May 14, 2020
By Becky Ford
COVID-19 will likely continue to cause significant disruption to global supply chains, particularly for manufacturers. CRDA has assembled a Rapid Response Team to quickly identify and address potential disruptions for businesses in our three-county Charleston region. The team will meet regularly over the next 60 days to:
- Develop a proactive understanding of the current challenges
- Anticipate how these disparate impacts are being addressed globally
- Actively support major transitions as companies begin to ramp up production
The Rapid Response Team consists of CRDA board members and allies with expertise to provide insight on global, regional and local issues:
- Team Chairman – Ford Graham, K&L Gates
- Bob Barrineau, CBRE
- Brad Cunic, Lifecycle Engineering
- Karen Davison, CRDA
- Bruno Ferrand, NextUS
- Don Hardy, Key Logistics
- Katie Holba, Volvo Cars USA
- Matt Hoffmann, IFA Rotorion North America
- John Truluck, Dorchester County Economic Development
Themes/topics identified by the group:
- Re-shoring and Localization
- Parts and assemblies typically produced and shipped from low cost countries have caused manufacturing, particularly automotive, to come to a screeching halt. As those countries begin to ramp back up, it will be take time for processing and delivery times to align with demand. Supply chain localization can mitigate this risk.
- Shift in Real Estate Requirements
- Companies need additional space for overflow reasons. Flexibility in leasing is critical, particularly for short-term leases and temporary warehouse facilities. However, short term leases are often difficult given it typically takes 60 days for the average closing. Open concept office space will also likely change significantly to require more square footage for the same number of employees – six feet apart, plexiglass, not facing each other, individual offices, less common area gathering.
- Alignment with Trade Agreements
- In addition to COVID-19 implications, companies are preparing to meet the July 2020 requirements of USMCA trade agreement and associated requirements for regional value content. These influence supply chain decision making.
- Establishment of a regional value content (“RVC”) of 75 percent (vs. 62.5 percent in NAFTA), with similarly high content thresholds for core, principal, and complementary parts
- A requirement that at least 70 percent of a producer’s steel and aluminum purchases originate in North America
- Elimination of NAFTA rules that allowed producers to ‘deem’ non-North American content as originating, regardless of origin (to reduce free riding and help ensure key auto parts are made in the region)
- A requirement that a certain percentage of qualifying vehicles must be produced by employees making an average of $16 per hour (to help level the playing field for US manufacturers and workers)
In addition to the supply chain rapid response effort, CRDA project activity continues to be active, albeit at a slower pace. All three counties have several projects largely in the defense-related and manufacturing sectors. CRDA has also organized parallel efforts to stand up a life science rapid response team and has already attracted a few new projects in that industry.
Becky Ford | Director, Global Business Development
843.760.4531 | [email protected]