I took a course called Scaling Up at Stanford last quarter. As part of the assignments, we were tasked with developing a supply chain for specific products.
I don't have much industry experience, but I found that creating simple Bills of Materials (BoMs) and supply chain maps revealed significant differences between domestic vs International manufacturing for straightforward consumer products, like electric rice cookers.
It's quite challenging to envision how manufacturing occurs for more complex products and how to optimize costs while still manufacturing in the USA.
I remember sourcing fixtures and tooling from china at 25% of the cost compared to the USA, and the quality was great, if you already have the CAD.
But sometimes the value of having a knowledgeable tooling vendor on your doorstep is immense, especially when you need something more than build to print. They can see first hand what you need, develop and review CAD with you, and manufacture in a hurry.
However, this service is beyond the price point of hobbyists and startups.
There are smaller machine shops but they are so hard to find, and often want 2d drawing etc, which may be beyond the skill level of a designer starting out. Platforms like Xeometry are helping but more for building prototypes than getting something produced at volume.
I recall in the late 70's and early 80's many molds were made offshore at lower cost. Portugal was one of the countries with much lower tooling costs. Mold designers in the US would produce 2D drawings and tools would be made in Europe or countries south of the US. China now has the capacity to make tools and the capability to design tools.
The lower supply chain costs in China include material, labor, and factory overhead, which are all of the COGS. Highly technical materials may have the same cost world wide, but more commodity and high volume materials will cost less in Asia versus the US.
Lower labor costs may be offset by greater capital investment, the classic substitution of capital for labor. But capital equipment may be 30% to 50% of the cost of similar equipment in the US or EU. A 50K machine in CN may cost 100K to 150K in the US for similar capacity and capability. So the offshore supplier has an advantage in labor and overhead even if material costs are similar.
Fascinating video to watch, sad to see skills being lost, but hopeful for those who choose these career opportunities in the future.
I took a course called Scaling Up at Stanford last quarter. As part of the assignments, we were tasked with developing a supply chain for specific products.
I don't have much industry experience, but I found that creating simple Bills of Materials (BoMs) and supply chain maps revealed significant differences between domestic vs International manufacturing for straightforward consumer products, like electric rice cookers.
It's quite challenging to envision how manufacturing occurs for more complex products and how to optimize costs while still manufacturing in the USA.
I'm excited to see what lies ahead in this field!
The findings are so true!
I remember sourcing fixtures and tooling from china at 25% of the cost compared to the USA, and the quality was great, if you already have the CAD.
But sometimes the value of having a knowledgeable tooling vendor on your doorstep is immense, especially when you need something more than build to print. They can see first hand what you need, develop and review CAD with you, and manufacture in a hurry.
However, this service is beyond the price point of hobbyists and startups.
There are smaller machine shops but they are so hard to find, and often want 2d drawing etc, which may be beyond the skill level of a designer starting out. Platforms like Xeometry are helping but more for building prototypes than getting something produced at volume.
I recall in the late 70's and early 80's many molds were made offshore at lower cost. Portugal was one of the countries with much lower tooling costs. Mold designers in the US would produce 2D drawings and tools would be made in Europe or countries south of the US. China now has the capacity to make tools and the capability to design tools.
The lower supply chain costs in China include material, labor, and factory overhead, which are all of the COGS. Highly technical materials may have the same cost world wide, but more commodity and high volume materials will cost less in Asia versus the US.
Lower labor costs may be offset by greater capital investment, the classic substitution of capital for labor. But capital equipment may be 30% to 50% of the cost of similar equipment in the US or EU. A 50K machine in CN may cost 100K to 150K in the US for similar capacity and capability. So the offshore supplier has an advantage in labor and overhead even if material costs are similar.
Fascinating video to watch, sad to see skills being lost, but hopeful for those who choose these career opportunities in the future.
What's your guess on the input/cost piechart for the 4x+ cost of bolt domestically?
price of energy?
price of labor?
cost of regs?
middleman markups?
other?
...where does the 'extra' cost come in?
Cool post, as always. Thanks.