At long last, some relief from global trade stress and strain

To listen to this interview, go to: https://www.sme.org/smemedia/podcasts/2020/pivot-international-ceo-on-ways-to-alleviate-global-trade-tension/. 

Passport to Innovation: A conversation with Editor in Chief Brett Brune

Mark, tell us about Pivot and its work in smart manufacturing, just in case some of the readers aren’t yet familiar with the company.

Pivot International is a 47-year-old company. We’ve done product development and we manufacture as a service provider. We’re in a large degree of industries of technology. We are a global team that has design offices around the world, and we are manufacturing both in Asia and in the United States. We’ve done a lot of embedded electronics and mechanical devices. Most of our business consists of products developed by us and
manufactured by us for our clients.

How have you gotten involved in smart manufacturing?

We’ve invested heavily in all kinds of leading-edge practices, including 3D printing for prototyping, all meant to improve our throughput and our cycle time from design to product launch in the marketplace. So we typically can deliver a product in six to 12 months.

What impact do you expect the China Deal First Phase to have on global innovation?

It’s going to unleash the hesitancy that’s been going on for the last year and a half or so. First there was concern over trade wars, then there were trade wars.

It’s not the ultimate solution, but it’s really relieved the stress and strain business leaders in the world have been experiencing, and in terms of putting forth resources for new innovation—for new products, for new risk-oriented adventures. There was a lot of sitting on your hands in the last year and a half because no one knew what the next day was going to hold.

What about USMCA, the free-trade pact between the U.S., Mexico and Canada?

That’s significant. Although we’re strategically very connected to China and the risks associated with it, should it impact the Asian sources, the actual aggregate numbers are higher from a U.S. standpoint for trade with Mexico and Canada combined. So that’s actually the largest trade package and the most material in our overall economy.

How much work is Pivot International doing with either Canada or Mexico?

Not so much. We have supply chain offices in Taiwan, Shenzhen, and manufacturing facilities in Manila. The Philippines has always been our Asia solution—first because there is rule of law there and second because it’s an English-speaking Asian country. And we have a large footprint in the United States. But we have not ventured to having manufacturing in Mexico.

Some people have rotated manufacturing out of China and into Mexico. Generally, people have definitely been energized to leave China but not energized to leave Asia on embedded electronics. However, steel stamping and some other industries have moved pretty heavily out of China and into Mexico.

What about Brexit now that it’s official? Do you anticipate this will impact trade and growth?

It, too, relieves some stress that was building in the U.K. However, there is a lot of work to be done there. There is an EU trade bill that the United States has to work out with European countries like Germany and others, like in auto trade. And then Brexit is determining what kind of trade deals the U.K. cuts with the United States and other countries. I think because President Trump and Boris Johnson get along there’s a good probability that’s going to be solved.

We have an office in London and two engineering offices in Scotland, so I’m over there quite frequently. They just couldn’t deal with not knowing whether
there was going to be Brexit or not for three years. So this, too, relieves some of that, even though there are still no trade deals yet.

What might we expect to see over the next several years in terms of geopolitical trade trends? And what might this mean to manufacturing?

The next leg after the election (in November) will be negotiations the United States is going to have with the countries we’ve talked about here.

There’s going to be some turbulence. There always is. That’s what we have to look forward to next year.

Regarding manufacturing, if we can work out a more robust trading relationship with Europe as well as a Phase Two China situation, it’s just going to build confidence—and global manufacturing.

There’s clearly a trend of onboarding manufacturing in the United States from where we were five years ago. And I really don’t believe that genie will be put back in the bottle: China will always be part of the global supply chain. Asia will always be part of the global supply chain. But it’s never going to go back
to 100%. We don’t have to worry about any mentality that existed prior to the last three years—because now people are focusing on things like the security risks for certain technologies and volcanoes. Henceforth and forevermore, it’s never going back to the completeness that it once was.

Let’s get a little bit into the weeds at Pivot. How has Pivot dealt with trade tensions operationally?

We’ve been fortunate. We’re a middle-market company but we’ve been organized over a multinational, large corporation.

We have manufacturing facilities in the United States and in the Philippines with equal capability, as well as with global supply chain and design engineering offices in Taiwan. Because of that footprint, we were able to rotate around those barriers.

Many times, middle-market companies and small companies have one product, and they used to find a Chinese contract manufacturer. Those kind of companies really got hurt in this deal.

What advice would you give to other companies?

Never single-source manufacturing and supply chain. Make sure you have options. Make sure you have set yourself up to balance the risks.

Mark, what might be an upside to some of the trade tensions manufacturers are currently facing? Is there some kind of a silver lining in terms of growth opportunities?

I think there is: It’s really invigorated executive corporate strategies (outside of Asia) in terms of strategically investing more heavily in ... their own manufacturing capabilities, in capital and people and education.

With these trade tensions, the risk factor (of relying on a lower-cost service contract manufacturing option in Asia) has gone up.

So some pain and some gain?

Exactly. I think it’s also going to reinvigorate universities (in the U.S.). Just in the last six months, you can tell the importance of the United States as an added-value country, as opposed to just a service country, has become more clear.