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


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.”
- Blue Yonder, Coresight Research Finds 65 percent of Retailers Established or Expanded Domestic Manufacturing Due to COVID-19 – Blue Yonder/Business Wire
- USA Today: American manufacturers pine for home as COVID disruptions, Trump tariffs shake up supplies – USA Today
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?
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14 Comments on "Are U.S. manufacturing sources an absolute necessity for American retailers today?"
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Professor of Food Marketing, Haub School of Business, Saint Joseph's University
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.
Principal, Retail Technology Group
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.
Principal, Retail Creative and Consulting Agency
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.
Retail Strategy - UST Global
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.
Contributing Editor, RetailWire; Founder and CEO, Vision First
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.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Content Marketing Strategist
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.
Content Marketing Strategist
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.
Chairman Emeritus, Relex Solutions
VP Sales, I-Drink Products
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.
Co-Founder and CMO, Seeonic, Inc.
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.
Retail Tech Marketing Strategist | B2B Expert Storytelling™ Guru | President, VSN Media LLC
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.
CFO, Weisner Steel
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.