Are U.S. manufacturing sources an absolute necessity for American retailers today?

Discussion
Photo: Getty Images/ollo
Feb 05, 2021

According to a new survey, 65 percent of retailers established or expanded their local and domestic manufacturing sources in order to gain better control of their supply chain during the pandemic.

The research from Blue Yonder and Coresight Research from a survey of nearly 300 senior executives in manufacturing, retail and apparel taken in January found 41 percent expanded and 24 percent established local operations.

Asked what they hoped to achieve with a nearshoring strategy, the top answer was better quality control, cited by 34 percent, followed by shorter lead times (23 percent), better inventory management (22 percent) and matching product to local demand (14 percent).

In a statement, JoAnn Martin, VP, industry strategy and market development, Blue Yonder, said sourcing had been trending in this direction for years in recognition of America’s overreliance on offshore manufacturing. The pandemic, however, accelerated the need for more onshoring strategies to address future crises.

“Even before the pandemic, our customers were balancing their desire to deliver speed to market versus cost when establishing a presence in the U.S.,” said Ms. Martin. “This has largely been driven by e-commerce giants like Amazon, the advent of online shopping and the need for readily available choices, product assortment and inventory.”

Ms. Martin said last week at a webinar, a “lack of synchronization” caused supply chain disruption during the pandemic and increased the appeal of securing production “closer to the customer.” The benefits include being closer to just-in-time manufacturing, being able to react more quickly to trends, and reducing order sizes, eliminating inventory and markdown exposure.

Other reasons supporting a nearshoring strategy were found to be demand for American-made products and establishing a more environmentally sustainable business model. An accompanying survey found that, at least during the pandemic, only a small minority of consumers were making purchases based on U.S. production or sustainability.

A USA Today story from December detailed how manufacturers battling the U.S./China trade war in recent years and COVID-19 supply chain disruptions have sought to bring production back from overseas to Mexico or the U.S.

Tony Uphoff, president and CEO of Thomasnet.com, sourcing and supplier platform, told the paper, “The pandemic created a heightened awareness of supply chain risk.”

DISCUSSION QUESTIONS: Will the pandemic provide a long-term or a temporary boost to onshoring or nearshoring? Has the crisis offered any insights into the promised benefits and potential drawbacks of local production?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Even beyond the pandemic, one can build a strong economic case for goods sourced on or near shore."
"For me, “Made in America” matters not due to national hubris, but because it’s a healthier way to configure an economy."
"Retailers have for some time realized that the smart strategy is to have a mix of on- or near-shore and offshore supply."

Join the Discussion!

14 Comments on "Are U.S. manufacturing sources an absolute necessity for American retailers today?"


Sort by:   newest | oldest | most voted
Richard J. George, Ph.D.
BrainTrust

In the long term, sourcing will continue to be focused on on-shoring or near-shoring. Two real long-term benefits of this are: 1.) Shorter and better control of the supply chain and, 2.) Consumer preferences for products “Made in America.” No doubt there will be costs associated with the transition from foreign to U.S.-made goods. However even beyond the pandemic, one can build a strong economic case for goods sourced on or near shore.

Bob Amster
BrainTrust

Yes, and there are two reasons why. Every country realized when manufacturing plants stopped working temporarily, that they need to diversify the manufacturing sources so that they are not solely reliant on the source that may stop running, for any reason. The second reason is not new and that is that retailers in the U.S. need to shorten the time to market.

Christine Russo
BrainTrust

If it wasn’t already obvious, production sourcing is a never ending process. There is a zeitgeist effect. Decisions move in waves and can be driven by price, quality, governmental incentives, and even governmental marketing. A look back on production for the past 20 years will show waves of movement within China and to Vietnam, India, Ethiopia and more. Add the U.S. to the wave – whether it’s due to the pandemic or consumer sentiment – it is a retailer’s job to continuously seek production solutions. What is becoming clearer to many is that production sourcing is not a one and done decision.

Peter Charness
BrainTrust

Manufacturing went “global” because it offered lowest cost product to the consumer, presumably to acceptable quality standards. Post-pandemic (yes there will be such a time) with a large and unequal portion of consumers having lower disposable income, and the supply lines flowing properly again, one has to wonder — why wouldn’t manufacturing retrace it’s lowest cost of production steps? Some product may benefit from smaller quantity, local production with higher retail pricing, but globalization happened because it made economic sense and benefited the shopper.

Patricia Vekich Waldron
Staff

Supply chain agility, a concern for years, was pushed to the forefront by the pandemic. Speed, quality and the increasing desire for local, sustainable products pushed retailers to find nearby production sources.

Gene Detroyer
BrainTrust
It must have been in the ’80s, I was calling on Walmart and in the lobby was a huge map of the U.S. and some very patriotic signs. “Buy American” was the motto of the day. It was a huge PR effort propagated by the government. The results were nil and it soon died away. (BTW, Walmart also had buying offices around the world at the time.) In the end it is up to the consumer. Will the consumer choose an American TV over a foreign TV? (Oops, there are no American TVs.) Or how about the Nike and Asics sneakers I just bought? Hardly American made. Will the buyers of Barilla switch to Ronzoni? What about that Boeing plane where over 80 percent of the components are foreign made? From a more operational POV, the world is not decoupling. The global supply chain is so ingrained in business for pure business reasons. While we always think about consumer products as imports, the fact is 70 percent or more of imports aren’t in consumer products,… Read more »
Lisa Goller
BrainTrust

The pandemic exposed the long-term need for a mix of globalization and reshoring for supply chain resilience.

