Renaud Anjoran, MTG partner and owner Sofeast, sent me an article earlier today from the Wall Street Journal. The article discusses how Divergent Technologies, a California based start-up, is building its own equipment and supply chain in the US. It is a fascinating read and provides a useful perspective for companies interested in reshoring.
Divergent Technologies is in the defense and aerospace industry, so local supply chains are especially important. One of the projects I was involved with before I joined China Manufacturing Consultants was tracking tier 2, tier 3, and even tier 4 suppliers for defense industries. Minimizing risk from foreign suppliers is critical for any defense related company. Digging through publicly available information often found considerable risks. That was before the heightened geopolitical tensions we find ourselves in now plus the tariffs.
What Can We Learn From the Divergent Technologies Example?
- Focus on the Risks, both current and potential
Divergent saw that raising tariffs could be a major challenge in the future and that foreign supply chain poses risks. By spending the resources now, it is able to get ahead of the changes and placed in a better place. The company is more insulted from supply chain shocks than other US companies. If the tariffs go away and the geopolitical situation improves, it still has a solid base to work from and can scale appropriately.
- How do you solve bottlenecks that are preventing you from reaching your manufacturing goals?
The article clearly shows how Divergent moved to deal with their biggest bottleneck in their production. For Divergent, the bottleneck was the printer. They understood that without a strong supply chain for that piece of equipment it would be impossible to scale operations. Divergent had the added benefit that sourcing the parts of their printers in the United States made them more attractive to customers and inventors than companies that rely on manufacturers in Asia.
- Invest in your supply chain
The success of your suppliers is your success especially for key suppliers. Developing the right capabilities in your suppliers will help with future scalability. A good example of a company working to develop the capabilities of their suppliers is Bed and Bodywork’s suppliers in Ohio.
Even if Your Company is Not in the Same Position, There are Good Lessons
The situation with Divergent Technologies is different than that of most companies. Most companies do not have $290 million in Series E funding nor have a company that is valued at $2.3 billion. We all wish we did. Most companies do not have the resources to develop their own supply chain like Divergent. However, that does not mean the lessons from Divergent Technologies are not applicable. All manufacturing companies should try to solve those issues in a way that works for them.
- Focus on the Risks, both current and potential
Everyone in manufacturing is dealing with tariffs and a complex geopolitical situation. How you deal with it depends on your situation. Some companies are not able to leave China while others may have options in other parts of the world.
More companies could manufacture in the United States if they wished yet lack the equipment necessary to do so. There is another route available to those companies. They could work with an equipment supplier in Asia to purchase what they need and alter the equipment to have more generic parts, so it is easier to maintain. It is a tactic we outlined in our white paper, Turning a Yugo into a Chevy.
- How do you solve bottlenecks that are preventing you from reaching your manufacturing goals?
Every company struggles with some sort of bottleneck. Focusing on that bottleneck directly is the best course of action. The bottleneck could be at your own manufacturing location or at your suppliers. We recently spoke with a client whose supplier has bottleneck in part of their metal tubing. They are not in a high employment area in China so need to think through what automation might be available to fix this bottleneck or if it is a process issue. Either way, they need to work with their supplier to solve the problem. Which leads us to…
- Invest in your supply chain
The success of your suppliers is your success especially for key suppliers. Developing the right capabilities in your suppliers will help with future scalability. A good example of a company working to develop the capabilities of their suppliers is Bed and Bodywork’s suppliers in Ohio. Having good suppliers, regardless of their location, is important in this uncertain time. Work together to find an arrangement that be profitable for both parties.
Divergent Technologies situation can teach us a lot about the manufacturing options available. What have you taken from this example? Is your company trying any of these methods?
What can MTG do to help you improve your operations?
