Random Thoughts About Reshoring and Buying American
What will be the effect of the supply chain disruptions of recent years? Here are several observations related to where companies produce and how we think about a manufactured product’s origins.
By the time you read this, I expect we will have posted the final episode of Season 2 of our podcast, Made in the USA. This season has been devoted to covering companies making choices to manufacture in the United States, and hearing both how and why they are doing so. Working on this season, and encountering companies’ various reasons for manufacturing domestically, has left me frequently considering the questions of where companies produce and how we ought to think about a manufactured product’s origins. There are various facets to these questions. What follows are reflections off of many of those facets, in the form of several different observations and thoughts:
1. The Reshoring Institute recently posted a survey finding suggesting that most Americans would accept a 10 or 20% higher price for products made in the United States. That price premium strikes me as either low or high, depending on the buyer. If the buyer is an OEM or Tier 1 supplier purchasing parts, this premium is probably a bargain. The various savings from having manufacturing close — reductions in shipping cost, warehousing cost, lead time and supply chain risk, among others — likely sum to a value beyond 20% of the unit price.
3. Manufacturing in China is subsidized to an unseen extent. In our podcast episode featuring Land Energy founder Scott Colosimo and his experience manufacturing in China, he describes loans that don’t have to be repaid and freedom from having to weigh profit margin. Our nation’s reliance on Chinese manufacturing is complicit with, or at least accepting of, this system.
4. If the buyer of a product is a lone consumer making an individual household purchase, then this is where the 20% premium of the survey cited above does seem to stretch the extra amount this person is likely to pay. Twenty percent means paying $59 for an otherwise $49 item. If the performance, promise and quality of the items are seen as likely to be equivalent, then I think it is a rare consumer who would not welcome the feeling of having scored a bargain in preference to consideration of where manufacturing is performed.
5. I do not see reshoring always or even usually taking the form of a decisive pullback. I know a quality manager for a company making an industrial product. Part of his job: He travels to China to assure production there follows the same quality procedures as production in the company’s U.S. site. Overseas delivery disruptions of recent years will not divert his company from continuing to rely on overseas production. However, the U.S. facility recently bought new machining capacity, and is investing in more. Providing for in-house capacity does not amount to reshoring in a decisive sense, but it does represent a readiness to begin reshoring to a limited extent, and to increase that extent as needed.
6. When there is a significant shift in production from overseas back to the U.S., frequently there are multiple reasons at once. The launch of a new product can provide a chance for fresh thinking about production, for example. Even when the consequences of a given manufacturing strategy are growing more difficult, the weight can still be carried and the emergencies can still be responded to — it is hard for a busy organization to see a moment to change. Some additional factor, such as a new product, new opportunity, new acquisition or leadership change, comes along to provide the moment.
7. Manufacturing in the U.S. is a social good in part because it brings manufacturing jobs to U.S. communities. However, it is too much to expect individual consumers to make effective choices on their own that advance this good. The situation is similar to the consumer making a commitment to recycling or sustainability. We can vote with our dollars to try to support the company practices we favor, but we generally do not have enough information to know how well companies adhere to their stated practices, or how far our dollars go in encouraging them to do so.
8. I expect the supply chain disruptions coming out of the COVID-19 period to have an impact for the next 20 years. In larger organizations, it was mid-career professionals who directly confronted the mess and the stress of components that could not be obtained when needed, along with the difficult choices and disappointing communications that had to made as a result, and the production schedules that had to be revised under a cloud of uncertainty. These people will advance in their careers, some of them will become executives overseeing these same organizations, and they will remember these experiences when it comes time to make their own choices about how production is sourced and where manufacturing occurs.
Peter Zelinski writes about manufacturing technology and how it is changing. Find more of his work related to CNC machining and additive manufacturing. To suggest an article topic related to a success in your manufacturing facility or business, or a technology development you are close to, email him here.
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