Why You Should Consider Moving Manufacturing Back to The USAAugust 3, 2022 - 12 minutes read
What you need to know about migrating your operations.
As an eCommerce or retail business owner, you might outsource your manufacturing or import goods from overseas.
For many years, China has been the world’s manufacturing superpower. But things are starting to shift due to a mix of socioeconomic changes.
From recessions and material costs to politics and the pandemic, manufacturing in China is no longer as attractive as it once was.
To save costs and take control of their goods and services, many retailers are choosing to bring their manufacturing operations back to the USA.
Here, we explore the reasons eCommerce and retail companies are moving manufacturing back to the United States while considering some of the benefits.
From China to the USA: A seismic shift in motion
While brands and businesses aren’t moving manufacturing back to the US in their masses, there is a notable shift happening. A steady but rising number of American companies are choosing to do their manufacturing back in the United States. Let’s consider two key factors in this head-turning shift.
The ‘Trump’ impact
This fact is often overlooked, but the Trump Administration has some sway in enticing American businesses back to US shores.
In addition to tax cuts and deregulation initiatives, Trump’s trade dispute with China placed heavy tariffs on US goods. Rising costs and political friction have seen a number of American companies jump ship in recent years.
Speaking to Bangor Daily News on the subject, Michael Araten, chief executive of Sterling Drive Ventures, explained:
“All of a sudden, the stuff you thought you were saving on overseas, you’re not saving. I saw this happen in the Great Recession: There’s a shock to the economic system that causes people to really look at their total cost of ownership.”
A simple case of geography
When the pandemic stopped the world in its tracks, the prospect of having their main manufacturing sources thousands of miles away made a more domestic situation seem incredibly attractive for many American companies.
Couple this with the fact that when outsourcing manufacturing to China, companies face supply chain risks (logistical disruptions, shipping inefficiencies, and security breaches, among others)—and bringing manufacturing back to US shores appears to be the way forward.
Reasons to consider moving manufacturing to the USA
Now that we’ve outlined the key motivations for businesses bringing manufacturing to the US, let’s explore the potential benefits in more detail.
Moral and environmental issues
When you’re an eCommerce or retail business owner, maintaining a glowing brand image or reputation is vital.
One of the most pressing reasons to move manufacturing back to the USA is social responsibility. Exploitation in the form of cheap labor, coupled with environmental impacts (China is renowned for being one of the planet’s biggest polluters), is placing many American businesses that use China for their manufacturing needs in the social media hot seat.
Many companies are receiving a backlash for investing in Chinese manufacturing setups, facing colossal reputational damage in the process. By bringing your manufacturing back to the USA, you will make your business a greener, fairer enterprise.
In an age where consumers can access information at the swipe of a screen or the click of a button, it’s never been more important to showcase your commitment to equality and environmental issues (plus, it’s the right thing to do). Changing your manufacturing setup is a huge step in the right direction.
Autonomy & control
Another big factor in the resurgence of reshoring is the ability to take greater charge of operational outcomes.
Droves of American retail businesses have experienced quality issues with their products, suffering financial losses in the process. Outsourcing manufacturing to China has also played into the often strained US economy.
Bringing manufacturing back to the USA will create new jobs, which will have a positive impact on your local economy. Having tangible access to your manufacturing processes will also ensure consistently high quality while giving you more autonomy over the processes and materials you use to make your products.
Reshoring your manufacturing operations will ultimately give you a greater grip over your commercial destiny, granting you the power to grow your business in a way that aligns with your goals.
Did you know? Intellectual property (IP) theft is a big issue with Chinese manufacturing. Many American companies have lost enormous portions of their market shares as a result of consumers buying poor (cheaply made and less functional) versions of their products.
Bringing manufacturing back to the US will help combat this increasingly pressing issue and ensure quality and authenticity prevail.
Long-term returns & rewards
In some retail or eCommerce sectors, such as clothing or footwear (which are particularly labor-intensive), many brands are reluctant to move their manufacturing operations back to US shores due to higher worker costs.
But the concept of “local-to-local” is getting stronger in the US. Sporting apparel colossus Under Armour, for example, decided to make its operation homegrown by opening a Baltimore-based Manufacturing Innovation Center in 2016—a move that proved wise.
Since then, other retail businesses have followed the trend, enjoying greater levels of internal engagement and productivity.
While labor costs may be higher in the US, when you consider the quality control, material, and supply chain issues we’ve discussed, moving your manufacturing operations will be a far better investment in the long run.
We live in a tech-driven digital age where autonomous technologies exist to make manufacturing processes more fluent, productive, and scalable. As these innovations become increasingly accessible to retail businesses, it’s likely that droves of American businesses will start moving their manufacturing operations back to US soil.
Carving the right path
The influence of the US and China trade war has seen some of America’s biggest names migrate their manufacturing setups back to US shores.
In addition to Under Armour, the likes of General Motors, Walmart, and Intel are moving their operations back to America. And many more big businesses (including those in retail and eCommerce) are planning to follow suit within the next two to three years.
Did you know? In January 2022, General Motors announced its plans to spend $7 billion on four new plants in Michigan. In 2021, the firm invested nearly $40 billion into buying parts from around 5,600 US suppliers.
Being caught in the midst of international trade disputes and uncontrollable supply chain issues stunts progress.
If you want to bypass the majority of these geographical, political, and logistical issues, moving your manufacturing operations back to the US is a strategic decision to consider.
Take Walmart, for instance. The US retail brand was pivotal in the initial trend to buy Chinese manufactured goods. Sourcing goods manufactured using an underpaid labor force and selling goods to US consumers at low prices formed the basis for the brand’s business model—a strategy that put many independent American retailers out of business (they simply couldn’t compete).
In a striking U-turn, Walmart is now on a mission to bring labor-heavy manufacturing jobs within the clothing, textile, and consumer goods back to the US. The retail machine is currently working to promote the manufacturing move back to US soil—it has also pledged to support American producers by buying domestically made products to the total value of $250 billion by 2023.
This turning tide is a testament to the fact that moving manufacturing back to the US is the way to carve the right path for your retail or eCommerce business. Gaining control is paramount to leading your brand down the right path. As your products are integral to your business, ensuring they are produced and sourced as ethically and efficiently as possible is vital.
Moving your manufacturing back to the US is certainly something to consider. While outsourcing to China was once an attractive strategy, it’s now a long-term investment that appears less appealing.
If you move your manufacturing back to the US, you will support an economy in which your business lives. You will be able to eliminate costly international supply chain snags from your operations while driving down the economic threat of intellectual property theft. You will also play a part in making your local and national economy more balanced and buoyant.
Shifting back to US soil has the potential to make your commercial future as a retail or eCommerce business brighter and more prosperous. Consider your move carefully, and you could make your business greater than you ever thought possible.
We wish you the best of luck! And for more inspirational advice on winning on the commercial battlefield, read our essential guide on how to open a successful retail store in 2022.