Last Mile Manufacturing concept
Last Mile Manufacturing is the part of the manufacturing process that happens in the final stages of the supply chain. It’s where subassemblies, semi-finished goods, and other components come together to form a finished product. Often these components are configured in some unique way to meet the needs of a particular buyer, relatively close to the time that the product is ordered.
Today, for many companies who have outsourced production to Asia, the entire manufacturing process is handled offshore by large contract manufacturers that basically provide end-to-end manufacturing services.
The Last Mile Manufacturing approach breaks the “local” end of this long supply chain off at a strategic point in the process and brings it back here to the United States.
When properly implemented, the Last Mile Manufacturing approach can not only return manufacturing jobs back to the United States, it can:
- Reduce the true landed cost of production - - including all “hidden cost” aspects of the supply chain.
- Reduce inventory levels and out-of-stocks, as product undergoes final assembly and configuration closer to the order point.
- Reduces a manufacturer’s exposure to global economic, geopolitical, and regulatory risks.
- Increases a manufacturer’s flexibility and speed, via a more nimble, less monolithic supply chain.
- Improves control over transportation costs.
- Reduces exposure to large contract-manufacturer leverage.
- Reduces risk of IP theft, since IP-sensitive components can be added in the last mile, here in the U.S., where IP protection is stronger.
Twenty years ago, manufacturers flocked to Asia to take advantage of low labor costs, reduced environmental regulations, and new economic infrastructure - - all of which generated compelling cost advantages. And millions of U.S. jobs went away.
The world has changed since the 90’s. Ultra-fast GDP growth in developing countries has led to standard-of-living increases and wage increases, narrowing the “wage gap” that represented the primary rationale for outsourcing. Exchange rate pressures have increased as Asian currencies grow more valuable. Transportation costs have increased - - primarily due to oil price increases - - making long, inflexible supply chains less attractive. Geopolitical concerns have increased. And finally customers everywhere are increasingly demanding more customized products, more frequent upgrades, faster product life cycles, more accommodative suppliers, and solutions to minimizing their inventory problems.
This is where Last Mile Manufacturing comes in. LMM modernizes the supply chain concept to improve the ability for a company to deliver what the customer wants, how they want it, when they want it, and in a way that protects valuable intellectual property and reduces cost along the way.
- Jobs. Jobs. Jobs.: Bringing back a portion of the manufacturing process to the U.S. not only creates jobs here, but it creates taxpayers, local revenues, upward mobility, and lifelong skills. The importance to our communities can’t be overstated.
- Creation of skilled and semi-skilled jobs here in the U.S.: The kinds of jobs LMM generally creates is in line with our unemployment “base”.
- Control of vital IP: Last Mile Manufacturing approach allows our country to retain better control of critical intellectual property. We’ve all heard the horror stories of IP theft overseas – the 2010 theft of Apple iPad 2 design secrets from a contract manufacturer, leading to the rollout of fake iPads ahead of the real launch is just one of hundreds of examples that add up to billions in lost sales.
- Shift of supply chain control back to the U.S.: LMM mitigates the risk of having entire supply chains exposed to one geography or one country. The recent nuclear incident in Japan shows how a single geographic focus can dramatically impact a supply chain based there.
- Self-funding approach: Manufacturers who adopt a Last Mile Manufacturing approach can generate jobs plus significant incremental profits, which provide for a win-win when moving a portion of the operation head.
Within the tech sector alone, LMM has the potential to generate 500,000 jobs or more. Add in other industries, and you have total job potential in the millions. (source Extron Inc.).
Key economic stakeholders - - manufacturers and government – need to jointly hear about and promote the adoption of LMM practices wherever possible. Learn more, get involved in any way you can, and watch for regular editions of the newsletter, and for upcoming events that you can participate in.