Strategies for Supply Chain Resiliency Amidst Tariff Uncertainty
Full Transcript Below
Heatherly Bucher
Let’s talk tariffs. Welcome to an Arena session where we sit down and talk with our partner Instrumental. I am excited to welcome Instrumental CEO and Co-Founder, Anna-Katrina Shedletsky of Instrumental. I’m Heatherly Bucher, the Director of Strategic Alliances and Partnerships for Arena at PTC. Anna, welcome. We’re going to talk tariffs, which you’ve spent a lot of time over the last couple of months talking with a variety of partners and some customers, including some joint customers of Arena and Instrumental.
Let’s start off with China. You’ve talked recently about manufacturers getting out of China, if they’re at volume in China, because anywhere else was better with regards to tariffs. The math was obvious. Now we have a 90-day pause on the U.S.-China tariffs, but really no indication of what may be next.
Do you see companies staying the course of the decisions maybe they made a month ago when we had outsized tariffs against China, or waiting, freezing their decisions? What do you think is happening with our customers right now?
Anna-Katrina Shedletsky
There’s a variety, and it kind of depends on where they are in terms of the size of their exposure to China and the experience that they have in other places outside of China, as well as where the large predominance of their market lies for their product. If their market is primarily the United States market, that’s a very different calculus than if the United States market is only 40% of what they sell, for example. So I think those are all part of the calculus, so there’s no one-answer-fits-all for this.
But generally, what we’re seeing is, even before all of the recent tariff talk in the last 12 months or so, primarily who was left in China were very large companies making high-volume consumer electronics, had essentially stayed the course from the 2018 tariffs. Many of the midsize and small companies had gotten to other places over that period of time and had just built up competencies and were doing things other places. Then we also saw small companies essentially doing NPI in China with the idea to transfer out at some point.
With the tariff talk of the last year or so, what we’ve seen is that essentially there are companies that are now deciding that they’re just going to get out. I think that, in general, that is the predominant industry sentiment across consumer electronics companies, from very small startups to large Fortune 50 and even smaller than Fortune 50 customer sets. The reasons are varied. But I think the main one is uncertainty, and uncertainty is really challenging for business. Certainly with the different on again/off again, what is the tariff rate going to be, where is actually safe has been an ongoing discussion for the past six months or so.
Generally, what we’re seeing is that customers are ultimately staying the course for decisions that they made in the last month or so. We’re not seeing the news cycle of every… crazy stuff happens on the weekend, is essentially what happened over the past six months. We’re not seeing that news cycle now. I think most people or most companies have come up with their strategy, they’ve committed to their strategy, and they’ve committed to the strategy because of the uncertainty.
So actually, news that there’s a 90-day delay is just further evidence of uncertainty to plan around. Now, it’s possible that there are companies that already had decided to wait and see. They’ve already decided, “We’re going to finish NPI in China. We’re going to do our first ramp and first customer ship from our China facilities for NPIs this year. Then we will move, and we’ll make the plan now to move. In the event that we need to just yank that plan and stay where we are, we’ll keep that open as an option.” So I think the larger companies that had stayed in China from 2018 have essentially built models that are similar to that.
We are seeing others take a range from, “Get me out of here ASAP,” where they’re already ripping and rolling and their new factories are ramping up right now even, so they’ve already made that decision much earlier this year to be able to do that.
Then we see others that are taking a more measured approach where they recognize that a large percentage of their product goes to the U.S. market, but they plan on having an actual bring-up in the summer and do control runs and ramp over time versus, “I need a new production line in two weeks, and I need to get my full-ramp production as soon as possible anywhere other than in China.”
So that’s what we’re seeing. We’re also seeing people move to different locations, primarily to Greater Asia. We’re also seeing a lot in Mexico. There are certain products with different HTS codes where you can actually take advantage of the USMCA and actually get tariff-favorable rates there. We’re seeing people do a lot of tariff engineering. We can get into some of that in some of your other questions.
