Issue link: https://iconnect007.uberflip.com/i/1265351
JULY 2020 I SMT007 MAGAZINE 21 new factory in Arizona for $12 billion. You don't pick up and move a fab because you want it closer; it depends on what element of the supply chain we're talking about. The way I describe this is that it's a combination of moving into strategic geographies for those benefits, such as supply continuity, proba- bly not cost. We're going to have to get used to spending more on things if we want that security close to home. The other element is that we spent the last 20 years creating a horizontal global supply chain. We can't undo that as easily, so we have to find clever ways to work with the sup- ply chain as it exists today because, for exam- ple, you can be looking at a very sophisticated system with 5,000 part numbers in it. It only takes one part number in that system to not be in hand for that start-to-build to be delayed. It could be a half-cent resistor from Asia. I use that example because although there is this trend to circle the wagons, if you will, and go regional, there are certain supply elements that will not migrate easily for economic and capability reasons. I highly recommend the article "Restoring American Competitiveness" from the July- August 2009 issue of the Harvard Business Review. If you read it today, the technology and devices examples they use have changed, but the idea of "industrial commons" still applies. Industrial commons is when business lead- ers dream up the product line, engineers, and operational staff, right down to the people that maintain the facility. All that lives and breathes when you have that ecosystem nearby. It's a very interesting article. Dan Feinberg: There's no doubt that we see sup- ply chain changes, and all of us know of addi- tional supply chain changes that are coming— some that we talk about, some that we don't want to talk about, some that we're not sure about, and others that we probably shouldn't talk about. Do you expect these ongoing sup- ply chain changes to become relatively perma- nent? Do you expect to see some movement back to the horizontal supply chain you were discussing? Kelly: That's a great question, but the issue is difficult to predict. My opinion is that it's going to be a hybrid. Jumping from one to the next, it usually doesn't happen in business in our economy. It's often an evolution. While there are driving forces to be regional, there's going to still be blended, horizontal supply chain aspects of it because you can't pick up, build, and move staff and equipment with the notion of a commodity. The idea of a commodity, by definition, means that anybody can do it. The analogy I like to use here is a loaf of bread. For example, you make a loaf of bread in Asia, but now I want to make it somewhere else. Ship the bread pans, order the flour, move some ovens, and make bread somewhere else—if it was that easy. In that case, you can do it because it is a commodity. However, we all know that electronics are not built like that. While the idea of commoditizing elements of the supply chain looks great on paper and in concept, it's not quite that easy. For example, on the EMS side, my estimate is it takes some- where between four and six years for an EMS facility to produce exactly the way you want Matt Kelly