Table Of Contents
Key Points
- Lower material costs, lower labor costs, and easier access to mass production make overseas manufacturing an attractive option.
- There are many complications that come with doing business overseas.
- Investing in domestic manufacturing brings a host of benefits that are more evident after navigating the supply chain disruption due to the COVID pandemic.
For decades, American manufacturing companies have shuffled their operations overseas to a variety of countries, for a myriad of reasons. Lower material costs, lower labor costs, and easier access to mass production are among the top reasons.
While these benefits sound enticing, there are a host of complications that come with doing business overseas.
Before COVID struck, supply chain bottlenecks were obvious around the world. War, natural disasters, and poor (or entirely lacking) labor standards all have impacted the global supply chain leaving businesses scrambling to navigate the repercussions.
C-suite focus is now shifting from heavily focusing on throughput and cost, to reshoring efforts in order to take control of their supply chain and mitigate risk. American businesses are beginning to truly understand the benefit of localized production.
Investing in domestic manufacturing is the future of production. Read on; we’ll cover a few of the key considerations of investing in domestic manufacturing.
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Buy American
With $600 billion in annual federal procurement for goods and services alone, the federal government will be investing a significant amount of money within the walls of the United States.
In January of 2021, President Biden signed executive order 14005, “Ensuring the Future is Made in All of America by All of America’s Workers.” Commonly known as ‘Buy American’, E.O. 14005 is an attempt to strengthen the use of federal procurement to support American manufacturing. What does this mean exactly?
It requires that a certain percentage of goods purchased with taxpayer money be purchased domestically. As of October 2022, that percentage requirement is 60% (up from 55%). In 2024, it will increase again to 65%, and in 2029 it will reach 75%. This lofty injection of spending will be sure to aggressively support domestic manufacturing for the long run.
Meeting Demands with a Skilled Workforce
With an increase in the amount of domestic procurement through Buy American, how will the industry meet the increased demand?
One of the ways the industry could meet the demand is through reshoring. The mission of the Reshoring Initiative® is to bring good, well-paying manufacturing jobs back to the United States by assisting companies to more accurately assess their total cost of offshoring, and shift collective thinking from “offshoring is cheaper” to “local reduces the total cost of ownership”.
Harry Moser, Founder and President of the Reshoring Institute estimates the potential total manufacturing jobs that could be brought back to America is approximately 5 million jobs. This is a welcomed statistic given the number of layoffs due to the COVID pandemic.
As an essential industry, the stability of a job in manufacturing is unlike any other. Manufacturing is critical to the country’s national security and the wellbeing of our people. As a leading manufacturing company, it is our responsibility to invest in presenting manufacturing in a positive light and to show that it isn’t the dirt floor operations of 50 years ago, making it an attractive career choice for future generations.
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Benefits of Domestic Manufacturing
Domestic manufacturing comes with a slew of highly attractive benefits which make investing in it that much more appealing. Here, we’ll cover a few of the most impactful.
Faster Turnaround
The one thing that many customers have their eye on is turnaround time. The pandemic showed us that any hiccough along the supply chain pathway can lead to manufacturing disruption. When the world was waiting on respirators and personal protection equipment, the delays impacted more than just customers’ wallets–lives were quite literally at stake. With control over domestic manufacturing, businesses are better able to navigate disruptions and delays through localized supply chains.
Higher Quality
Returning production to American soil means businesses will have more control over their production lines, which often translates to a higher quality product. The cost of poor quality can be catastrophic to a business, both as it relates to their bottom line and their reputation.
Reduced Shipping Cost
Shipping costs have long been a necessary, but negative, aspect of offshore manufacturing. Investing in domestic manufacturing directly reduces costs associated with shipping such as tariffs, customs, and transportation.
Higher Labor Standards
Take a look back through recent history and you’ll find news headlines fraught with articles about child labor and forced labor around the world. Not every country around the world provides a great standard of working and living for their people like America does. America has a responsibility to ensure that it is not supporting these types of atrocities, and by reshoring manufacturing processes, we’re able to do that.
Modus: Shortening the Supply Chain
By investing in our domestic manufacturing operations here in the United States, we benefit our people–our neighbors, friends, siblings, and families. We bring high-quality, responsibly, and domestically made products to our stores and our homes. We can take comfort in knowing that we ultimately have the most control over what happens within the borders of the United States
While it may take years before most manufacturers are able to return their manufacturing operations home and restructure their complex supply chains, the resiliency associated with domestic manufacturing makes getting and staying on American turf well worth the complexities.
At Modus, we understand the importance of domestic manufacturing and the benefits its brings. To learn more about how our vertically integrated manufacturing processes could help you, reach out to our team. Give us a call at 925-960-8700 or contact us online today.