Dennis Flaherty lists the supply chain concerns and manufacturing constraints faced by T/CCI, a $150 million manufacturer of heavy-duty compressors and clutches for the mobile air-conditioning and refrigeration sectors. He’s almost out of fingers.
Even before pandemic lockdowns slowed production in Ningbo, China, T/CCI had to decide how to handle the costs associated with former President Donald Trump’s 25% tariffs on imported Chinese-made items. There had previously been a longshoreman strike in Long Beach, California.
“It’s difficult to select one issue that is influencing the supply chain,” Flaherty, chief operating officer of T/CCI in Decatur, Illinois, said in an interview ahead of FreightWaves’ Future of Supply Chain event May 9-10 in Northwest Arkansas. “It’s a fluid scenario.” We are constantly assessing our purchasing and manufacturing processes.”
Think globally, but act locally.
Localization is one approach that is becoming a manufacturing trend: making components where they will be used. For a company like T/CCI, this implies increased production in Decatur rather than in China and India, where the majority of its products are created.
“This has really caused individuals in all businesses to take a step back and think about stability,” Flaherty added. Customers’ purchasing managers seek the confidence of a resilient supply chain with adequate contingency plans in place to respond to material shortages or changes in logistic routes.
Prior to the pandemic, T/CCI paid around $5,000 for each container to ship compressors produced in Ningbo to the United States. That identical package now costs between $25,000 and $28,000. And forget about the usual 35-day time it takes to move a container from India or China to T/Decatur CCI’s site via U.S. Customs and ports. That process now takes up to 120 days.
T/CCI President Richard Demirjian stated, “We’ve had merchandise stranded in Chicago, buried in there trying to get it out.” “From 2010 to 2016, the customer’s exclusive concern was that the United States was too expensive to manufacture [in].” We’d like you to visit China. We want you to visit these low-cost places in India.”
Changing mandates
T/CCI commenced manufacturing in China in 2006. In November 2021, it will complete the construction of its 5 millionth compressor in Ningbo. In 2018, it increased production in Noida, India. The majority of its manufacturing takes place in these two countries.
“Now, [the customers’] perspective is, ‘Hey, we want it manufactured in the location where we’re using it, and if it’s not, it’s got to be 20% or more competitive to create it offshore.”
Heavy-duty vehicle manufacturers are accustomed to shifting supply base regulations.
“We have two goals,” Demirjian explained. “What is best for us in the long run?” “Which option makes the most sense?”
The T/CCI company was founded in the 1980s with the purchase of Tillotson products from Borg Warner Inc. in 1984. The Demirjian family purchased Borg Warner’s York Automotive compressor line in 1987.
Redesigning Manufacturing Procedures
The goal now is to design production processes internationally so that they may be applied to local markets. For heating and air conditioning compressors, castings made in the United States or China employ the same materials and procedures, allowing for very simple validation. Pistons and shafts require far more time to evaluate and approve for durability.
The production part approval process enables the relocation of production from one site to another to be smooth. However, it will take another two years to do this.
“You can’t suddenly say, ‘Hey, tomorrow, I’m going to start producing this out of the United States,'” Demirjian explained.
Dual or triple sourcing is more expensive for truck orders, which are substantially less than automotive volumes, perhaps 30,000 units against 250,000 or 500,000 for a car or light-duty truck. If T/CCI wants the business, it doesn’t have a choice.
“We’re already hearing it from our customers.” Their 2024-2025 automobiles are telling us, ‘We want this compressor made in the United States.'”
Increasing adaptability
T/CCI is modernizing its Decatur production lines, which produce older legacy goods. The idea is to make the line more adaptable to handle components from India and other countries, while also preparing products for the industry’s move to electric vehicles.
Adding value to American-made products helps T/CCI avoid the kind of inventory glut that occurred at its Hamburg, Germany, business after a European customer shut down its production for a month because its wiring harnesses were coming from war-torn Ukraine.
“As much as we’d like to say we can create everything in the United States,” Demirjian said, “there have to be things that come in from lower-cost countries, so the greater value parts can still be produced in the United States.” “You really need to get back to normal of getting product flowing without interruption.”