Heatherly Bucher
Great, thanks. I think, like you said, the uncertainty and the rapidity of the timeline changes over the last six months, it’s definitely an interesting moment. I’m sure it’s occurred in the past, at least in specific geomarkets.
But I think I wanted to lean in a bit. You have a lot of NPI experience personally as well as what Instrumental helps customers with. What we’re seeing now, let’s say those companies, like you said, are like, “Let’s just get out of China now, as soon as possible,” so they’re needing to bring up a new factory or a contract manufacturer or both or multiple. Normally, that’s done at a fairly measured rate. When we’re bringing up a new factory or we’re starting a relationship with a new contract manufacturer, there’s a lot of process and step involved, in qualification, in establishing the relationship, and setting up the lines, and all of these sorts of things.
Now we’re doing it in a rush timeline. So like you said, it can even be a new factory for an NPI, or shortly after NPI in this scenario, in a very short timeline. How do manufacturers… what does that expected risk look like? They’re launching a new factory or a contract manufacturer. It’s almost like even if they’re not doing NPI, they’re assuming the risks of NPI potentially on top of that new factory or contract manufacturer. In your past experience with NPI and bringing up new lines, what does that look like to have all that extra risk?
Anna-Katrina Shedletsky
Let me start with this. Economic policy has a cost. There’s a lot of particularities around best practice for moving a factory from site A to site B. There’s lots of shortcuts that companies may or may feel like they have to take or that they can take but probably shouldn’t take.
So if you’re interested or your listeners are interested in some of the details of the best practice and the particularities… Because it does matter a little bit if you are bringing up a totally new factory partner like you were changing from one company to another versus if you are bringing up at a new site with the same manufacturing partner, there’s contemplation about secrecy and the information of who knows what, when, because there are people who are going to lose their jobs as a result of moving to the location.
Do you even own your own test? Are there house parts on your BOM? There’s a lot of things that it’s hard to summarize in a quick answer. Instrumental has actually produced a white paper with a bunch of experts on the best practices that get into some of these details. So if you are working on a factory move and you just want to check your plan against some of those best practices, I’m sure we can add that link in the show notes here for everybody to be able to see. But those are some of the things to think about.
The best practice is ultimately not to shut down site one until site two is up and running. That is a very expensive proposition. But I’ve also seen companies go out of business because they try to essentially build up inventory, shut down site one, move everything to site two, bring up site two, and site two doesn’t come up as fast as they planned, and they literally have no revenue stream now because they’ve sold out their inventory. This can be very problematic and very high risk. So if you are a large business with many product lines, maybe this is an easier risk to bear. But if you have one singular product you sell, it’s a high risk. But it’s also very expensive to have two simultaneous factories. You need double the tooling, double all of that stuff. Your supply chain is also super confused because suddenly they have to produce 2x the volumes in order to do a bring-up. I think a lot of folks who are operational in nature…
As a background, my background’s in engineering. I was a product design engineer at Apple for six years, so I led a variety of iPod programs and then the first-generation Apple Watch. I’ve now had a decade of experience working in NPI and production with the world’s most admired electronics brands. So I’ve seen inside a bunch of companies doing it well and some that maybe are not following all the best practices. So I’ve gotten to see a lot of scenarios kind of play out. I know that the operational mindset is that once you’re already in production, the line should be stable, the design is stable, so you can move it.
But I think we all acknowledge, hopefully, that that is really not the case. There’s nothing stable about having completely new operators in a completely new location often with new jigs, new setups. Are your SOPs actually documenting what is actually happening? Oftentimes, there’s all sorts of undocumented stuff. So that adds a ton of risk. As you were suggesting, Heatherly, it is a new NPI. Hopefully, you can do it in one build, and it’s an NPI that’s kind of a control run and maybe you can even ship some of those units.
But assuming that you’re just going to one and done, like a control run at the new factory, I think is very problematic as your plan of record plan. You should probably plan on doing a development build and a control run, especially as you’re adding new people, new jigs, new tooling, maybe new suppliers, because you have some house parts in the other site.
