From quicker turnaround times to greater control over the manufacturing process, many companies are starting to see the benefits of keeping production close to home.
A growing number of manufacturers are finding it essential to locate their facilities closer to end users. Manufacturers are finding that having production centers close to the market base reduces lead times and improves their agility.
Known as near-shoring – or new-shoring – it occurs when U.S. or foreign manufacturers prototype and make small numbers of a new product in America. They do so for a host of reasons but chiefly because it reduces the chance of idea theft, allows manufacturers the ability to fix initial problems quicker and gives them greater control of the production process. All of these goals are difficult to achieve if the product is made overseas – and more companies are starting to realize it.
If the item is a success on a small scale, production often is ramped up in America. And that is because the end-user market is in America. Near-shoring slashes shipping delivery costs for manufacturers and boosts a quicker turnaround to the customer. It also fosters pride in products that are made in America, which can be a selling point for consumers.
All of this is made possible with the growth of near-shoring in American manufacturing.
“It’s definitely the new trend, there’s no question about it,” said Jack Pfunder, president and CEO of Manufacturers Resource Center in Hanover Township, Lehigh County. “I think people have found that manufacturing needs to be more agile. If you can do your manufacturing closer to home you can be more receptive to your customer’s needs.”
Pfunder said he sees near-shoring occurring more frequently in the region, pointing to two recent examples of company growth. German-based B. Braun Medical Inc. is expanding its manufacturing facility on Marcon Boulevard in Hanover Township, Lehigh County, and Fuling Plastics, a Chinese manufacturer, is experiencing strong growth since beginning production in its Upper Macungie Township facility last year.
The Chinese-based company makes plastic tableware, mainly for the fast food industry, which has a significant base throughout the nation.
Overall, near-shoring will continue to take hold throughout the Greater Lehigh Valley.
“I think the Valley is very strong,” Pfunder said. “It’s not only opening up, it’s growing. They are doing automation, but they want to keep it here. Location is important, but you also have a good workforce.”
In northeastern Pennsylvania, foreign corporations are setting up operations for production/manufacturing, or near-shoring, and therefore seeing less overseas production, said Darlene Robbins, president of the Northeast Pennsylvania Manufacturers & Employers Association in Pottsville. The association represents businesses in 18 counties, including Berks, Carbon, Lehigh, Monroe, Montgomery, Northampton and Schuylkill.
“If Congress is successful in comprehensive tax reform, our manufacturers will be given an even playing field, and manufacturers would prefer to support their own economies,” Robbins said. “Businesses are trying to be more responsive to customer demand variations, so having manufacturing closer to the end customer helps in that regard.”
If business is growing in a particular region, companies look to set up manufacturing and support there, she said, to be more responsive to the customer.
“The American manufacturing mindset is changing, and more companies are focusing their efforts on near-shoring as well as reshoring in order to gain the benefits of better, faster order fulfillment and product quality,” Robbins said.
The trend is reflected in the explosive growth of e-commerce. Much as consumers want products stored in warehouses shipped to their homes faster than ever before, demand is shifting to manufacturers to make these products quicker, without sacrificing quality.
Manufacturers close to where their products will not only be shipped but delivered are at an advantage. Furthermore, manufacturers are finding the Greater Lehigh Valley is ideal for distribution – near major markets, ports and airports and with excellent access to interstates and highways.
Robbins also noted a trend toward reshoring, when manufacturers return production operations to the U.S. after being overseas.
“It is unlikely every [overseas] factory of a U.S.-based manufacturer will return them all to the United States …,” Robbins said. “But many U.S. companies are redoubling their efforts in this venture of near-shoring and reshoring so they can get the benefits of lower shipping costs and increased quality.”
Another benefit of production on American soil is the reduction of idea theft.
For U.S.-based manufacturers, it’s easier to closely monitor their product and control who sees it and who works on it, a task that’s much harder to do if production is in another country.
With unseen eyes and hands involved in the production, there’s a greater chance a manufacturer’s creation could be stolen.
Also, other nations might not have the patent protection and its enforcement that are enjoyed in America, meaning it could be fair game to copy ideas and concepts in other nations.
In addition, a consumer trend to “Buy USA” is gaining traction as more people are paying attention to where products are made.
They know that made in America keeps jobs here and boosts the economy.
Manufacturers are noticing this patriotism, and not just as a marketing tactic to consumers. Making products in America also can promote good will among other businesses, including suppliers and clients in the region.
Near-shoring growth could continue throughout Pennsylvania if the state government takes steps to support it, according to David N. Taylor, president of the Pennsylvania Manufacturers Association, a Harrisburg-based trade organization.
“[If they] adopt a pro-growth policy in Harrisburg, we can see the growth the high-performing states enjoy,” Taylor said. “We need to benchmark ourselves against high-performing states; there are tremendous advantages we have, and we just have to take advantage of them.”
Pennsylvania has the benefit of locating manufacturing facilities close to customers because it is close to the Midwest, the southern states and New York and New Jersey, Taylor said. The problem has been that Pennsylvania often gets a lot of logistics jobs but not as many manufacturing jobs.
While Pennsylvania’s location and natural resources are inherent benefits, state government has many issues, such as taxes, government spending, workforce readiness and regulatory compliance that thwart this potential for manufacturing growth, Taylor said.
