Customers push global compressor maker to localize
Dennis Flaherty addresses supply chain issues and manufacturing localization challenges faced by T/CCI, the $150 million maker of heavy-duty compressors and clutches for the air conditioning and heating industries. mobile refrigeration. He’s almost missing fingers.
Even before the pandemic shutdowns reduced production in Ningbo, China, T/CCI had to decide how to handle the costs associated with the 25% tariffs imposed by former President Donald Trump on imported Chinese-made products. Before that, there was a longshoremen’s strike in Long Beach, California.
“It’s hard to pick one issue that affects the supply chain,” Flaherty, chief operating officer of Decatur, Ill., T/CCI, said in an interview ahead of the Future of Supply Chain event. FreightWaves May 9-10. in northwestern Arkansas. “It’s a dynamic situation. We are constantly evaluating how we source and manufacture.
Think global but local
One solution that is becoming a manufacturing trend is localization: building components where they are used. For a company like T/CCI, that means considering more production in Decatur than in China and India, where most of its products are made.
“It really made people in all industries take a step back and consider stability,” Flaherty said. Purchasing managers at customers want assurances of a resilient supply chain with robust contingency plans to respond to material shortages or changes in logistics routes.
Before the pandemic, T/CCI paid around $5,000 per container to ship Ningbo-made compressors to the United States. Today, that same expedition costs between $25,000 and $28,000. And forget the average 35 days to ship a container from India or China for the landed shipment to pass through US customs and ports to T/CCI’s Decatur facility. It now takes up to 120 days.
“We’ve had products stuck in Chicago, buried in there trying to get them out,” said T/CCI President Richard Demirjian. “From 2010 to 2016, the client’s goal was that the United States was too expensive to manufacture [in]. We want you to go to China. We want you to go to India, those low cost areas.
T/CCI began production in China in 2006. It built its 5 millionth compressor in Ningbo in November 2021. It added its production in Noida, India in 2018. Most of its manufacturing takes place in these two countries.
“Now, [the customers’] The perspective is: “Hey, we want it to be made where we use it, and if not, it needs to be 20% more competitive to produce it overseas. “.
Such shifting mandates for the supply base are common for heavy truck manufacturers.
“We have two goals,” Demirjian said, “What’s best for us in the long run? What makes the most sense?”
The T/CCI business was created in the 1980s through the 1984 acquisition of Tillotson Products from Borg Warner Inc. In 1987, Borg Warner sold its York Automotive line of compressors to the Demirjian family.
Redesign of manufacturing processes
The goal now is to design manufacturing processes on a global scale so that they apply to local markets. With few regional changes required for heating and air conditioning compressors, castings made in the United States or China use the same material and processes, allowing them to be validated with relative ease. Pistons and shafts take much longer to test and approve for durability.
The production part approval process allows for the seamless movement of production from one site to another. But it’s still a two-year process to get there.
“You can’t willy-nilly say, ‘Hey, tomorrow I’m going to start producing this in the United States,'” Demirjian said.
Double or triple supply of a product is more expensive for truck orders, which are much smaller than automotive volumes, perhaps 30,000 units versus 250,000 or 500,000 for a car or light truck. T/CCI has no choice if it wants the company.
“We are already seeing this with our customers. Their 2024-2025 vehicles, they tell us, ‘We want this compressor to be produced in the United States’”
T/CCI is reorganizing its production lines at Decatur, which makes older legacy products. The goal is to make the line more flexible to handle components from India and other countries while preparing products for the industry‘s transition to electric vehicles.
Adding more value to US-made products helps avoid the kind of inventory glut that T/CCI has at its factory in Hamburg, Germany, after a European customer closed its factory for a month because its wiring harnesses came from war-torn Ukraine.
“While we’d like to say we can produce everything in the United States, ultimately from a cost perspective there has to be product from low cost countries, so the higher value parts can still be produced in the United States,” Demirjian said. “You really need to get back to normal to keep the product flowing uninterrupted.”
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