Flow is smooth and smooth is fast. I think that is probably the case. Certainly, I’m sure there are some companies that are able to roll the dice and it works out for them. But it is a very high-risk proposition.
Heatherly Bucher
I love your point about design control and IP concerns and, of course, all the undocumented, I have to call it, tribal knowledge, the things that we think everyone knows, we thought we documented, and then we find out that the SOPs don’t cover certain things. It’s really resident in people’s heads. Those individuals may or may not be involved in the new site. Both Arena and Instrumental focus a lot on quality: quality assurance, quality control, and quality processes.
I think that … another risk we see is quality.
Anna-Katrina Shedletsky
You may not have the same specs in each location. It’s why it’s so important, I think, if you’re going to extract out of a site, to document super well, to try to vacuum up all that knowledge. It’s one of the ways that I know having a properly set up Arena instance can help you have a stable bastion of understanding of what is real, as well as Instrumental, which essentially is capturing in-line, in-process imagery and functional test performance of those units so you actually know when you get to site two and you start seeing new failures or new defects, there will always be this question of like, “Oh, but maybe it was like that before. We don’t know.” And this just helps you actually just know that answer if you have that data record of what you’re actually producing at site one before you go to site two.
Heatherly Bucher
You mentioned inventory moving from site one to site two. For the consumer product industry, which we both have customers heavily in large-volume consumer products, the end-of-the-year holiday season is kind of a make or break for most of the volume consumer product industry. Manufacturers begin in the summer months, accelerating production based on what they expect to sale and sale volume. So we’re there. This is summer basically. Here we are, recording on May 20th.
Let’s talk about how manufacturers can navigate this uncertainty in the tariff landscape and prepare for what’s typically the busiest manufacturing season, the summer. We talked a little bit about the different strategies that you’re seeing. But I’m interested, based on your background and looking at customers, what are they perhaps not thinking about? What are things that they should be thinking about that they’re not thinking about as they’re coming into this busy manufacturing season?
Anna-Katrina Shedletsky
I think that there’s a split in resourcing required to both bring up a new site, it requires engineering, and so does an NPI. So I think that companies really need to decide to focus, but I think that focus is one of the core pieces.
I think there have been a lot of, hopefully, listeners who are interested in this topic, have been spending time in the last six months getting ready for this moment. So I don’t know that there’s anything that they need… Right now, I think we’re in execution of plans that have been laid out several months ago where hopefully they looked at tariff engineering and their HTS codes and they’ve got all of that figured out.
There might be some question of, like, “Oh, I wonder if we should pull forward a lot of units,” because maybe there’s this tariff holiday, this pause for negotiation over the 90 days pause that we’re currently in? We should resist, I think, the temptation to try to pull forward inventory into United States warehouses because I think inventory ages, and this creates challenges later on. I did a whole deep dive session on why that is evil, if people are interested in some of the details on that from real supply chain experts; I’m just playing one on TV.
Those are some of the things that I think people are thinking about that are really just executing on plans that were laid before. I do imagine that engineering teams are pretty stretched thin right now because they’re probably being asked to do more than originally planned. Everybody’s really just heads down and focused on delivering the product on the schedules that they committed to, and that is a typical summer DVT, TVT ramp process right now with potentially the added complexity of trying to add an additional line.
What I have seen is that companies that are trying to essentially finish NPI and do first customer ship in China and then also bring up a parallel site somewhere else, site two, that eventually maybe they’ll ramp this one down, and that’ll become their primary site, I have seen them bifurcate their teams so that each of those teams can focus on those independent missions.
Certainly, there is a team still working on improving yield on that original line. You are doing ramp. You are making sure that you’re building great units for your customers. That is really hard to have that second line, be able to take in that constant fire hose of information. They need to be fire rolled off and get started. Then they can do a bring-up build that brings them back up to what is the best recipe. So we are seeing companies do that kind of maneuver, if they haven’t already just decided that they’re moving.
Then if they’re already in production, it’s a different kind of scenario because it can be maybe a little bit more measured, and we’re seeing those customers have more measured timelines, longer timelines. Certainly, I think the 90-day pause creates a little bit of reprieve in terms of the financial balance sheet implications of continuing to ship out of China location.