Relying on “the factory of the world” for production works — until a global pandemic shuts China down for months. The international ripple effect was devastating and proved the U.S. needs more options closer to home.

Domestic production would boost job growth and spread prosperity to communities in need of rejuvenation. Drawbacks of local production include higher costs. Reallocating some production to markets like Vietnam could keep labor costs low, yet the country lacks China’s capacity and scale.

RandyDandy
Guest
8 months 12 days ago
There is no denying that during the early months of the pandemic, especially as overseas plants had to close and shipping ceased temporarily, there was a sudden (and huge) awareness of our country’s too one-sided reliance on foreign goods and supplies. But aside from their loud proclamations, Lisa, I ask you and other experts to tell me which American companies were able to switch any external operations to internal ones? Partly or wholly? Effectively and efficiently? From my mainly consumer POV, all I witnessed were vastly reduced inventories of goods. Or, in the case of certain retail selections, a sort of “time stands still” of item choices staying very much the same for very much longer than usual. Perhaps if the actual global supply chain was still (god forbid) shut down, then American companies would be working on meaningful and lasting ways to make things on- or near-shore, and, maybe, we would see some evidence. But just expecting that domestic plants alone could make things as well and as economically as their overseas counterparts takes… Read more »
Lisa Goller
BrainTrust

All fair questions. Companies like Apple and Nike have had reshoring strategies since before the 2016 election and created U.S. manufacturing jobs since then. Now I, too, am interested in knowing how much the pandemic has sped up reshoring efforts, the percentage of total production moving back home and the long-term change in both productivity and costs.

Andrew Blatherwick
BrainTrust
Retailers have for some time realized that the smart strategy is to have a mix of on- or near-shore and offshore supply. This has certainly accelerated over the past year and a large proportion of the gain for local manufacturers will remain longer term. However retailers also need to protect margins and therefore a percentage of Far East production will remain. The best retailers with good supply chain optimization solutions can manage this mix very effectively, planning the offshore with longer lead times, larger minimum order quantities, less certainty in a crisis but with higher margins and using the near shore in the plan to provide flexibility, certainty and shorter lead times while usually at a lower margin. The bigger question is whether, given the recent Far East Trading Block agreement and the ever-increasing middle classes with spending power in China, India and other Far East countries, suppliers can mop up their local production to such an extent that the cost of their production matches that of local production and therefore removes the margin benefit… Read more »
Jim McElroy
Guest

The economic case for near- and on-shoring has improved as the dollar has weakened, and other offshore costs keep increasing. But I think the main lesson from the crisis (re-learned) is the need for supply chain diversification.

Meanwhile, we’re a manufacturer that sources most of our products overseas. Ironically, the only supply chain problems we’ve experienced have been inside the U.S., at ports of entry and with rail transportation.

Harley Feldman
BrainTrust

The pandemic will provide a long-term boost to anchoring and nearshoring as retailers seek to not have to deal with the long China supply chain during the pandemic. Insights offered into local production have come from retailers testing it out during the pandemic, including getting feedback on quality control, shorter lead times, and better inventory management. Many of these benefits will stick after the pandemic is over, from the lessons being learned.

James Tenser
BrainTrust

Mass retailing, mass marketing, and mass manufacturing have brought incredible access to consumer goods, but the system is ossified. The Paradox of Scale applies here: bigger, further, longer, less agile, and more vulnerable to catastrophe.

The COVID event has exposed the brittleness of this approach. As a matter of human economic security, it is imperative that makers and sellers pursue means of producing commodities and products closer to the points of consumption. This is true for crops, manufactured goods, and even energy.

Digital technology makes this decentralized-but-networked approach more attainable. Mass-localization also would make our global economic system more resilient and able to withstand adverse events or threats from rivals.

For me, “Made in America” matters not due to national hubris, but because it’s a healthier way to configure an economy. International trade and sourcing will never go away, but choosing scale over proximity isn’t always the best option for retailers or their customers.

Craig Sundstrom
Guest

I’m going to speak for the 8% (“nil to negative”) here: I just don’t see it. Cost continues to be the overriding factor in most manufacturing/purchasing matchups, and as long as it take 20¢ of labor (and 5¢ shipping) for an item that would cost $1.53 to make in the U.S., onshoring — much like the weather — will be the thing the everyone talks about, but no one does anything about.
That’s not to say there will be zero movement in this direction: there are always things where cost is no object, and as automation continues — relentlessly — labor will become ever less important, but tweaking, not a paradigm shift. What the pandemic really taught us was just the opposite: the world is even more interconnected than we realized.

wpDiscuz
Braintrust
"Even beyond the pandemic, one can build a strong economic case for goods sourced on or near shore."
"For me, “Made in America” matters not due to national hubris, but because it’s a healthier way to configure an economy."
"Retailers have for some time realized that the smart strategy is to have a mix of on- or near-shore and offshore supply."

Take Our Instant Poll

How much of a benefit will the pandemic provide to the trend toward onshoring or nearshoring?

View Results

Loading ... Loading ...