflation Reduction Act and the bipartisan CHIPS and Science Act, serves as a catalyst for encouraging domestic production. The Inflation Reduction Act offers tax credits to facilities that source iron, steel, and manufactured products within the United States, fostering a conducive environment for localized supply chains. The CHIPS and Science Act, designed to advance domestic high-tech research and semiconductor manufacturing, has far-reaching implications for the American manufacturing landscape, creating opportunities for job growth and supply chain enhancement. Additionally, the Bipartisan Infrastructure Law allocates federal funding for various programs, presenting many opportunities for North American contract manufacturers. The combined efforts of governments in North America underscore a commitment to supporting and expanding the manufacturing sector, as highlighted by the McKinsey Global Institute’s report, which indicates the addition of 1.3 million manufacturing jobs to the US economy between 2010 and 2019. This legislative momentum provides hope for an upswing in local manufacturing, offering businesses increased opportunities to forge partnerships within North American supply chains. 

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Switching To Local Manufacturers and Suppliers

It can be challenging to make the switch to a fully local supply chain, but even just switching to a couple local manufacturers or suppliers (such as for lighting) can simplify projects significantly. We hope to have highlighted the value of doing so, as well as the many risks of relying too heavily on international suppliers. Project delays due to long wait times for overseas products are very disruptive to business schedules, and expose companies to financial risks, including costly interest rates and late fees. The aftermath of the pandemic vividly highlighted the consequences of depending on international imports, with millions of companies worldwide facing significant disruptions. For example, the surge in demand for essential goods during the pandemic, such as delays and expenses in acquiring Personal Protective Equipment (PPE), underscored the vulnerability of international supply chains. Furthermore, the Ernst & Young LLP (EY US) survey from 2020 revealed a lack of preparedness among companies, with only 2% of survey respondents saying they were fully ready for pandemic challenges. As nearly two-thirds of American manufacturers consider localizing supply chains, it becomes more strategic than ever for businesses to follow suit, and seek local, reliable manufacturers. 

To prepare for unexpected crises, some other prudent actions are:  

  • Maintain extensive inventories (and rethink lean manufacturing)  
  • Start sourcing products from North American manufacturers before crisis strikes, so you are ready with local partners 
  • Start slowly and take it one step at a time. It can make a big difference to source just a couple business essentials from local manufacturers. For example, commercial lighting and backlighting solutions can be locally sourced from Omnify Lighting, with manufacturing facilities in both Canada and the US  
  • Look into government incentives to switch to local manufacturers and suppliers 

Conclusion

The benefits of embracing local manufacturers and supply chains in North America can make a big difference when it comes to lead times, reliability, customer service, and more. In fact, relying too heavily on international suppliers can be very risky, as we’ve shown, and can even increase project costs through delays and complications (negating the benefit of potentially cheaper products). 

Switching to North American suppliers, such as Omnify Lighting, is an easy way to begin reaping the rewards of local supply chains. Omnify Lighting is a North American backlighting company with production facilities in the US and Canada (Los Angeles and Toronto), and provides overseas support for budget-friendly, large volume backlighting solutions. Operating at full capacity, even when global supply chains face sudden and unpredictable interruptions, Omnify Lighting demonstrates resilience and reliability. 

As businesses navigate a dynamic economy, the shift toward local suppliers emerges as a strategic imperative for continuity, reliability, and success. Making the switch to local suppliers can be a long and complex process, but taking it one step at a time, and starting with locally sourcing one business essential (such as backlighting) is a simple, and effective place to start.  

“Made in North America” isn’t just a feel-good slogan anymore; it’s a business advantage. At Omnify Lighting, we continue to invest in industry leading turnaround times, and the “Made in North America” movement, for the benefit of our customers and the economy.