Is MaaS the Antidote to Tariffs and Trade Wars?

by

If you’re concerned about tariffs and the ongoing trade war with China, you’re not alone. Almost every U.S. OEM is feeling the same pressure, wondering if China is a viable manufacturing location for the future, while stressing over how to quickly select and qualify new suppliers in the U.S. and still get competitive pricing.

That’s where MaaS (Manufacturing-as-a-Service) solutions seem like the ideal alternative.

The trade war between the U.S. and China doesn’t look like it’s ending anytime soon. And this is just the latest of several trends that point toward regionalized manufacturing, if not toward a ‘Made in America’ strategy.

Other trends pushing OEMs away from China include the rising cost of manufacturing labor there, the ever-present risk to intellectual property, the desire for shorter supply chains with greater agility, and the need to connect innovation to volume production as seamlessly as possible. In short, OEMs need shorter time to market combined with the agility of a dynamic sourcing strategy that can adjust to any political or economic shift quickly and simply.

So, what is MaaS, and why is it so relevant right now?

We know MaaS is good for U.S. manufacturers, but why is it so relevant right now, and where does the real value come from for the OEM looking to move from a China-dominant supply chain?

Agility has been a buzzword used by EMS and OEM companies for the last year or two. Everyone is looking for a more agile solution, and just about every large EMS is professing to have the most agile offering, but is that true? Can a single vendor be truly agile?

The fact is an EMS is there to fill factories and turn a profit of the products they produce. This inevitably results in the need to fill vacant capacity, wherever it is. While in the past, lower utilization was in high labor cost regions like the U.S., it seems likely that the current climate will result in that vacant capacity, or white space, being more prevalent in China. Not ideal for OEMs wanting to balance their manufacturing geography by shifting some business out of China.

MaaS, by its very nature, is naturally agile. It provides access to underutilized capacity throughout the platform’s pre-vetted factory list. In the case of a company such as MacroFab, that’s more than 40 facilities in the U.S. and Mexico. Misha Govshteyn, CEO of MacroFab, estimates that in the U.S. there is up to 37 percent of capacity available and ready for business returning from China, or anywhere else for that matter.

Like many in the MaaS industry, MacroFab delivers the benefit of ‘Elastic Capacity’ to OEMs who want to fulfill variable production demand simply and quickly. Being able to ramp up or down quickly and painlessly is one of the compelling arguments for sources from multiple factories through a single portal.

The best of both worlds

There are basically two options open to OEMs wishing to move some or all their production from China to a new region. There is the old traditional route, of releasing a request to bid to several EMS providers, waiting for them to respond to that request, and then auditing the factories that seem most likely to fit the bill. Next comes the wait for detailed quotations and the pre-contract discussions, that can take weeks, and sometimes months, followed by some low volume build as the new vendor gets up to speed. A painless, laborious process, which feels far from agile.

The alternative process, in the new digital-first world of MaaS, is quite different. The OEM either hands over their package to one of the trained team members, who loads it onto the platform and expedites the best price and delivery solution. The more tech savvy buyer, can load the bill off materials (BOM) and computer aided design (CAD) files themselves and see prices within hours, and in some case instantly.

Safe in the knowledge that the factories have already been pre-vetted and approved, the buyer can then manipulate volumes and prices to achieve the ideal outcome and place orders seamlessly online. Some MaaS providers offer their own guarantee, giving the buyer, the proverbial “single point of contact”, or “single throat to choke”, should anything shift from the original parameters.

These online MaaS platforms also deliver unrivalled levels of data and visibility into both manufacturing progress and the supply chain. Tools for the buyer as well as tools for collaboration with engineers and other members of the team, make control of outsourced production simpler and more intuitive that ever before. No more wading through complex reports full of smoke and mirrors at quarterly business reviews, just simple intuitive dashboards available 24/7.

Now’s the time

Now is the ideal time for OEMs to re-evaluate their manufacturing geography because it makes good business sense. What’s more, now is the ideal time to embrace MaaS platforms that deliver on the agility and performance promised, and thus far not delivered, by traditional EMS players.