With those tariffs on, in some cases we had customers who were incurring $200,000 a day in extra tariff costs just because of the volumes they’re producing at, where those products are going, what those HTS codes are. Every day that they’re not ramped up somewhere else is $200,000 a day. So I think actually knowing what your numbers are and your burn cost of the different pieces is important to help prioritize, do we want to spend additional effort and money here, or do we want to spend it over here?
Heatherly Bucher
I’m going to have to go. I didn’t watch your deep dive on pulling inventory forward. Like you, I just play a supply chain expert on TV or recordings. I’ve been around in the industry for a long time but adjacent to all of our customers, or at least for a long time, I was at a customer decades ago. I’m going to go watch that for sure, and we’ll make it available to all our listeners as well. You mentioned at the end staying the course, but also, I think in some cases, companies just tightening up on everything as they understandably don’t know what product costs will actually be.
It’s a hard calculus today. You mentioned knowing the numbers, but I think it’s a hard calculus to know what the numbers will really be on these unexpected costs. What will the tariffs be when the inventory comes into country? So they’re tightening up on expenditures understandably to manage the tariff impact and also the manufacturing shift costs that they’re making. But to your point, we’ve talked over the last 15 minutes about data and how do companies make better decisions.
Both you and I were talking before we recorded. Transparency to data, the right data is important to making decisions. So even as they’re managing these unexpected costs and tightening up, but what should they be spending money and resources on to get through, I would say, the rest of the year or the rest of the next couple of years? It’s not really clear how long this uncertainty is going to last. What should they spend money on?
Anna-Katrina Shedletsky
I think that this is why I was suggesting even just having a finger in the wind element of what the cost is to stay versus to go. Like, “Every day we’re in China producing at this volume, and I don’t have an alternative costing me $200,000 a day,” makes it very clear whether there’s going to be rapid ROI for something that is going to enhance your ability to get up faster in site two, because it’s all about, how much of that can I replace with site two and how fast?
So in that case, things that are cutting even hours if not days or weeks out of that bring-up process are incredibly high ROI. Maybe they didn’t make sense before, but now they do. I think teams are a little overwhelmed, so it can be very difficult for IC level engineers who are in execution mode right now to be trying to step back and see if there’s a smarter way to work.
So I think it really relies on… This moment is a moment for leaders. Maybe you also feel totally down in the details and dragged in to probably know IC work at times, as many leaders are, when stuff is happening like this. I think taking a step back and actually looking, like, “Are there ways we can credibly cut time out of our bring-up process?” That could be better tools. It could be consultants. It could be technologies like Instrumental. It could be leveraging additional parts of the Arena package that maybe they’re not currently using.
The payoff period here is going to be rapid. I think it’s super important if starting a new relationship with a company of consultants or technology, etc., that you’re also thinking about, how quickly I can get up and running and how much work it’ll be to do so? But I think many companies are offering white glove support to get up and running so you can just get value immediately. Certainly, you should ask for it if it’s not being proactively offered because I think many companies are acknowledging that that is an opportunity for them to provide value very quickly to customers. It’s certainly something for us. How can we bring up faster in the next site? What’s your recommendation? Instrumental is a technology that helps accelerate bring-up. We accelerate NPI. When you’re in the production environment, a new site, it’s an NPI, days or weeks even out of that process.
The ROI is incredible. So, customers realize that. They want to get something dropped in quickly. They have a timeline that is now, and they do not have a team that can spend a lot of time on it. So I think leaders need to pop their heads up above the chaos of what’s going on in the team and see if there’s tools they can bring in or consultants they can bring in who can really help to accelerate the mission at hand.
The mission at hand is to stop the bleeding on the $200,000 a day, or maybe the mission at hand is we need to launch the most awesome product because the company’s dead if this product isn’t amazing and doesn’t get five-star Amazon reviews. Then the focus is different. Then it’s an existential focus on, “How do we make this NPI the best we can? How do we make this the most stable? I’m just going to forget about tariffs for the next four months until we ship our first customer ship out of our existing China factory because that’s what’s going to reduce the risk for my mission associated with that.”
