Why Reshore Manufacturing? It’s the Only Way to Avoid Defective Pirated Parts
Reshoring the entire supply chain so it can be trusted is the low-cost solution once you add up the total lifecycle cost of a hopelessly counterfeit global supply chain.
There are two basic arguments against bringing manufacturing that was transferred overseas (offshored) back to America (reshoring):
1. It’s too costly
2. The supply chain is now in China/Asia and it’s not possible to source the parts needed to bring manufacturing back to America.
I beg to differ on both counts: nothing is more costly and destructive to profits than defective, pirated parts made overseas. Counterfeits made to look like legitimate parts are highly profitable to the counterfeiter and immensely damaging and dangerous to the manufacturer and end-user.
In a global economy burdened with massive overcapacity, the only way to maintain profit margins is to lower costs by cutting corners: in effect, defrauding customers by delivering deceptively reduced quantity and quality, and/or defrauding the end-producer by shipping low-cost counterfeit parts that mimic legitimate products.
Gordon Long and I discussed this systemic reality in Bankers Crippling the Global Supply Chain (34:50).
Bloomberg/Businessweek recently outlined the scope of fake parts and the impossibility of rooting them out of global supply chains: The Dangerous Game Behind Fake Ball Bearings:
Everything from shoe polish to medication to car parts is pirated. Estimates of the scale of the problem range from $461 billion — 2.5 percent of global trade — the Organization for Economic Co-Operation and Development says, to some $1.8 trillion, according to calculations last year by the International Chamber of Commerce. And while makers of luxury goods — among the most prominent counterfeited products — lose profit from the trade, there’s little risk to consumers. In the case of more mundane stuff like bearings, forgeries can be dangerous as well as costly.
“Many people believe piracy is limited to handbags and other similar products, but the more serious issue is industrial companies,” said Ann-Charlotte Soederlund, co-founder of the Global Anti-Counterfeiting Network, an umbrella organization of fake-fighters around the world. “The effects can be immensely larger than the consequence of a fake handbag.”