Why US Manufacturers Should Move Production Closer

Why US Manufacturers Should Move Production Closer

Iconic brands such as Apple, Nike, and Wal-Mart have moved the manufacturing of most of the products they sell overseas. These juggernaut companies have been able to provide United States consumers with affordable products by using China as their primary manufacturing hub. Many U.S. based manufacturing companies in a wide array of different industries have capitalized on China's ability to manufacture at a very low cost.

With the recent COVID-19 pandemic and the invasion of Ukraine by Russia, a significant downside has emerged in global trade. In addition, current geopolitical tensions between the U.S. and China have increased the danger of depending entirely on China for U.S. goods imports. These unexpected events have prompted the need for U.S. companies to bring production closer.

Reason #1: Shipment Costs Are More Expensive Than Ever

Along with low manufacturing costs, freight costs from Asia have been very attractive to U.S. importers. However, during the COVID-19 pandemic, shipping costs increased substantially as U.S. demand from China rebounded. Many companies were caught off guard, had difficulty delivering goods to their clients, and had to absorb freight increase costs. Disruptive events are likely to happen again.

Reason #2: Shipment from Far Away Countries Takes Time

Most shipping is done by sea and takes a considerable amount of time. Beyond increased prices, the time it takes to ship products to the U.S. is another unattractive factor to consider. It would be far preferable to have stock quicker and avoid overstocks. If a company chooses to produce back in the U.S. or in a neighboring country, products would reach customers faster.

Reason #3: Bringing Production Closer to the U.S. Generates Jobs

Moving production closer to the U.S. is not only an investment for the company, but also in the region. When US-based companies manufacture near home soil, they create jobs. Creating new jobs in the area could reduce illegal immigration as migrants would find jobs in their home countries. In addition, people will have more money to spend, and regional economies could prosper.

Reason #4: Quality Control

Moving production back to the U.S. or a neighboring country has another crucial benefit. Companies manufacturing at home or closer to home will have greater control over product quality. Quality control in factories located on the other side of the world can be costly. Companies can increase their quality control visits to suppliers in the region, ensuring the end customer receives high-quality products.