So I think it’s just really important for leaders to be really clear where their priority is and execute to that priority because their team members may not be able to lift themselves out of the chaos of the day-to-day.
Heatherly Bucher
Yeah, no, I think you make a great point of, first of all, knowing what your mission is of the company. Every product company, you’re in a specific industry, you’re at a specific stage of your journey as a product company. If it’s a launch and a first to market or own the market or it’s a ramp or it’s continue the volume, I think that’s really important for them to understand, like you said. Then where are the opportunities, whether it’s data transparency or control, data control, quality control?
I think collaboration. What’s interesting is, of course, most of our customers, as well as ourselves, lived through the pandemic, which taught us a lot about collaboration, communication/collaboration with the dispersal and the work from home, send everybody home except for essential. Certainly, at that point in time, there was this big emphasis on supporting… If you weren’t really, truly virtual or you didn’t have the tools to work virtual, you were in a bind. Now we have obviously a different scenario, but what I find interesting is the parallels.
It brings to the forefront weaknesses perhaps in company processes. Where are you weak, because the way you were doing business in October worked for where you were, where your contract manufacturing was, where your factory were, where your supply chain was? All of a sudden, now you’re shifting. It’s not there anymore.
It goes back to the things that weren’t documented but also maybe the tools you don’t have, or even the tools you have, certainly selfishly, make sure you’re using all of Arena platform and Instrumental, but also other things. Are you really using even things like Slack and Teams? Are you using them well in a disciplined manner across your team and your supply chain partners? Have you really leaned into what you’re already invested in?
I think we all have seen… And we do this. We get technologies, we get systems, we get them to a certain point to address what we purchased them for and then we kind of stop. We don’t stay up with their latest releases. We don’t push it to the next team. So I think everything you said, plus we’ve talked with a lot of our customers, that maybe they just never got to the Quality module in Arena. Maybe they never rolled out the training management. Maybe they never really pushed supplier access to all of their supply chain. They were just managing it outside the system because it was work to do it.
But to your point, now the payoff of doing these things can be, “Oh, if I can gain a couple of hours every day or days or week, it adds a lot of value.” So I think those are great points.
Anna-Katrina Shedletsky
I think maybe just to add on to what you’re saying about people whose businesses might’ve worked fine back in October, I think as an engineer, people who are attracted to engineering tend to be a little bit more like, “We want to go and solve impossible problems.” People who are attracted to operations and quality, they want to deliver on a specific thing. It’s just a different cultural attraction for different types of people. So everybody that’s kind of on the ship here can get on the same page, that it doesn’t matter if it worked back in October because the reality now is different.
The sooner that reality becomes like, “Well, how do we operate in this reality?” and certainly I think the continued evidence is kind of similar to the pandemic years, so it’s a good analogy where companies were disrupted on a three, four… Every six months, it was different. There was a different problem to solve. So I think what’s gone is gone and let’s solve the problem that we have. It may require different tools or a different approach or a different prioritization than we had before. So I think it’s a really good point, Heatherly.
Heatherly Bucher
Yeah, absolutely. I guess to wrap up the conversation and talk about the parallel between the pandemic years and now, in the pandemic years, it was a lot about collaboration and then it was about availability at any cost. Supply chain managers were working 20 hours a day: “How do we find the parts? We don’t even care what the cost is. We’ll figure that out later. We have inventory building up. We can’t assemble finished goods and get them out. So now we’re dealing with this massive stocking problem and getting to the market problem.”
Now, of course, the focus is on the uncertainty, the unpredictability of cost, and so the focus is on how do we maximize or modify our supply chains for cost. You said recently over the months, which is true, that it feels like there’s really no safe place right now when it comes to cost … or less safe. When it comes to cost, there’s a variety of places, but there’s no perfect zero-cost place right now.
