More than a year after the CCP (Chinese Communist Party) virus entered the scene, manufacturers are dealing with a very different world and supply chain. As they battle ongoing disruptions, congested ports, and ongoing delays, the idea of sourcing closer to home is gaining interest.
“There’s such an initiative now for the reshoring,” says Nicole Wolter, president and CEO at HM Manufacturing, a power transmission components facility in Wauconda, Illinois, that focuses on delivering custom precision timing belt pulleys, gears, splines, sheaves, and shafts.
“I’ve seen a lot of my customers start to do things more internally,” she told NTD Business.
Moving operations to the United States provides the opportunity to reduce supply chain risks.
“By shortening the supply chain, and producing products in the United States, you’re removing the possibility of goods being stuck overseas or even at our own ports,” according to Steven Vigilante, the head of new business development for OLIPOP, a soda with microbiome and digestive health support.
“We may still be facing labor shortages, but at least we can eliminate some of the broken links in the chain by keeping production stateside,” he said.
A careful weighing of the current costs involved with domestic production can help guide decisions for manufacturers.
“While producing goods overseas used to be cost-effective, that’s not necessarily the case anymore,” Vigilante said. “In recent years, the costs of labor, energy, transportation, and materials have skyrocketed.”
As a result, the perceived savings of manufacturing abroad isn’t always a reality.
“By reshoring your production, you’re eliminating the need to overproduce inventory in anticipation of long lead times,” Vigilante said. “You’re less likely to have dead stock, so your cost to your consumers doesn’t have to go up, just because you decide to move production stateside.”
OLIPOP produces its sodas domestically and, as a result, hasn’t been affected by the global supply chain crisis. The benefits of this domestic arrangement include “reduced shipping costs, faster fulfillment times, easier communication, and greater quality control overall,” Vigilante said.
Still, for those who want to produce locally, the steps to make it happen aren’t always easy—or even possible.
“Supply chains in the United States are not what they used to be,” Howard Gordon, co-founder of CustomPlasticPart, a startup offering AI quotation services to manufacturers, told The Epoch Times.
Due to the specialization of many products, companies might struggle to find a local supplier that can make what they need at a price point they can fit into their operating budget.
“Many industries won’t have another choice than sourcing overseas,” Gordon said.
Case in point: Consider the production requirements of a computer mouse with a cable. In simple terms, the parts consist of an outer plastic case, a mouse wheel, a circuit board, and an optical sensor.
“Making molds for the plastic case and the mouse wheel allows you to manufacture those in the United States without any issues,” Gordon said. “The investment cost is not that high and there are plenty of custom molders available that can run these parts for you.”
For a computer mouse and cable, the obstacles of local production involve sourcing the circuit board and optical sensor.
“There is no industry in the United States for rather simple electronic components like these, especially not at a competitive price,” Gordon said. “Eventually, you have to turn back to China to source those two components.”
The final assembly and packaging can be carried out within the United States, though it may increase the final price that consumers pay.
China and other countries with vast industrial clusters cater to different industries and serve particular niches. To build the equivalent in the United States isn’t a process that can be carried out quickly. It will require time, investment, and an understanding of logistics.
“What would help the U.S. manufacturing industry is a general awareness of customers,” Gordon said.
If consumers become more knowledgeable of where and how the goods that they are purchasing are being produced, there may be a greater interest in buying locally.
“Additionally, there must be more policies to support smaller manufacturers in order for them to invest in automation to become more competitive,” Gordon said.
Labor costs in the United States tend to be higher than in other countries, making it tough to keep prices low. This issue only increases as companies offer more benefits with the goal of attracting workers, including higher wages.
With the right moves, the near- and long-term future could bring more domestic manufacturing and with it, greater job opportunities.
“COVID was absolutely horrific for a lot of people and for a lot of businesses,” Wolter said.
The situation, however, does often lead to an evaluation of a company’s strengths and weaknesses.
Wolter continued, “If we can start keeping manufacturing in the United States and start offering more jobs, which is going to be helpful for the community, helpful for the middle class, helpful for people that want skills and have a great paying job, this is where it’s needed.”