As COVID-induced lockdowns in China snap the links of global suppliers, US manufactures are benefitting from growing ‘Made in USA’ sentiment among consumers. Established in 1992, New Jersey-based Unionwear saw a rapid surge in business this year. With 100 per cent local supply chain, the manufacturer of customized baseball hats, scarves and backpacks, the company witnessed a surge in buyers no longer able to import goods due to lockdown.
About 70 per cent respondents to a survey by the Reshoring Institute showed preference for US-made products over imported goods; 83 per cent are willing to pay over 20 per cent more for locally-made products.
Realizing the benefits of nearshoring
As per information on BR Logistic website, container rates for China-US routes have surged almost three times of the pre-pandemic rates to about $18,000 per 40-foot container. Oil prices have also increased due to the Ukraine-Russia conflict, leading to sharp rise in shipping costs. However, localized manufacturing is helping Unionwear sell products at competitive rates. Before pandemic, baseball caps would cost about 40 per cent more than products imported from China. Currently, they are being sold at $10 per unit in wholesale.
Bigger companies in the US are also realizing the benefits of nearshoring as a more secure and reliable option for manufacturing, says a April report by Thomasnet.com.
Meanwhile some non-resident companies also aim to step up investments in the US. South Korea-based Samsung Corporation plans to invest $17 billion to set up a new facility in Texas for producing advanced semiconductors. To be operational in late 2024, the facility would stabilize global semiconductor supply chain. Released in 2022, the Kearney Reshoring Index shows, 79 per cent manufacturers based in China have either shifted a part of their production to the US or plan to do so in the next three years, and another 15 per cent are planning to follow suit.
Reshoring to make supply more sustainable and carbon-neutral
Meanwhile re-shoring trend in the US has intensified due to the tariffs imposed by Trump government on Chinese imports, says William Reinsch, Industry Expert - International Trade, Center for Strategic and International Studies. Bringing these companies back to the US would help them shorten supply chains, making them more resilient to natural and manmade disasters, explains Nick Vyas, Associate Professor -Operations and Supply Chain Expert, University of Southern California Marshall School of Business.
A domestic supply chain also helps make US companies more sustainable and carbon neutral. He advises companies to adopt the triple bottom-line mindset that also takes into account a company’s resiliency and sustainability besides costs. US companies also need to strengthen relationships with suppliers in the Caribbean, South America and Canada in order to become insulated from rising production costs, Vyas affirms.