The changing economic landscape forces businesses to challenge their long-established practices. The majority of our clients are starting to think about altering their supply chain operations for the first time in decades. We are often asked: “Should I move to Vietnam?”, “Should I move to Mexico?” or “Is it best to stay in China?”
Our answer is always the same: it depends on your goals and plans as a company. Any of these or all of these or something totally different might be the best answer. There is no clear “right” answer that applies to all companies in these situations.
Companies must conduct a feasibility study to determine the best course of action. These are complex and far-reaching decisions and should not be made on a whim. Instead, they require careful study and reasonable projections on your future business operations to make a sound decision.
The feasibility plan is step 0 for Manufacturing Relocation . The feasibility plan will determine if relocation is necessary and under what conditions it would be.
How to Structure Your Feasibility Study?
The exact structure of a feasibility study will vary depending on your company, your goals, and the problem you wish to solve. There is no one set template yet there are guidelines to follow. MTG uses the following steps when developing the feasibility.
- Identify the core problem to be solved.
- Understand your current state.
- Brainstorm solutions
- Test Solutions against current state
- Decide on a course of action
Each of these steps can be as shallow or as deep as needed for your particular need. Some problems require dozens of hours and detailed analysis while others can be worked through over a couple of meetings. Do not go into more detail than required but do not ignore details that are needed.
Identify the Core Problem to be Solved
Identifying the core problem is often difficult. The surface level problem is usually obvious but solving that will not do anything unless the core problem is solved. An example of this was a client once asked for assistance in creating work instructions. A deeper look showed that the client needed work instructions because it had to constantly hire new people and that it constantly hired new employees because the workplace was dirty and unsafe.
Understanding Your Current State
Again, this can be more difficult than you might expect. Many companies do not fully understand their pricing and the current state of their manufacturing operations. It is especially true for companies that do not manufacture their own products. To understand the current state, it is vital to understand the cost of the components for your products and where they come from. There should be data that can be used for comparison.
Brainstorm Solutions
Brainstorm at least three possible solutions. More solutions are generally better as the odds of making a better choice increase. One option should always be to make no changes to your location or general mode of operations. This option would be to stay with your current supplier or manufacturing location. That does not mean doing nothing, there are still underlying issues that need resolution, but it does mean avoiding drastic action.
Test Solutions Against the Current State
Each brainstormed idea should be stress against the current state. What if tariffs go up another 20%? What if they go down? What if demand rises, what if it falls? What is the ROI on changing the manufacturing location or starting to manufacture your own products?
Testing the solutions gives insight into what are the necessary criteria to make a large move.
Decide on a Course of Action
The analysis of the various ideas in the previous step should give you a good idea of the options you are willing to accept and what works best for your operations.
Each of these will be discussed in more detail over the coming weeks.
Feasibilities studies are best completed and updated on a regular basis. It should be something that companies keep in reserve in case to make a rapid move if the situation requires it. While many companies spent the last 6 years “toughing it out” over the rise in tariffs, most were not prepared for “liberation day” levels of tariffs and scrambled to find solutions. Companies should have been prepared for the possibility of raising tariffs and should be still as the situation could rapidly change at any time. Our next blog will show how you can continuously update your feasibility on a regular basis so that it
What can MTG do to help you improve your operations?
