Global Supply Chains are Changing Fast & Creating New Quality Challenges

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Our latest newsletter featured an article written by Pro QC’s VP/Americas, Michael L. Hetzel.  In the article, Michael expands on the ideas he presented in a recent interview with Awarely regarding trends in logistics and supply.  The original article is posted below.
“Finally, product simplification/modularization/mass customization will dictate short supply chains and inventory reductions. Manufacturing in proximity to each market becomes the lowest cost option.”
The above quote is from an article I wrote that was published in the January-February, 2007, issue of Mexico Now magazine, titled; ‘Avoid Strategic Overshoot©: Consider All Elements Before Moving Production Outside the U.S.’ This has been a theme in my articles and lectures ever since.

It took a while for the trend to accelerate and gain prominence, but this prediction is coming true at an increasingly rapid pace and getting catchy names like “reshoring” and “nearshoring” from the pundits.

But catchy names threaten to make the return to proximity to market as much of a fad as “offshoring” became at its peak. Let’s just call it “being practical about supply chain strategies” as the practitioners seize the opportunity to move enterprises forward more efficiently by manufacturing where their markets are.Although underlying comparative advantages will continue to exist (and continue to shift over time), and so some level of offshoring will always exist, the overlay of artificial inducements to attract manufacturing to low-cost countries, especially China, are no longer as compelling as reduced inventories, shorter, cheaper and much more rapid logistics (and the attendant reduction in carbon footprint), accommodation of shorter product life cycles, and automation supplanting low cost labor. In short, the lower total cost of procurement for many products will be realized through production close to market – even if this means producing the same product at different sites worldwide in order to produce close to each market.

But automation and other advanced manufacturing technologies don’t eliminate the need for well planned and executed quality assurance measures. In fact, the acceleration of production velocity and more consistency unit-to-unit, including the potential to produce large volumes of ‘consistent defects’ very quickly, can also result in enormous costs and lost market share just as quickly. A fatal assumption is that the defects of hand labor being removed will result in no defects, when in fact it will result in entirely new and as yet undiscovered types and new classes of defects.

It’s also time for supply chain strategy and execution to move up to the C-level and fully integrate with the quality functions. The role and skills of the Chief Supply Chain Officer (CSCO) must match the complexity of the type of automated manufacturing, and quality management strategies, that are evolving for regionalization to take the place of chasing low cost labor. This is another prediction that I hope doesn’t take as long as the one at the opening of this article to materialize. The sooner we advance supply chain to the highest executive level and fully integrate quality as a component of supply chain and not a stand-alone ‘silo’, the sooner we capture all of the potential of advanced and dynamic supply chain architecture.

This period in time is also where the engineering focus of Pro QC, a key corporate focus in place since our founding in 1984, continues to greatly increase in value to our clients. Services such as process audits, where our highly trained engineer-auditors analyze complex automated production streams and help suppliers develop effective corrective action plans, and even the seemingly mundane first-article, in-process and pre-shipment inspections being conducted by engineers, are increasingly needed to detect and resolve new and increasingly subtle defects.

The other key to high level 3PQ service from Pro QC is that we’re already positioned in many of the market countries where supply chains will migrate to. We’re there now, ready to serve our clients seamlessly as they reposition their production assets. Let’s innovate together.

Copyright 2014 by Michael L. Hetzel, All Rights Reserved

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