Securing the Supply Chain: The Case for Domestic Manufacturing
The Case for Domestic Manufacturing
The US aerospace and defense industries face unprecedented challenges, from unstable supply chains to escalating geopolitical tensions. For years, these challenges have threatened delivery and price of materials and products. Increasingly, supply chains and their sources are being objectively recognized for the additional threats they impart to domestic manufacturing. For example, critical equipment that relies on sensitive designs and valuable intellectual property often gives an edge to commercial and defense products. Those products can now be threatened, and their advantages defeated, by overseas sources of manufacturing in ways that were not previously foreseen. As a result, security, innovation, and resilience have become greater concerns to the reliable manufacturing of manned and unmanned aircraft, satellites and space vehicles, and all their supporting systems and components.
Today, securing the supply chain also means securing the ability of the homeland to create world-leading products that give the US competitive advantages, both commercially and militarily. And how best to do that? One way is to emphasize domestic aerospace parts manufacturers for domestic use aerospace products.
Given the complexities and challenges associated with offshore manufacturing, the strategic importance of domestic manufacturing – particularly in the aerospace and defense sector – becomes evident. Companies like KLINGER IGI represent the best of US-located manufacturing capabilities, offering precision fabrication, AS9100-certified quality, and a robust commitment to security and reliability. Plus, KLINGER IGI and similar domestic manufacturers can provide high-performance, high-quality aerospace parts in a way that contributes to national security and economic stability.
Those same results cannot be attributed to offshore sources. Further, the benefits of shorter supply chains, enhanced quality control, and safeguarding intellectual property underscore the many strategic advantages of working with US-based manufacturers. By prioritizing domestic production, aerospace and defense stakeholders can and should mitigate the present and emerging risks associated with offshore manufacturing, thereby ensuring a more secure and resilient supply chain, resulting in US supremacy in the skies through the purposeful use of highly qualified US resources.
It’s time to weigh the legacy financial interests that were inherent to replacing US manufacturing with non-US manufacturing against the current security interests that are vital to maintaining control of supply chains and security of the products designed and built in them. So, let’s examine the pros and cons of offshoring for mission critical and sensitive products. We trust the evidence of facts should lead one to conclude the best course forward is to strengthen our domestic manufacturing base through increased onshoring.
Pros of Offshore Manufacturing
Cost Efficiency: Traditionally, lower labor costs in countries outside the United States have translated into reduced production expenses and, consequently, lower prices for consumers and companies. However, integration of advanced manufacturing technologies and other factory automation initiatives have helped minimized the labor content found in domestic manufacturing products. This means material sourcing capability and the underlying material component of total cost have become more influential than labor cost when comparing offshore and onshore pricing. And with raw material, neither party will enjoy a distinct advantage when purchase volumes are similar. Through automation and the avoidance of duties/tariffs, KLINGER IGI and other leading US manufacturers are now closing the gap on price.
Foreign Market Access: Offshoring can provide companies with direct access to new markets. It’s undeniable that manufacturing goods closer to the end consumer in foreign markets can reduce shipping times and costs, facilitating a company’s global expansion efforts.
Scalability and Flexibility: For many common types of end products and components, offshore manufacturing facilities can offer scalability for companies looking to adjust production levels in response to market demands quickly. This flexibility can be helpful for companies needing to scale up operations without the capital investment required to expand domestically. However, for custom products that demand different design accommodations or new manufacturing practices, both domestic and offshore manufacturers can be equally adept at achieving scale in a rapid time. And as production volumes increase, the difference in capital investment amortizations into cost become less significant, thereby encouraging work with the contractor on either shore who will be able to provide the timeliest and least complicated coordination of expansion project efforts.
Minimal Regulatory Influences: Many countries that have absorbed much of the offshoring capacity continue to leverage immature and sometimes lax environmental and labor laws. While there has been some improvement by US corporations flowing down their safety and health requirements to their subcontractors, the reality remains that factory emissions, employee safety, wage suppression, and more are still widely tolerated overseas. Simply put, those lower regulations translate to lower expenses for compliance being passed on to the customer. Operating in a more highly regulated environment, US manufacturers like KLINGER IGI must sustain greater compliance costs for the benefit of our employees and communities. That dynamic will only widen the compliance cost gap when considering the application of additional environment, health, and safety laws and regulations in the US.
