How Manufacturing is Returning to the United States — and what that means for your business
Manufacturing jobs are coming back to the United States, as 15,000 jobs were added this June, according to the U.S. Bureau of Labor Statistics. The United States is recuperating losses from the pandemic — almost a million and a half manufacturing jobs vanished following country-wide lockdowns in March of 2020 and demand ceased and people became ever more cautious. However, as supply chain changes manifest following the pandemic and a return to the new normal in the United States, some suppliers are reconsidering their options and thinking of changing their supply chains to recover other costs and externalities that might not appear directly on the balance sheet, but may very well affect quality, service, and the ability for goods to go where they are needed.
The push for the United States to offshore production, primarily to China, was driven heavily by an increasing cost of labor in the US, with a very low cost of labor for low-skilled workers in China. As a result, many firms took their manufacturing operations overseas, looking to recuperate a more expensive international supply chain with significantly lower labor costs. However, labor costs in China have been rising, and the current supply chain’s flaws made all-too-apparent by the effects of COVID. As a result, a slowly emerging push for reshoring, brought on mainly by tariffs placed in the presidency of Donald Trump, has been put into full swing, seeing huge economic benefits for the transition.
The push for reshoring has been brought on by firms reconsidering the primary motives of their supply chains and business models. A push for lower costs of labor has been offset by a counter-push for lower shipping costs, fewer workers in the supply chain, less inventory, less inventory infrastructure, and other external factors that may not be considered on the balance sheet directly, but do affect the business. Paul Harencak, a VP at LPS, a packaging manufacturer in New Jersey, stated in an interview with InsiderNJ, “We believe that the experience of getting the product made closer to home has been an eye-opener for many. Off-shoring began decades ago to take advantage of lower wages and more relaxed environmental and tax regulations. What few understood at the time was that these advantages were balanced against longer shipping times, lower quality of the product in many instances, and concerns about protecting intellectual property rights.”
As a result of these other external factors, American supply chain experts have been making a push to reshore. In a survey conducted by Supply Chain Dive on the State of North American Manufacturing in 2021, manufacturing supply chain experts were asked about important factors in the products they provide and what makes for a good supply chain. While price and cost per unit were near the very top, other factors such as lead times, product certification, product data, and supplier relations also played an important role in a supply chain. All of these other factors were brought down by the presence of a huge international supply chain during COVID and the general difficulties of international supply chains, and as more supply chain professionals consider their importance, it becomes clear how the push for reshoring has come about, as all of these other factors might make it more apparent that international supply chains could cost more in the long run.
America is making some strong pushes in bolstering its local supply chains. The Reshoring Initiative looked at data on reshoring operations taking place within the US, and that firms such as 3M, Apple, Dillard’s, GM, KitchenAid, Oracle, Pfizer, and Stanley Black & Decker had re-shored parts of their manufacturing operations. Another study was done by Kearney, a consulting firm, showing that manufacturing operations had seen their biggest move upwards since 2002. And Arizona is currently in the process of becoming the home of Taiwan Semiconductor and Intel’s biggest chip manufacturing plants as shortages of electronic components become rampant. Overall, there is clear evidence that reshoring to the United States is making a comeback thanks to economic influences, our supply chains could become easier to navigate, and goods will become easier to access and deliver to your business