Manufacturing trade war or overdue market correction?

Manufacturer products that once owned more than 90% of some markets are now, for the first time, indefensible.

By Mark Zetter

In news headlines for the first time in the last several years the words ‘trade war’ are appearing more regularly. Mentions of ‘tariff’ in earnings calls, and discussions about adherence to corporate and various government policies, supply chains, compliance audits, and near- and long-term tariff impacts are becoming even more prevalent.

The latest disruptions are only the opening salvo of what you may consider the lazy, status quo between corporations and outsourcing.

But what’s at stake is much more than build at the lowest cost, then reselling with the highest profit margin.

Today, your bill of materials (BOM) goes into a work order or PO. And once your materials and finished goods are shipped across state lines or country lines chances are you can be fined. And in most cases, you’re certainly losing money.

Where in your supply chain do you run the greatest risk of paying penalties? And how do you find out how much money you’re leaving on the table?

Normalization of global economies is already in motion and some believe this will begin to reverse years of outsourcing as the de facto way of doing business.

However, outsourcing is not the point here. What has your company been doing regarding trade and the global dissemination of your products?

Typically, you try and make sure you are focusing your business to be consistent with current financial regulations and you work tirelessly to stay on top of identifying pain points and gaps in existing policy frameworks so you can then try and balance your company’s legal and global trade compliance requirements which are then implemented across the organization or import regions in North America, Europe, EMEA, APAC and emerging markets.

There can also be many organizational structures which are engaged with logistics to control or administer this intricate domain.

You typically do this with a mixed approach: internally, you have a team or one individual who helps. This can also be outsourced to one of the large consulting firms to obtain a more comprehensive view, supported by advice and adjudication.

Brand loyalty or saving millions?

Looking at current trade imbalances, these can directly influence manufacturers and decision-making in various ways. Do you shift production? Change products with ECO or launch new products? Do you pass costs to buyers and customers?

Today, as an example, clients purchasing heavy equipment and machinery have only a few options: Volvo, New Holland, Tomatsu and Caterpillar. They purchase heavy machinery for mining and raw materials extraction, building and construction, and improvements.

A 25% to 45% cost increase means adding millions of dollars to the price tag thus reversing the last two decades of outsourcing.

Is this a radical destabilizing effect? And does this do what’s intended, or will companies take a second look at re-patronizing products?

Common to human nature, often the least path of resistance will happen until buyers and consumers just say not interested which means every OEM is vulnerable to being impacted and can be disrupted.

At a moment’s notice, non-traditional products that once owned more than 90% of some markets are now, for the first time, indefensible to any enthusiastic competitor that can enter the market with 25% to 45% lower costs.

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