Cons of Offshore Manufacturing
Supply Chain Risks: Reliance on offshore manufacturing can lead to significant disruptions when global crises impact shipping, production, or political stability in manufacturing regions. Longer supply chains have more links that can break. Even “friendshoring” to supposedly more reliable foreign partners carry the same risks since economic threats and raw material sourcing disruptions tend to not respect boundaries or treaties. The use of domestic raw material and product/component fabrication sources like KLINGER IGI becomes the best strategy to reduce such risks.
Quality Control Challenges: Maintaining consistent quality is difficult when production is outsourced to offshore manufacturers. This is because differences in standards, oversight, and communication barriers can result in product quality and consistency issues. Of course, quality challenges can sometimes be created domestically as well. That’s why it’s critical to select manufacturers like KLINGER IGI who have demonstrated success employing elevated quality management systems based on strict aerospace standards – and who are in the same time zone or a short drive/flight away.
Intellectual Property Risks: Offshoring can expose companies to increased risks of intellectual property theft. Legal protections may be weaker or harder to enforce in other countries, putting proprietary information and products at risk. Top tier domestic manufacturers like KLINGER IGI tend to already maintain higher standards of data security to product the integrity of US innovations and fulfill the strict cybersecurity requirements set by the Federal government for defense work.
Geopolitical and Economic Dependencies: Dependence on foreign manufacturing makes companies vulnerable to geopolitical tensions, trade wars, and economic instability in other countries. These factors can unpredictably affect costs, availability, and the overall reliability of supply chains. While the US is not immune to its own disruptions, at the very least its manufacturers are subject to a uniform national economy and strength (and arguably, dominance) in transportation, financial services, and other sectors influential to supporting homeland businesses like KLINGER IGI.
Finished Goods Freight Expense: With labor cost disparities often negated by new technologies and manufacturing automation, and with raw material procurement expense being similar in same volume purchases, the cost of shipping from the manufacturer to the customer begins to become a more significant consideration. In that realm, domestic manufacturers like KLINGER IGI enjoy an uncontested advantage. That advantage only widens further when considering duties and taxes.
Domestic Market Access: As earlier noted, duties and taxes may apply, which serves to dissuade the import of foreign-made products. However, a more significant factor is whether offshore products meet the strict acquisition requirements of Federal agencies – particularly, defense customers who are required to consider foreign content and cybersecurity as significant risks. Companies like KLINGER IGI who are compliant with ITAR, NIST/CMMC, and other regulations can deliver access to both commercial and defense markets in the US while assuring the integrity of product designs and manufacturing relationships.
Cross-border Solutions and “Friendshoring”
The notion of cross-border manufacturing and “friendshoring” offers a limited view of the potential solutions to the current challenges. While these strategies may offer temporary relief in diversifying the supply chain, they do not address the inherent risks and dependencies involved in relying on offshore manufacturing.
The recent emphasis on friendshoring reveals a trend that, while aiming to mitigate risk, still falls short of leveraging the full potential of onshoring to domestic manufacturers. Granted, these strategies can provide an interim step back to the US. Where that’s the intention, such a progression is welcome. However, borders, laws, and transportation mean that distances remain significant factors to consider when deciding to go halfway or the whole way to shorten and secure the supply chain.
The Imperative for Domestic Manufacturing
Aircraft and aerospace parts manufacturers, especially AS9100 quality certified companies like KLINGER IGI, play a pivotal role in ensuring the reliability, quality, and security of components we all rely on for defense and civilian aerospace applications.
Choosing domestic manufacturers like KLINGER IGI, who are committed to quality, innovation, and security, is not just a matter of logistical convenience or patriotic preference; it’s a strategic imperative for the future of US commercial and defense aerospace manufacturing.