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Customers put squeeze on maker of compressors to localize manufacturing

Purchasing managers want component supply relocated closer to where it will be used

T/CCI workers inspect an air compressor, which the private company builds in China and India with an eye toward more production in Illinois. (Photo: T/CCI)

Dennis Flaherty ticks off the supply chain issues and the challenges to localize manufacturing faced by T/CCI, the $150 million maker of heavy-duty compressors and clutches for the mobile air-conditioning and refrigeration industries. He nearly runs out of fingers.

Even before pandemic lockdowns crimped production in Ningbo, China, T/CCI had to decide how to handle the costs associated with 25% tariffs imposed by former President Donald Trump on imported Chinese-made goods, Before that was a longshoreman strike in Long Beach, California.

“It’s difficult to pick any one issue that is affecting the supply chain,” Flaherty, the chief operating officer at Decatur, Illinois-based T/CCI, said in an interview in advance of FreightWaves’ Future of Supply Chain event May 9-10 in Northwest Arkansas. “It’s a dynamic situation. We’re constantly evaluating how we’re buying and manufacturing.”

Think global but localize

One solution that’s becoming a manufacturing trend is localization: building components where they are used. For a company like T/CCI, that means looking at more production in Decatur than in China and India where most of its products are manufactured.

“This really has caused people in all industries to step back and consider stability,” Flaherty said. Purchasing managers at customers want assurance of a resilient supply chain with solid contingency plans to react to shortages in material or changes in logistic routes.

Before the pandemic, T/CCI paid about $5,000 a container to get compressors made in Ningbo to the U.S. Today, that same shipment is $25,000 to $28,000. And forget about the average 35 days to ship a container from India or China to get the landed shipment through U.S. Customs and ports to T/CCI’s Decatur facility. That now takes up to 120 days.

“We’ve had product stuck in Chicago, buried in there trying to get it out,” T/CCI President Richard Demirjian said. “Back in 2010 through 2016, the customer’s whole focus was, the U.S. is too expensive to manufacture [in]. We want you to go to China. We want you to go to India, these low-cost areas.”

Shifting mandates

T/CCI began production in China in 2006. It built its 5 millionth compressor in Ningbo in November 2021. It added production in Noida, India, in 2018. Most of its manufacturing occurs in those two countries.

“Now, [the customers’] perspective is, ‘Hey, we want it manufactured in the location we’re using it, and if it’s not then it’s got to be 20%-plus more competitive to produce it overseas.”

Such shifting mandates for the supply base is common for heavy-duty truck manufacturers.

“We have two focuses,” said Demirjian, “What’s the best for us in the long term? What makes the most sense?”

The T/CCI business was formed in the 1980s through the 1984 acquisition of Tillotson products from Borg Warner Inc. In 1987, Borg Warner sold its York Automotive compressor line to the Demirjian family. 

Compressor on a computer screen
A T/CCI engineer works on a compressor. (Photo: T/CCI)

Revamping manufacturing processes

The goal now is designing manufacturing processes globally so they apply to local markets. With few regional changes required for heating and air conditioning compressors, castings made in the U.S. or China use the same material and processes, allowing their validation with relative ease. Pistons and shafts take much longer to test and approve for durability.

The production part approval process allows the seamless movement of production from one location to another. But it is still a two-year process to make that happen. 

“You can’t just willy-nilly say, ‘Hey, tomorrow, I’m going to start producing this out of the U.S.,’” Demirjian said.

Dual or triple sourcing of a product is more costly for truck orders, which are much smaller than   automotive volumes, maybe 30,000 units compared to 250,000 or 500,000 for a car or light-duty truck. T/CCI doesn’t have a choice if it wants the business.

“We’re already seeing that from our customers. Their 2024-2025 vehicles, they’re telling us, ‘We want this compressor produced in the U.S.’”

Adding flexibility

T/CCI is revamping its production lines in Decatur, which makes older legacy products. The goal is to make the line more flexible to handle components coming from India and other locations while preparing products for the industry transition to electric vehicles. 

Adding more value to U.S.-built products helps avoid the kind of inventory glut T/CCI has at its plant in Hamburg, Germany, after a European customer shut its plant for a month because its wiring harnesses were coming from war-torn Ukraine.

“As much as we’d like to say we can produce everything in the U.S., ultimately from a cost standpoint, there’s got to be products that come in from lower-cost countries, so the larger value pieces still can be produced in the U.S,” Demirjian said. “You really have to get back to that normal of getting product flowing without disruption.”

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Click for more FreightWaves articles by Alan Adler.

Alan Adler

Alan Adler is an award-winning journalist who worked for The Associated Press and the Detroit Free Press. He also spent two decades in domestic and international media relations and executive communications with General Motors.