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.

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.

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.

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.

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 »

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.

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 »

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.

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.