I think, if I look at the pandemic certainly, we learned certain things about supply chain and flexibility and resilience having to do with availability. What do you think is the lesson if we look back two years from now, five years from now, 10 years from now at this moment in time? What do you think we’re going to have learned about supply chains and manufacturing strategies that everyone will take forward as they hopefully build better supply chains 10 years from now? What is that big thing we’re going to take forward?
Anna-Katrina Shedletsky
I think that adaptability and design for adaptability is probably one. It’s hard to have a crystal ball because it’s hard to know how everything’s going to actually play out. Maybe in 90 days there’s no tariffs and everything is just the same as it was last year and we go back to that state, then I don’t know that there’s anything that’s learned.
I think that if we continue in what’s being said at least, then I think that adaptability would be a core point. I think that companies will think twice about having house parts on the BOM. I think companies will think twice about, “Are there just proactive tariff engineering I can do or just engineering of my whole supply chain I can do before I even get started, and how much upfront work is done versus just pursuing the cheapest possible assembly costs?”
I’m aware of a customer who because of the substantial transformation definition, they were actually able to just move SMA somewhere else outside of China. That’s their substantial transformation. They’re just doing assembly, put the pieces together in the box, kitting, effectively in China, and it’s not a transformation. So there’s where, if you plan in advance, you make different decisions. Maybe the tariffs stay. Maybe they don’t. Maybe things continue to change and be volatile. Building a team that’s resilient to those kinds of changes and can roll with the changes, I think the valuing of that. I was not around at this time, but many of the experts that I talked to said that, prior to the aughts, it was very common to move suppliers from program to program. You’re with one EMS and then the next one and then the next one, and you rebid every year. Over time, it became a little bit less… kinda more taboo to do that. I think the pandemic made it so it’s back in play that people go and they bid.
But I think it’s what you’re prioritizing in your bid. Are we working with a partner that has five different places they can be and can bring you up really quickly in those five different places? That could be great. Maybe you’re looking at trying to build and bring some of that manufacturing in-house.
We’ve seen companies do that. Depending on what kind of product, the cost point, what’s required in assembly, you can make things in America, and that’s probably the safest place to be if you can make the cost work out for you. So we do see companies exploring that. Some have done that quite successfully. Yeah, I think design for adaptability will probably be a takeaway lesson from this period of time.
Heatherly Bucher
Oh, I love that. I think in the whole design for X world, adaptability, and not just tariffs, but adaptability. I think your point on how might this transform the practice of not just what does the supply chain do, but what does the OEM do, is very interesting.
I started in this space in the ‘90s where OEMs themselves… The preferred model at the time was when you got to a certain scale, you did your own manufacturing. Then, of course, like you said, there was an evolution, and then there was the contract manufacturers. I do remember a time, I’m going to date myself, I was at Iomega corporation in the ‘90s when the zip drive was a thing. Everyone who’s younger will probably not know where removable storage started. It was a time where when you got to a scale, you built your own factories. You owned your factories in manufacturing. So I may have launched in Malaysia at the time in the ‘90s when they went to volume. Then of course, to your point, things change, and then there was more contract manufacturing.
I do remember the time when there was that rapid EMS, particularly in the EMS space. I think it’s a great conversation. We could probably bring on some experts from our customer base to have a conversation, maybe that’s a future conversation with customers, that have that experience because I find that part to be interesting overall for customers. What might be the practice in 10 years as it regards supply chain, what your supply chain partners do? That, of course, has a huge impact on everything: how you build, how you design your product, how you price your product.
I think we’re also all talking around what will the market bear, right?
Anna-Katrina Shedletsky
Yes.
Heatherly Bucher
If more manufacturing moves to the country of market, in this case we’re talking about the U.S., but we could also talk about EU for EU market and things like that, what does that do to the finished good cost and the finished good price and what will the markets bear? I think there’s some interesting conversations there, too. It’s hard to predict consumer sentiment.
Anna-Katrina Shedletsky
I’ve certainly noticed a thing that’s started to worry me a little bit as an engineer and who grew up as an engineer. I was not around in this market in the ‘90s, but I did grow up at Apple in the late aughts and then the early teens, which I think was kind of the heyday of the contract manufacturing model.
