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Companies Once again Talking about Moving Sourcing from Asia – maybe this Time they Really Mean It

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Companies are bringing Back Manufacturing, moving Away from Outsourcing, in an Effort to Gain more Control

 
Nov. 2, 2021
SCDigest Editorial Staff
     

How many years has it been that surveys started to show a high percentages of companies planned to bring production back to US soil, or at least closer to home, such as Mexico.

Various events such as rapidly rising wages in China, or the Trump tariffs on hundreds of billions of dollars in Chinese imports, would cause another round of such predictions. Somewhere along the way, we even came up with a new word for it, “reshoring,” to capture the concept.

 

Supply Chain Digest Says...

 

Some are taking action. Home builder Pulte, for examples, is moving from offshore production of a variety of building materials to company owned US factories.

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The problem: it just never happened, with the allure of lower prices and the challenges of actually pulling sourcing out of China just too difficult to overcome for most companies.

While there were a small number of anecdotal examples of companies returning companies returning some production to the US, or reversing plans to offshore, the data tell the real story. US imports and trade deficits continue to rise. Just last week, the Commerce Dept. announced the US trade deficit in goods with the rest of the world in September reached an all-time monthly record of $96.3 billion.

While the tariffs appear to have at least temporarily reduce imports from China in some areas, most of that production went to countries such as Vietnam and Cambodia. US manufacturing output has been flat at best in recent years, with current output below baseline 2012 levels now almost 10 years later, according to the monthly Manufacturing Index from the Federal Reserve Bank.

But now, after more than a year of disruptions and shortages of about everything, changes in traditional supply chain thinking are once again being tossed around – maybe this time they will mean it.

Take Apple – while it had a strong Q3, as announced last week, CEO Tim Cook said the company lost about $6 billion in sales due to the now famous chip shortage and COVID outbreaks that slowed production in parts of Asia.

“With the machinery of international trade slowed, business leaders are ditching, at least temporarily, overseas partners and the conventional wisdom of the global economy in favor of reliability, even if it costs more,” an article this week in the Wall Street Journal said.

That includes moving workers and factories closer to home and relocating plants closer to suppliers. But it can also mean acquiring suppliers or bringing formerly outsourced production in house.

The goal: achieving great control in a highly variable world.


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CATEGORY SPONSOR: SOFTEON

 

 

Ellen Kullman, CEO OF 3D printing company Carbon Inc. and a former DuPont CEO, told the Journal that a growing number of companies are “realizing, right now, they’re losing business because they’re kind of stuck with a very long, very efficient - but very inflexible - supply chain.”

But as noted above, we’ve heard this refrain before – will the words really turn into action this time? The Journal article notes that some believe this current supply chain scenario will pass before long, discouraging companies from substantially changing strategies or networks.

But some are taking action. Home builder Pulte, for examples, is moving from offshore production of a variety of building materials to company owned US factories.

CEO Ryan Marshall told the Journal that “You’re in a bit more control of your destiny” by having your own facilities. The company has one existing US plant, is constructing another, and plans to build six to eight additional US factories in coming years.

Bartesian, a Chicago startup that makes a countertop cocktail machine, built a factory in Chicago after deciding against an all China sourcing strategy for its drink capsules.

Costs per capsule costs more than for those made in China, but “We’ve learned that we need to have control,” Bartesian CEO Ryan Close says. “We can’t be at the mercy of our suppliers.”

So will examples such Bartesian and Pulte become commonplace – or will all the talk about changing strategies and reshoring be just that in the end?

We just know one thing – if it doesn’t show up in the numbers, with lower import levels and an increase in US manufacturing output – then it was wishful thinking once again.

Will sourcing and supply chain strategies really change this time? Let us know your thoughts at the Feedback section below.


 
 

 

 

 

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