The Global Rebalancing of Supply and Its Impact on New Product Development

There’s a global rebalancing underway in the world of supply. For the past 20 years, the goal was to source components at the lowest cost. Total cost of ownership (TCO) was king but now, new factors are driving a reevaluation of how supply chains need to work in an era of global change and disruption. 

From political upheavals to a general decoupling of previously utilized regions, global shifts are forcing new paradigms for new product development (NPD). Uncertainty around international trade and tariff is building. Additionally, demands for more sustainable practices and efficient operational models mean that our previous NPD may not align with the current global reality. 

As Molex considers its own risk-rebalancing — such as trade, tariff and stewardship issues — we are currently building out a new framework to strengthen each of these pillars as part of a foundation that tracks with future political, environmental and societal shifts. Through relationships, process and technological development, we’re rethinking how our global supply networks can flow and function. And we’re approaching it all from the perspective of how to enable our customers to future-proof new product development strategies when facing uncertain risks, as well as capitalizing on market opportunities as they become available. The world is changing, but the key is in understanding the nuances behind each change to embrace new supply models that transform change into growth strategies that keep pace with a dynamic business environment. 

McKinsey estimates that based on current and ongoing patterns, average companies can expect disruptions to erase almost 45 percent of one year’s profits over the course of a decade. That’s why Molex is redeveloping our supplier base to focus on ensuring that production is happening closer to our customers. This provides the agility to rebalance global supply and leverage local production to offset the impact of trade and tariff changes.

While network modelling is certainly a core focus, we’re also launching the tools to clarify sourcing and segment our supplier base by location and category. 

Segments include: 

• Enterprise strategic—our core base of suppliers
• Business unit critical—an expanded group of 175 suppliers
• Transactional suppliers—a broad, diverse group numbering in the tens of thousands

Supplier optionality and localization help increase supply chain resilience while also ensuring on-time delivery and cost-effectiveness. At Molex, we work to localize deep into supplier tiers — beyond our own suppliers into our suppliers’ suppliers when possible. And we’re building in the redundancy necessary to work around sudden or unexpected disruptions and maintain efficient operations. Our goal is to redevelop our supplier base to keep pace with growth, and more importantly, the growth of our customers’ businesses. 

But there’s another shift occurring in the global supply network, and it sits at the nexus of both manufacturer and end customer demand for supply-based sustainability. You may have read about Molex’s “Design for” methodology. As part of our NPD 3.0 program, we are adding a fifth pillar of design: “Design for Stewardship.” 

This new pillar focusing on stewardship will help to better understand which suppliers are active in that field (e.g., reduction of their greenhouse gas emissions, use of recycled materials and renewable energy, etc.). We will also look at how material is sourced through our raw materials suppliers to have a complete view.

Here’s an example: Injection molding produces a lot of scrap material.  Some of this material can be reground and put back into the injection molding process. But what are the production costs and time impacts of making this change? Will the effort actually drive mutual benefit?

Finally, it’s important to remember that these efforts are all interconnected. Molex network modelling efforts and the push for localization and optionality in our supplier base also impacts on our stewardship initiative. When the distance between supplier and customer is shortened, the CO2 emissions from transportation and logistics are also reduced. Efficiency, agility and stewardship feed into each other and are all critical for a smarter operational model.

To ensure our “Design for” risk management and stewardship efforts run smoothly, we’ve implemented monthly divisional product reviews within our global procurement teams. This provides much greater visibility into high-priority projects and aligns our Global Category Management and NPD programs because NPD can become highly fluid in today’s evolving world.

Global logistics is changing, and the reality is quite complex.  Yet, we’ve found that the best approach is the agility and responsiveness that can come from a smart network with dedicated resiliency. We believe the global rebalancing should not be feared but embraced as a strong strategy to adapt to the international supply challenges of the future.