Rosemary Coates is executive director of the Reshoring Institute, a nonprofit consulting group based in California's Silicon Valley. In that role, she provides research and networking and coordinates efforts to bring cost-effective manufacturing back to the U.S.
Coates recently spoke with Plastics News about challenges facing the plastics supply chain, which has been squeezed by many factors since early 2020.
Q: Since early 2020, the pandemic, hurricanes, an ice storm and logistics challenges have had a huge impact on supplies of plastic resin and other raw materials. What should purchasing executives be focusing on as we approach the middle of 2022?
Coates: It's very important for purchasing departments to develop a risk assessment tool. Risk assessment tools for suppliers should consider, at the very least, the financial health of the supplier, geopolitical risk, sole-source risk and lead-time risk. Each supplier should be evaluated, starting with evaluating your most strategic parts suppliers and long-lead items, and then determining your strategy going forward. If the supplier is at risk, then consider developing alternate sources or building an inventory of these specific parts.
Q: How have inventory levels been affected by these recent events? Is it still possible to have just-in-time inventory?
Coates: Both just-in-time inventory management and lean manufacturing techniques should be reevaluated as strategies now. We learned a lot of lessons during the pandemic, including the precarious position companies were in because of very low parts inventories.
Fits and starts in global supply chains caused some manufacturing lines to shut down completely for a lack of parts. Shortages were worldwide and continue to be a problem today in many sectors. Manufacturers are now considering buying and holding inventory of critical parts to make sure there are no manufacturing line disruptions.
Q: Are manufacturers taking more steps to have backup suppliers or even backups to those backups?
Coates: Yes, most manufacturers across all industries are aggressively developing alternate suppliers, especially for critical and sole-source parts. Of course, this significantly increases the workload for procurement, supplier quality and inventory management staff, but it also effectively mitigates risk.
Q: Is the current supply situation being looked at as temporary? Or do you think it will bring lasting change to purchasing strategies?
Coates: I don't think we will be out of the current supply chain chaos for 18-24 months. That's a long time in the life of manufacturing. The changes made in strategic sourcing are likely to last for the foreseeable future. Of course, as business conditions change, new strategies are likely to replace old ones.
Q: Will the impact of these recent events on global supply chains lead companies to do more purchasing in their home regions?
Coates: Yes, absolutely. A recent study by Thomasnet indicated that 84 percent of manufacturers in America were either considering reshoring or were already actively pursuing reshoring projects, including at least a 10 percent increase in domestic sourcing. The U.S. government is now aggressively enforcing the "Buy America Act" and increasing the requirements for U.S. content in the items the government buys. The same is true in Western Europe, Australia, South Korea and Japan.