How Has it Impacted Summitech?
Since the establishment of tariffs imposed by the Administration on goods manufactured in China several months ago, we have had to learn about how to manage our supply chain partners and our logistics partners in this new reality. To some degree, it has been a challenge for both our customers and us to come to agreements on how to handle the new costs and up-charges. Freight forwarders in many cases are requesting payment for the tariff before the release of goods. Whether it is 10% or 25%; it represents a significant immediate cost and does put a financial burden on our customers and us.
Multiple Manufacturing Sites
Supply chains can also be complex and difficult to change. Setting up new facilities or additional capacity in plants outside of China could take months; if not years. Moving to a new factory will be costly and require engineering resources on all sides to evaluate the alternatives to the existing suppliers. Depending on each customer’s outlook on the situation; they must determine their plans to deal with the additional tariff costs. Many of our customers are already taking steps to move production to other countries if their manufacturing partners have multiple locations. In situations where the factories we partner with that have multiple manufacturing sites, we step in and are able to lend some help. If our customers need the product shipped to the USA; we arrange for the production to run at a site that is not affected by the tariff. In every case, though, Summitech must follow the letter of the US law.
All parties are cautiously hopeful that the two countries can get their trade issues resolved soon, and the strategy of tariffs is a successful one. A long drawn out situation of ever-escalating tariffs will not be good for anyone, and for companies like Summitech; we must pass along the higher costs to our customers. We hope that the short-term costs will be outweighed by the longer-term gains that will come with a more balanced trade agreement.
For those looking for EMS alternatives to China, the Philippines has made a resurgence as the most LCR (Low-Cost Region) in Asia. You can learn more about one of our partners located in this region, Ionics-EMS, on our website, and as usual, if you have any questions or concerns please feel free to contact us.