The single biggest issue for US manufacturers is the uncertainty of the relationship with China and how tariffs will affect products, pricing, delivery, and costs. But that’s not to say there aren’t other issues to consider.
Tariffs are certainly causing pricing issues as US companies try to envision what will happen over the next months and years. Automobile companies whether based in the US, Germany, or Japan are scrambling to move their production facilities out of the reach of the tariff war. Their cars that were once the most profitable models have become loss leaders as China adds 25% to 40% to the cost. It doesn’t matter whether the company is US owned, Japanese, or German owned. If the car is manufactured in the US it is subject to the increased cost and buyers are shifting their choices to similar models that aren’t subject to the penalty.
To combat this some companies are closing plants, drastically modifying their product line, or moving production to unaffected countries like South Africa and China. These changes in production facilities don’t happen fast but that doesn’t mean they can’t start fast. And that puts pressure on logistics and supply tactics. How this plays out for auto manufacturers and any producer of goods bound for China will be significant over the next year.
Changes in production technologies
We’ve opined about 3D printing and its possible impact on the supply chain before. The advent of additive printing for larger quantities of goods is likely to become a reality this year as the kinks are worked out, more materials become available beyond plastic, and more companies enter the market to create these printers. The ability to reduce stockpiles of specific parts and replace them with production materials that can be used to print wide varieties of goods means less reliance on delivery of scarce parts because they can be printed on demand.
The implications of copyrights, IP restrictions with the ability to modify designs on the fly, and unauthorized production of privately owned designs are issues that will need to be ironed out. Licensing fees and production counts may need to be rethought to accommodate this new way of production.
Security and intrusion
Disruption of expectations is always an issue and as industry continues to become increasingly digital the risks of hacking, data theft, and ransom add strain to budgets and contingency planning. Whether state sponsored agents are behind the attacks or they are perpetrated by dedicated hobbyests in their bedrooms, the threats are there. As we’ve recently seen with emailed bomb scares, the actions don’t even need to be real to cause disruption. Businesses will err on the side of caution for their employees and for the safety of their business, and that caution can delay production and delivery causing financial damages.
What changes do you see for 2019? Do the positives outweigh the threats?