When Rosemary Coates, CEO of the nonprofit Reshoring Institute, worked as a supply chain consultant for large companies in the 1990s and early 2000s, CEOs would invite her into their offices and say, “Just take me to China.”
“We know it’s cheaper. Our competitors are doing it. That’s what we have to do. Let’s just go to China,” Coates said. Summit of women in production In Chicago On October 13. “There wasn’t a lot of thought put into it. Some may have been financial analysis, but overall, it was just forward strategy.”
Cut to the 2012 election, preceded by then-President Barack Obama and presidential candidate Mitt Romney. China’s business practices were discussed and bringing jobs back to the United States, orgrab“
“They were both saying, ‘It’s all China’s fault,'” Coates said. The economy is all down because of China. “That’s what I was doing for a living, outsourcing, closing factories and plants in the U.S. and moving all that production to China.”
Then in the debate the executives talked about the potential for revitalization and asked, “Is it even possible to bring production back? Can we do it?”
Coates then decided to focus on helping to rebuild, reevaluate and find ways to bring manufacturing back to the United States by founding the Reshoring Institute in 2014.
So can manufacturing make a comeback?
The answer is yes and no, Coates said.
“Prepare yourself. [Change is] “If it’s not here already, I will,” Coates said. And you have to learn to be flexible and accept that and look to the future.”
Mexico as an alternative
Earlier this year, Reshoring The institution was interviewed 18 C-suite level executives from various industries across the United States on how they are reacting to the tariffs.
The responses were pretty consistent, Coates said. Overall, they would not make any capital investments and hire until the global business environment stabilized, he added.
Additionally, nearly all of the CEOs said they would prefer to manufacture and source products in the U.S. — if they could make the economics work. – and realized that they were going to raise prices to pass the cost of the tariff on to consumers. In addition, most executives surveyed said they are rethinking their global manufacturing strategy.
The Reshoring Institute helps clients assess 15 different aspects of where production is located, such as global politics, global risks, tariffs, trade wars and advances in technology, Coates said.
In general, companies consider a China strategy plus one or twomaintaining operations in China as well as diversifying into other countries, such as Mexico or the U.S. All executives the Reshoring Institute spoke with said they were considering Mexico as a possibility. China has even set up factories in Mexico to export products duty-free, according to an agreement between the US, Mexico and Canada.
In addition, labor is cheaper, sometimes even compared to China, according to the Reshoring Institute Wages and labor report in Mexico. For example, wages in San Diego average $17.25 per hour, while wages in Tijuana, Mexico, are hourly. $2.59 an hour
“We’re seeing a lot of companies moving out of China and into Mexico, especially if they’re in that cost profile,” Coates said.
Complex construction
According to Coates, the United States is not bringing back some of the types of manufacturing done in other countries, such as Vietnam, where workers might sit on a plastic stool for 10 hours a day, six days a week, assembling a shoe.
“It’s just not culturally what we do in America,” Coates said. “Our production here is much more sophisticated. It’s cleaner, it’s less hours, it’s just different in general. It’s a different approach.”
Coates said there is an extreme intention and CEOs desire to bring manufacturing back to the US, but “it has to make economic sense.”
This means implementing robotics, 3D printing, [artificial intelligence] Used in floor sequencing with chips that help arrange machines on the factory floor. [manufacturing execution] “The systems, all these ideas are much more complex in production than they were 25 years ago,” Coates said.
But it also means dealing with the skills shortages in the current workforce.
I have been saying for a long time, we do not have a labor shortage [have a] “We need to force more of these projects into community colleges, more programs to train skilled workers, get more welders, get more electricians, get more people working robots,” Coates said.
Other factors that the United States lacks
In addition to the skills shortage, the U.S. lacks the factory infrastructure, Coates said.
“We don’t have thousands and thousands of factories to set up this kind of manufacturing in America,” he said. “We don’t have the roads and bridges and ports and other infrastructure needed to support production, while you can shut down a factory in the middle of nowhere, but there’s no way around that.”
Coates added that it takes three days for a company to drive to a port that is not convenient enough to export its goods.
Additionally, the US power grid cannot support the facilities.
“Not that we can’t build it in 10 or 15 years, but it’s not here today,” he said. “So here we are forcing this discussion about reshoring.”
What products can be considered for reshoring?
The Reshoring Institute provides its customers with a fixed bill of materials and splits the costs of manufacturing a product as well as packaging materials. If the costs are more than 50%, the nonprofit says the product should not be manufactured in the United States.
“You can’t make a case for that unless you’re a very small factory with 20 people,” Coates says. “But on a large scale, if you put a lot of work into the product you’re building, that doesn’t happen here.”
If companies have a product that doesn’t require a lot of labor, they can turn to automation, machinery and reengineering processes, he said.
For example, shoes and small electronics require significant labor, forcing companies to seek low-cost labor environments. In contrast, textile factories have only machinery and one or two engineers to oversee the equipment, Coates said.
“As a result, you can set up a textile factory in many different places around the world,” Coates added. “So what we want to bring back to the U.S. is more complex manufacturing” that requires different skills.
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