Beyond Tariffs: The Enduring Value of International Supply Partners

Contents:

Introduction

Cost Considerations

Risk Reduction

Challenges

Decision Checklist

Conclusion

Introduction

The last few years have seen significant changes in global sourcing policy.  Tariffs, reshoring incentives, and geopolitical tensions have reshaped supply chains.  Many companies are reevaluating their sourcing strategies.  However, a sustainable sourcing policy does not consider overseas or domestic; but how to strategically integrate both overseas and domestic supply chains.  If tariffs alone decided sourcing strategy, global trade would have ended decades ago.  So, let’s look at the nuances of sourcing for the long term.

Cost Considerations

Yes, of course, tariffs have increased the price of overseas commodities, but that doesn’t mean that overseas production does not continue to be beneficial from a cost perspective.  The difference now is that specific industries have a clearer advantage for overseas production.  Overseas producers can still offer significant cost advantages in initial capital investment, labor cost and economies of scale.  It is no coincidence that these three areas are also very important for powder metallurgy (PM) manufacturing. 

From a buyer’s standpoint, the initial capital investment for a powder metallurgy project focuses on the cost of tooling.  Overseas manufacturers have a significant advantage in this area.  Labor cost varies depending on the country that production is in, but are often lower internationally compared to the U.S.  Lastly, economies of scale is already a big factor in powder metallurgy production.  PM excels when volumes are high and this becomes even more true in overseas manufacturing when a small labor advantage on a per piece basis can become a price difference of millions at scale.

Risk Reduction

Think of your supply chain like an investment portfolio.  One of the keys to investing in a portfolio aimed at long-term growth and sustainability is diversification.  The same holds true for a supply chain portfolio.  Only sourcing domestically creates concentration risk.  Any regional disruption, such as natural disasters or labor strikes, will put a halt to a concentrated supply chain. 

Multi-region sourcing spreads this risk and creates diversification.  Any disruptions in one region can be quickly nullified by scaling up in another already established manufacturing region.  This is a key philosophy for modern sourcing management.  Global sourcing is no longer just about cost but about finding the right balance between cost and continuity.

Challenges

There are certainly challenges with sourcing overseas.  Tariffs and trade policies can be volatile; risk of long lead times and communication / time zone barriers are also relevant concerns.  However, a quality global sourcing partner can mitigate these challenges and integrate seamlessly into your supply chain.

Communication and time zone issues can be easily solved by a truly global manufacturing partner.  Porite, for example, has offices in Asia, Europe and North America.  This allows for prompt responses to concerns and staff that communicate effectively with buyers in their native region.

This global presence also helps to mitigate possible issues associated with long lead times.  In recent years, we have all felt the effects of delayed ocean freight.  However, a true global partner, like Porite, can stock product in domestic warehouses.  Production may occur overseas, but through careful planning, domestic safety stock can eliminate concerns regarding international freight disruptions.

Tariff and trade policies will always be volatile, but knowledgeable local staff can help to ease this burden.  Additionally, domestic policy is always changing as well, so this concern is not unique to international suppliers.  The key is to be ready to react decisively when necessary.  A global supply chain helps you do just that.

Decision Checklist

The checklist below can assist in determining if a component is ideal for overseas manufacturing:

Conclusion

A supply chain strategy is more complex than many realize.  A simple check of current tariff rates is not a suitable way to make supply chain decisions.  Hopefully the above information has provided a window into a complex decision-making process.  If you are ready to explore how Porite can make international sourcing easier for you, click here and let us know the details of your project.