For most customers, the best strategy for Sold in the USA is Made in the USA
For starters, understand AMI’s conviction that private enterprise, free markets, and free trade are critical contributors to the common good and essential components of the American way. Thus the argument here is not about politics; it’s about good business.
AMI’s parallel conviction is that its foreign competition includes great companies building high quality products at the lowest prices. Their growth and success, therefore, reflect good business decisions made by their customers.
Yet when a middle market customer selects a foreign supplier it’s almost always a bad decision.
One reason is that middle market customers, by definition, suffer the diseconomies of modest scale. Successful outsourcing relationships, intrinsically complex, require continuous cross support between customer and supplier, and the cost of that support – which quite obviously increases significantly with a foreign supplier – is relatively inelastic to scale.
Consider that when a $200 million outsourcing customer enjoys a ten per cent price differential, the one or two million dollars of incremental support costs are somewhat immaterial to the $20 million price savings. In contrast, the $500,000 outsourcing customer can blow through the comparable $50,000 price savings at the drop of a hat, either through incremental support costs or, as likely, the lack thereof, wherein a single misunderstanding or forgotten communication can easily cost $50,000 or more. Thus for many middle market customers, given their diseconomies of modest scale, the real price of foreign supply is higher than its apparent savings.
Perhaps above all, middle market customers should beware the foreign supplier go-betweens – agents, representatives, even employees – that masquerade as domestic suppliers. Although they might describe “their” plant or plants in x or y country, the customer’s relationship with its true supplier is always at least one removed and, at best, no better than the go-between’s continuing relationship with its principal.
Last, too many middle market customers – having lost control of their products, and therefore their businesses – have learned the hard way that among the differences that make a difference are distance, language, and culture.
That’s in part because things that are unlikely to happen in the short term will almost surely happen over time. For example, those duly approved “form, fit, and function” substitutions add up over time to BOMs and AVLs that the customer can’t recognize as applicable to its products. And those mom and pop job shops, located just across town from the foreign supplier and recommended in various emergencies as secondary suppliers for critical custom materials, gradually become primary suppliers. And as customer engineers become reassigned or move on to other employers, the expert product knowledge before long lies solely with foreign-based supplier engineers.
So when the customer and supplier part company, or the go-between disappears or moves to another principal, the customer must then fend for itself as a stranger in a strange land.
Alternately, the multinationals are learning that the best financial strategy is to build their products in the region in which most of those products will be sold. Witness that more and more plants in the USA – the world’s largest market — are owned by foreign companies. Thus for most middle market customers the best sourcing strategy for Sold in the USA is Made in the USA.
AMI, located and operating only in the USA, is the right size and the best choice for the EMS middle market.