I’ve continued to see now over this past decade more and more the outsourcing of the design and the outsourcing of the know-how and the outsourcing of the caring about the design or the know-how. It is much more common now to find companies that are admired brands who really are operating under an ODM model where they’re just buying boxes and mostly as a company, engineering and operations know-how, teaching a supplier to build the product is no longer how they operate.
I think in a world where you need adaptability, you might need to actually go back to that. Maybe this sounds kind of the early stages of the “Ok, Boomer,” like, “We need to go back a decade to when I was doing it, which was the optimal model.” But if you need adaptability, it means you need the know-how and knowledge inside your organization of how to build your product. If you have outsourced all of that and the design to a partner, that’s great as long as that partnership can work for your business in perpetuity.
I think there’s a risk to that in a more volatile, adaptable, different-things-that-could-happen kind of market. That actually having your know-how in-house and ability to reproduce what you’re doing somewhere else feels very important and prescient now. So for the companies that have drifted into just wanting to buy a box, I think it’s something to consider that could be problematic if there’s continued disruption in the space.
Heatherly Bucher
Yeah, I know. I think that’s a great point. It’s a great place to end. I will say that I’m with you. I find that to be a concerning factor. We’ve spent a lot of time talking about tariffs and adaptability. We could throw on top of that the existing increasing requirements on sustainability and compliance, particularly driven by the EU regulatory environment. But if you are a global company for your markets, I know a lot of our customers talk about it’s best just to engineer for the highest common denominator, so you’re going to engineer for your most stringent regulatory market, which today is the EU for most products.
So you have digital product passport requirements, sustainability requirements, now labor requirements coming and rolling out across countries as well as the EU. So to your point, if you as an OEM, and it’s interesting that acronym, original equipment manufacturer, if you’re actually not manufacturing or designing, if you’re not the ODM or the OEM, and you’ve outsourced it all, today it’s adaptability with regards to tariffs.
Absolutely though, the sustainability, the regulatory compliance requirements are still there and still growing in this 2025 environment. We’re all focused on tariffs at this moment, but you still have to meet those, too. How much harder does it become when you, to your point, don’t really know how to design and develop your product?
Anna-Katrina Shedletsky
I think maybe to try to land on a positive note. There are teams, they tend to be startup teams, which I know folks who work at larger companies might discount, but however, in a startup you can take more aggressive risks than you can in a more established business.
I do believe that there is a generation of engineers who got their experience in larger companies coming into startups and are starting companies now where they are reimagining NPI, they’re reimagining how production works, how they’re going to set stuff up. They are going fast. It’s cheaper. They’re bringing more products to market, more variety of product or more highly designed and engineered product to market that really delights customers in ways that large organizations can’t contemplate right now.
But I do think those models are being figured out. There is a bright spot of organizations who are taking on the challenge. The environment, it’s going to change over time. As you said before, what worked before may not work today. I think the startups have already started to turn on the dime, and the rest of the organizations will follow based on what is learned in the trenches from folks who are adapting and, I think, doing so quite successfully.
We can all learn from that as they start to talk about how they’ve changed, how NPI works, how production works, how they’re making decisions differently.
Heatherly Bucher
No, absolutely. I totally agree with you. Our startups are always fun to work with. To your point, it’s new technologies both in their products and also in how they’re making their products. These are the cloud-forward, cloud-only product companies. They’re running smart manufacturing. They have instrumental and a variety of other smart manufacturing tools. They’re always fun to talk with and see what they’re doing differently.
To your point, they have a level of flexibility and speed to iterate, I think, too, that is exciting. So hopefully they figure it out and share with the whole industry or push the larger companies. This was great. It was a fun talk.
We’re going to make some resources available to everyone who watches, including some of your fabulous white papers and better manufacturing processes and things like that. Maybe we do another one in the future with some joint customers, something like that.
Appreciate it. Thanks, everyone, for watching.
Anna-Katrina Shedletsky
Yeah, thank you so much.