Mexico Could Be The Big Winner Post-Coronavirus

­­­ Impacts on U.S. Supply Chain

Thomasnet has been conducting surveys to assess the impact of COVID-19 on the manufacturing industry. Here are some takeaways:

• 60% of U.S. manufacturers say business has been impacted by the pandemic
• OEMs and tier one suppliers are seeking alternatives to China
• 28% of suppliers report they are seeking domestic sources
• Disrupted shipping and logistics were reported as a top concern in March
• Manufacturers say this may prompt them to more aggressively diversify supply chains and consider reshoring some production back to North America

Coronavirus and Global Shipping
With 80% of goods shipped by ocean freight, “The shutdowns mean that some ships can’t get into Chinese ports, as the loading and discharging of goods slows. Others are stuck in dock, waiting for workers to return to ports so that construction and repairs can be completed. Still more vessels are idling in ‘floating quarantined zones,’ as countries such as Australia and Singapore refuse to allow ships that have called at Chinese ports to enter their own until the crew has been declared virus-free.”

Tectonic shifts in global supply chains were apparent even before COVID-19. Analysis by Bank of America points to tariffs, automation, carbon footprint issues and national security as driving factors of the shift. The Reshoring Initiative’s 2019 Data Report supports this theory. Look for the Report’s release in late April.

Impact on China’s Dominance in Manufacturing

China’s Post-Virus Plan to Destroy America’s Economy
There will be major geopolitical repercussions if we do not become self-sufficient. This article has numerous insightful quotes from Chinese leaders. For example: “The [Chinese] State Administration of Science, Technology, and Industry for National Defense lays out the strategy: ‘Accurately support industries affected by the global spread of the new epidemic, proliferate information technology and other industries overseas to help fight the epidemic, and pave the way for international market expansion after the epidemic is over.’” This article is hardline but worth reading.

COVID-19 Could Be the End Of China As A Global Manufacturing Hub
Mexico is the most likely beneficiary. Of the companies that recently moved their supply chain, or are planning to do so, some 64% of them said they are moving it to Mexico, which “is the best positioned to take advantage of the long-term geopolitical rift between the U.S. and China. It is the only low-cost border country with a free trade deal with the United States…”

The American Mold Builders Association, National Tooling & Machining Association, Precision Machined Products Association, Precision Metalforming Association, and Technology & Manufacturing Association stated in the open letter that companies facing global supply-chain challenges can find local solutions with U.S. suppliers. Many other industry leaders are also helping companies find local suppliers. See CompanyWeek’s COVID-19 Forum: Master Supplier List.

COVID-19 brings an end to unconditional globalization. Here’s how to compete for manufacturing jobs moving out of Asia. Bart Taylor advises companies to make the decision to invest in more capable local supply chains, when and where it makes the most sense. He proposes using our TCO Estimator to make that evaluation.

Retool U.S. supply chains to address weaknesses exposed by new coronavirus This article defines numerous ways that policymakers can encourage innovative reshoring.

Combating the COVID-19: Fashion designers, automakers and other companies make masks and medical supplies See how small and large companies are transforming their production lines to make COVID-19 protective equipment. In light of the rapid response of auto and textile manufacturers it seems that we can change and grow domestic supply chains when we have to. Let’s recognize the long-term need for resilience and apply our current enthusiasm to a broad range of products. After the crisis, it would be great to see the auto industry put as high a priority on finding domestic solutions for their own supply chains.