Managing Labor in Supply Chain Is a Risk When Reshoring

commodity risk management

In his rebuttal to reshoring stories in the Atlantic, as we detailed in Part One, Alan Tonelson also brought up a good point about subsidizing reshoring for businesses which, although makes sense and is a good thing, is rather unsustainable in this current economic climate for the US (what with the huge national debt that the impending fiscal cliff is bringing into sharp focus).

Check out MetalMiner’s follow-up on the effects of reshoring on the US aluminum industry.

Made In The USA, But — To Buy In The USA?

However, the biggest ostensible benefit of reshoring manufacturing to the US on a macro level may be local job creation and not much more, if one is to take Timken CEO James Griffith’s overall viewpoint in this interview as a proxy for the entire manufacturing industry: that companies must get closer to where the growth is.

That is why Timken and others are broadening their supply chain networks and taking tangible steps to make them run more efficiently in places such as China, India and Poland — because the US, although still the largest, is not remotely the fastest growing economy in the world.

As the company does that, one of their methods of managing commodity risk and volatility in metal and raw material prices is being flexible with the type of labor force they employ — to defray price volatility, Timken tries “to do a mix of what we call ‘fixed,’ permanent Timken people and a contingent workforce that allows us to deal with it,” Griffith said.

But if American companies (those that are big enough) still need to get closer to emerging markets, employing folks from local Chinese, Indian or other labor markets carries inherent risks for the supply chain.

As Griffith put it: “How do you find the people, on a global basis? And then how do you balance what it takes to be the same, to be common, on a global basis, and yet respond to the individual needs of individual markets? Finding that balance, from my point of view, is the biggest challenge.”

Perhaps the only way to ensure that is to source your manufacturing labor in the US.

Check out MetalMiner’s follow-up on the effects of reshoring on the US aluminum industry.

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