It’s easy to get caught up in the awfulness of the current pandemic the world is experiencing. The ongoing disruption in the supply chain, nearly two years of labor shortages, increased shipping costs and the shortage of energy supply in China is of major concern.
Sure, if we stop this story right here, the current picture looks pretty bleak – but depending on your point of view, there is a silver lining and there are some really epic good things happening in spite of all the bad news you might be hearing.
Some background: We’ve recently had a number of discussions with aftermarket companies about the current state of the industry. While on one side it’s disheartening to learn of the uncertainly they are facing; it’s equally encouraging to learn of what they are committing to ensure the continuing existence of their companies.
Here’s an example: One aftermarket company used to pay $3,500 for a shipping container. We’re talking about those jumbo-sized containers that fit onto a container ship for transport across the ocean from China or Asia to North America. Where the price was $3,500 not long ago, they have to pay $22,000 now. You can imagine the impact an increase like that has on the wholesale and retail prices of every item inside those containers.
This is just the start. Trucking fees have doubled and manufacturing operations in China are being curtailed due to the energy shortages there so factories are being forced to shut down for portions of the week. Add in COVID-19 related labor disruptions and there is no longer any advantage whatsoever for North American firms to outsource to China. As result, many of those North American companies are now resorting back to local production.
The good news is, in the big picture this situation is really good for North American manufacturing. More goods will definitely be produced on this side of the ocean and more people on these shores will be employed to work in those affected factories. Unfortunately, the same goods will undoubtedly cost more than they did a few years ago.
Get used to it, though. Incredible demand for goods has caused prices to jump upwards on all kinds of things – including automobiles, ATVs and snowmobiles.
Working in our favor are the quicker turnaround times we could be getting, as components can now be delivered to production lines much faster, and the fact engineering designs can be converted to final product in less time.
Let’s also not discount good ‘ol North American ingenuity. Increased efficiencies in manufacturing operations have been integral to the North American automotive sector remaining competitive and there is lots to benchmark.
Combine this with better quality products resulting in fewer warranty costs and it’s just a matter of time for the cost differential between offshore made goods to be less consequential.
Yes, in the short-term you can complain about the high cost of our sport – however, it’s simply a hard reality – and a sign of the times. The good news is this: if the movement towards more North American manufacturing continues, so will our ability of controlling our own destiny.
Are you a North American manufacturer facing the same challenges? Do you know of any more success stories of the return to North American Manufacturing? Leave a comment below and let us know what you think.