There are no patriotic reasons behind the ongoing wave of reshoring, although many politicians are trying to navigate this wave today. The reason why so many companies—including Apple, Ford, Caterpillar, General Electric, Intel and others—have reshored some production plants back to their home country is primarily because they wanted to be closer to their customers. The increase in labor cost in traditional low-cost countries like China, combined with the emergence of new automation technologies, is making reshoring a viable option today.
Changing Manufacturing Footprint Strategies
Over the past few years, the approach to manufacturing footprint strategies has changed dramatically. Companies are moving from a strategy essentially driven by low-cost labor arbitrage to one driven by the needs of improving customer fulfilment through more agility and responsiveness. More than half of SCM World’s community members tell us they are planning to reshore at least some of their production capacity.
One of our members—Under Armour, a U.S. supplier of sportswear and casual apparel—has recently unveiled its reshoring strategies aiming to manufacture apparel and footwear back in the United States. The company is currently staffing a new advanced manufacturing innovation facility near the company’s Baltimore corporate headquarters to investigate new production technologies and develop a new manufacturing model that would make this possible. Under Armour believes that “local-for-local manufacturing drives growth with better products and a more efficient supply chain.”
Bringing the labor-intensive apparel and footwear industry back to the U.S. is also at the top of Walmart’s agenda. Last January, the company’s U.S. Manufacturing Innovation Fund awarded $2.8 million to five universities for their ability to address two key barriers to increased domestic manufacturing: first, to reduce the cost of textile production, and second, to improve common manufacturing processes with broad application to many types of consumer products.
Walmart’s U.S. Manufacturing Innovation Fund was launched in 2013 as the company’s long-term strategy to help revitalize U.S. manufacturing through a commitment to buy an additional $250 billion in products that support U.S. jobs by 2023. Based on Walmart’s research and surveys of its customers, the company found that “Made in USA” is a strong driver of purchase decisions, second only to price. Products across all categories are, in fact, perceived to have higher quality if made in the U.S.
