Some Tier 1 automotive suppliers and automakers are rethinking supply strategies as the cost of manufacturing products internationally has increased due to compounding issues that slow lead times and create more packaging waste.
A U.S.-based model, where companies source and manufacture products close to their distribution points, is able to provide a competitive price while also saving the OEM on warehouse space, Garry Craft, director of sales at Koller Craft South, told Plastics News.
"Due to political and economic forces, quality, transportation problems, [OEMs] saw their cost increase dramatically," Craft said. "Lead times increased, which means they have to increase their warehouse space to include more product than they want to order."
Koller Craft LLC, owned by Koller Enterprises Inc., gained an opportunity to expand its markets from OEMs and Tier 1 customers looking to reshore production, he said, in the automotive, agriculture, and lawn and garden markets.
The injection molder's 213,000-square-foot Gadsden, Ala., plant has the capacity to expand to meet its current customers' needs while expanding and balancing its customer base, he added.
While Japanese, South Korean and German automotive companies have requested to review reshoring opportunities with Koller Craft, the company has also seen interest from other markets including small appliances and ATVs.
"You're very lucky if you have the opportunity and it fits your open capacity," Craft said.
Value streams based on a product price alone, which might have looked like a good decision to OEMs at the beginning of a vehicle manufacturing program, might not last for the life of the model, he said.
"In some cases, [companies] offshore their business at the beginning of the program," he said. "The outcome of that is based on the tooling cost, the packaging cost and the amount of years left in the program."
Eventually, the companies' costs "don't meet the numbers they expected when they started the program," Craft said.
As international politics and economics shift, those companies will need to look for an alternative.
"We have to understand their daily, weekly and yearly demand, the type and cost of raw materials, and the cost of getting the materials to our facility and other suppliers that might be involved," Craft said.
U.S.-based value streams like Koller Craft's use about 95 percent returnable containers that are used daily, or even twice daily, to ship product, he said.
"Offshored material [from China] comes in disposable containers that cost the supplier money to get rid of," Craft said. "The cost of packaging is much higher when you offshore and you have to throw everything away.
"We're expecting to see growth, not only in our core business of injection molding, but also our ability to assemble modular components for [the automotive market]," Craft said. "The appliance industry is going crazy right now because people are doing a lot of home remodeling."
While Michigan and the Upper Midwest had been the dominant region for automotive manufacturing support, OEMs are beginning to develop more heavily in the southeastern U.S., "from Louisville, Ky., to Montgomery, Ala.," he said.