Why reducing lead time will help machine shops recover from the crisis
The current situation is changing the way we are thinking. After we make sure that our family, friends, colleagues and ourselves are safe and healthy, we wonder how our business will recover from this unprecedented crisis. If they can adapt, local machine shops can become an alternative to overseas suppliers.
Supply chains have been over optimized to reduce costs but reliance on only one supplier or country is proving to be a weakness during uncertain times. Just-in-time delivery has been widely adopted in the manufacturing industry but unforeseen events cause delays of shipments and shortages of parts. When transportation alone accounts for several weeks of lead time, overseas suppliers cannot offer the same flexibility and responsiveness as local shops.
Moreover, the market is shifting from standard mass-produced parts towards high mix low volume production, where the designs change constantly to suit customers needs. This means that many manufacturers can’t predict what parts they will need in the future. Placing orders on large batches that can only be delivered after weeks or months is riskier than ever.
Finally, the advantage that some countries had in terms of cost per part is shrinking. Increasing wages, tighter regulations and even tariffs imposed by some governments are narrowing the gaps between countries.
SPEED VS COSTS
Manufacturers have serious reasons to reconsider their supply chain decisions and where they outsource their parts. The Coronavirus pandemic may just push them over the edge to look for alternatives. Now is the time for domestic machine shops to prove that they can compete. However, labor cost still prevents them from competing on price alone. But if they can turn around parts in days instead of weeks, they will catch the eye of customers looking for fast and reliable suppliers.
Machine shop owners can use this period to rethink how they compete. By putting emphasis on lead time, your company will reap more benefits than you imagine. If you respond quickly to quotation requests and design changes, and if you can deliver customized parts faster than others can standard ones, you will easily justify the extra cost you charge by the flexibility you provide.
We have seen countless times that lead time reduction is achieved not by dumping more money trying to do more of the same thing but rather by daring to do things differently. Of course this is a huge challenge, but those who step up to the challenge will recover faster from this crisis.
In a coming post, I will share a few ways for machine shops to reduce lead time. In the meantime, don’t hesitate to share your thoughts in the comments and stay safe!