In recent years, there has been a slow but steady trend to bringing manufacturing back to America from cheaper options overseas. In the latter part of the 20th century, with the expansion of free trade agreements and rising labor costs in the United States, companies made a huge push to close domestic factories and shift production to Asia in search of less expensive labor.
There are several reasons for the recent push to “reshore” manufacturing rather than produce products offshore. As American jobs have been lost to factories overseas, there is demand for those jobs to be brought back to the United States. The spotlight on unfair labor practices and sweatshops has called attention to establishing fair and ethical standards for labor. As seen most recently in the catastrophic garment factory collapse in Bangladesh in 2013, there are fatal consequences for ignoring fair labor practices. Additionally, disillusioned with the poor quality standards that have been associated with “Made in China” products, Americans have begun to seek higher quality goods that are made with intention and longevity in mind.
Online shops such as Etsy and CustomMade have become popular sources of products made by individuals and small companies. Often times, these pop up shops are started as side projects or sources of additional income for those who have turned their hobbies into revenue. By utilizing these skills, makers can offer wares such as clothing, small-batch grooming products, and handmade furniture. The marketplace has not only made thousands of people into small business owners, it has become the de-facto resource for handmade products that are made by individuals.
Similarly, the website CustomMade.com is an online marketplace that connects customers with artisans who produce furniture, jewelry, and other items customized to the purchaser. Acting as a hub for conscious consumers, individual craftsmen can produce personalized products for customers – makers that wouldn’t normally have an outlet to sell their products in a scalable way.
As these online marketplaces have shown the growing demand and trends toward domestically produced, artisanal products, larger brands are taking notice and making their own movements towards producing products in America.
How Larger Companies Can Take Advantage of This Trend
General Electric Builds New Factories
General Electric, behemoth maker of nearly every product imaginable, has led the movement in bucking the trend of closing American factories and instead has invested heavily in building a new one – spending $800 million to build a new water heater factory at its compound Appliance Park in Louisville, KY. As the first factory built at the park in 50 years, its part of GE’s commitment to create 1,300 new jobs in the U.S. by the end of 2014.
General Electric’s decision to invest domestically isn’t just one of compassion for the loss of U.S. jobs – it makes financial sense for the company. Coupling the sharply rising cost of Chinese labor (wages in China are rising 15 to 20 percent annually) and higher transportation costs associated with manufacturing products thousands of miles away, it makes less and less sense to produce products abroad. In fact, the new water heaters produced at the Kentucky plant are less expensive than other models being produced abroad. Why? Because the manufacturing jobs and engineering jobs work together in tandem on location, the product can be developed with less waste and more efficiency – leading to a shorter product development lifecycle with more of the expenditures going into the materials rather than costly trial and error.
Walmart’s American Made Fund
As part of a $50 billion commitment over a 10-year period, Walmart has been at the forefront of nationwide chains committed to increasing the share of American made products at their store. In addition to buying goods produced here already, the company is helping vendors bring production back to the U.S. that currently have production overseas. Walmart has also set aside grants to encourage new manufacturing projects in the United States. They’re showing that you don’t have to sacrifice affordable prices at the expense of sourcing products manufactured domestically – even in the midst of increasing competition and uncertainty in the economy. As the CEO of Walmart, William Simon stated recently, it’s “as competitive of a market as we’ve ever seen.” Contrary to popular belief, though, American manufacturing doesn’t necessarily have to cost more than overseas production.
Making – and Buying – American Made Makes Sense Financially
When engineers, skilled labors, and customers are all in the U.S., there’s a shorter supply chain – which means greater efficiency and reduced costs of production.
Domestic manufacturing is also more sustainable because it minimizes over production, a large source of waste. By manufacturing leaner, waste reduction saves significant amounts of money in labor and energy usage. (The Guardian).
Based on projections in the continuing rise in cost of Chinese labor and rising transport costs, by 2015 it will cost the same to manufacture certain goods in the U.S. as it would in China, in industries like electronics, machinery, appliances, and furniture (The Economist). The rebirth of American manufacturing shows no signs of slowing down. The Boston Consulting Group estimates that by 2020, 2.5 to 5 million new manufacturing jobs will be created in the United States. As hubs for artisans like Etsy has shown, there is demonstrated interest in choosing products that are made by skilled makers here in the U.S. It’s up to bigger retailers to follow suit and stay relevant with the inevitable trend.