The Reshoring Initiative: 3 Reasons Why American Retailers Are Reshoring U.S. Manufacturing Jobs
After decades of jobs moving overseas, the tide has turned in favor of reshoring, reports the Reshoring Initiative in its latest annual report. Together reshoring and related foreign direct investment by companies returning to the U.S. added 77,000 jobs in 2016, with an additional 13,000 reported for the previous six years, for a total of 338,000 manufacturing jobs reshored since 2010. The trajectory toward reshoring continues to accelerate under the Trump administration, with an all-time high of reported reshoring jobs per month in January 2017, followed up by companies such as Softbank, GM, Spring, Infosys, and Apple announcing reshoring initiatives. Retailers are also climbing aboard the reshoring trend. Walmart’s $250 billion U.S. manufacturing program, including its June 28 Open Call for U.S. products, is projected to bring back at least 250,000 manufacturing jobs. That would be 25% of the manufacturing jobs the Return One Million Jobs initiative has committed to bring back to America. (thanks to Harry Moser of the Reshoring Initiative for correcting this sentence from an earlier version.)
Why are so many companies making the decision to bring jobs back to American shores? And how does this benefit manufacturers in the retail industry? Here’s a look at some of the reasons why retailing companies are increasingly bringing manufacturing jobs back home.
Reshoring Initiative Provides Positive Publicity
The Reshoring Initiative lists thirteen separate reasons why retailers can benefit from supporting their project to bring more manufacturing jobs back to America. The top reason is the opportunity to promote reshoring case studies, which translates into good public relations.
A case in point is Walmart, the largest U.S. retailer and the largest retailer to support the Reshoring Initiative. When Walmart announced its commitment to increase its American-made purchases by $50 billion annually by 2023, resulting publicity gave a big PR boost not only to the Reshoring Initiative but to Walmart as well. Walmart had previously faced criticism for its heavy reliance on offshoring and related practices, drawing fire from powerful labor enemies such as United Steelworkers. By positioning itself as a leader of the reshoring movement, Walmart has improved its ability to answer such criticisms with a PR counter-offensive.
Supply Chain Control
Apple’s move toward reshoring reflects another motivation compelling manufacturers to move their operations back to America: supply chain control. Apple has traditionally been relying on a supply chain based in East Asia, using Korea to produce memory chips, Japan to produce displays and China to assemble products. But this leaves Apple potentially susceptible to disruptive political forces, such as instability on the Korean peninsula and trade disputes between China and the U.S. By pulling back to the U.S., Apple sidesteps potential disruptions to its supply chain.
The same strategy makes sense for retailers. For instance, British luxury clothing brand Burberry has reshored its production in order to maintain better control of its supply chain and underscore its brand commitment to quality. U.S. apparel retailers have been reshoring for similar reasons, as evidenced by the emphasis on reshoring by participants in last year’s Texprocess Americas trade show. For instance, North Carolina shoelace and braid manufacturer Hickory Brands says bringing its supply chain back to the United States from China has yielded greater efficiency due to greater proximity.
Reputation for Quality
Burberry’s concern for maintaining brand quality highlights another reason companies are reshoring. Another company that manufactures in the United States in order to maintain a reputation for quality is Amway, which has invested most of $335 in recent manufacturing upgrades inside the United States, despite having major markets overseas.
For instance, one of Amway’s popular Asian products is its nutrition line. In Asia, “Made in the U.S.A.” conveys a reputation for quality due to the traceability and safety standards of the American food industry, explains Amway Chief Supply Chain and R&D Officer George Calvert. Amway maintains the reputation of its nutrition products with its Asian customers by keeping production here in the United States.
Positive publicity, better supply chain control and a reputation for quality are a few of the reasons more retailing manufacturers are moving their production back to the United States. These benefits help explain why an estimated 20 percent of goods previously sourced in Asia have been reshored in recent years. All indicators suggest that this trend will continue as more retailers realize the benefits of reshoring their manufacturing.