DESA Comes Back From China
Well, the swing back to American manufacturing continues. DESA Heating, a Kentucky based manufacturer of heaters has signed a two year contract with the Sheet Metal Workers International Association to move jobs back to Kentucky in order to cut costs.
Across the country, manufacturing companies are starting to look at costs differently. Low cost regions are not always the best answer. When you have to ship raw materials halfway across the globe and tie up your money for six to eight weeks or more, those costs begin to add up. During the height of the rise In gas prices, it was not unusual to see fuel surcharges that added more than 20% to the cost of shipping. When this cost is not factored in, it can wreak havoc with your bottom line.
In recent posts, I have been talking repeatedly about Toyota, and what I deem the new American manufacturing model. This model balances low cost regions with other alternatives. In the new global economy, there will always be a need for low cost labor regions for manually intensive production, but one size does not necessarily fit all. Manufacturers need to look at all aspects of their supply chain and devise the supply chain scenario that is most cost effective for them. China is great for some products, Mexico for others and the United States for yet more alternatives.
Look at your total cost of acquisition, including logistics, cost of capital and warehouse space to hold larger orders. You may find that in the words of Dorothy, “There’s no place like home.” At least for some of your products. It is a lesson my customers understand, and yours should too.
Brad
