T’is the season for quiet reflection, taking stock of who’s been naughty and nice and so forth, so we recently began thinking about New Year’s resolutions for our family members. Some of us have young adults under our supervision; in fact, as we were sitting in the emergency room recently, where one of our young adults was being treated for a broken arm caused by an ATV accident, we realized that our advice should be short and sweet in order to be most effective.
So it is in that spirit that we submit CBA’s 2013 Electronics Industry New Year’s Resolution:
“Try not to do anything stupid next year!!!”
For the electronics industry, it’s no secret that 2013 is going to be challenging. Many global trends that have been percolating for a decade are likely to come to a boil. The sovereign debt problems of developed nations, the geopolitical unrest in emerging markets, the rising labor rates in ‘low cost regions’, as well as major market shifts around the world, will likely test the mettle of many managers of electronics companies as they guide their company’s manufacturing strategies.
Given this less than rosy outlook, the new buzz word we have been hearing – ‘re-shoring’ –gives us reason for pause, as in our opinion, this word echoes much of the nonsense that was bandied around during the recent electoral silly season. Political candidates curried favor by promising to bring manufacturing jobs back to the US. This is in contrast to what is actually happening within the global electronics manufacturing industry today, a return to ‘regionalization’ (or build in the region for the region.)
Make no mistake. Building in the region, for the demand from within that region, is a good idea and a trend we have been tracking for the past couple of years. But the word ‘re-shoring’ implies something completely different. To us it sounds more like public relations amd plaques for corporate social responsibility than a viable means of reversing the knee-jerk reaction to the Groupthink that led to the wholesale transfer of work to China about 10 years ago.
If the decision is made to change the current manufacturing approach (always an expensive proposition), then first do a thorough buy vs. build analysis of your company’s unique situation, taking into account the entire product lifecycle and starting with a clean slate. Understand thoroughly the current costs of manufacturing, both internal and external, and then construct a global supply solution, embracing the capabilities and requirements of both your internal operations and your potential supply base. For large OEMs that probably means building in the region for the region, no matter which continent that happens to involve. But for smaller to mid-market OEMs, that probably means in their home region, not around the world.
OEMs of all sizes that do this type of analysis can rest assured they will be keeping the CBA 2013 New Year’s Resolution for the Electronics industry in spades.