Made in America: Waving the Flag
Expanding America’s manufacturing base as it pertains to everyday consumer packaged goods is a concept that has been much discussed, but the cost savings offered by making goods in China and other Asian countries has been the big hurdle to any major reshoring effort.
Today, global political issues, most notably rising tensions with China, and the continual review by retailers and suppliers alike of the challenges the pandemic presented with obtaining goods from overseas, has sparked a renewed effort to expand the manufacturing base in the United States.
Additionally, another significant factor in the conversation is the price of importing products today. From high transportation costs to labor issues and the challenges of expediting products through major U.S. ports, retailers are reviewing their total costs and finding that manufacturing outside the U.S. may not be as cost effective as it was in past years.
“Our goal is always to provide the best quality (products) that we can to our members at the lowest cost of goods,” said Emily Detwiler, executive director of Associated Wholesale Grocers’ AWG Brands. “Many times that comes simply by working through the logistics of having products come from the closest possible places. When you think about it from that perspective, proximity is a huge component for us in being able to provide quality products at great prices for our member-owners.”
For companies such as AWG seeking domestic suppliers of products that are nearby, there are growing options. For example, companies such as Simmons Pet Foods and G&S Foods have either previously expanded or are in the midst of growing their manufacturing efforts in the U.S. The $500 million strategic growth plan at Simmons included significant investments in manufacturing at several facilities in the Midwest.
This included installation of a fourth high-speed canning line at its manufacturing facility in Emporia, Kan., and a second production line of canned pet food at its Dubuque, Iowa, plant. Additionally, the company opened a 750,000-square-foot facility in Edgerton, Kan., focused on meeting demand for multi- and variety-packed pet food products.
G&S Food earlier this year broke ground on its new 348,344-square-foot plant in Hanover, Pa. With a 2024 grand opening target date, company officials previously told Store Brands the new plant will allow the company to be more nimble and open new opportunities to expand its private label product assortment.
While some companies are making investments to expand their domestic manufacturing, there are still challenges that are impacting the overall effort. Harry Moser, founder and president of Reshoring Initiative, an organization focused on bringing manufacturing back to the U.S., said more companies need to look at the total cost of making products overseas.
“The reason the work was offshored in the first place was that manufacturing costs in the U.S. were typically 40% more than in China,” he said. “So companies thought, 'why would I spend that much more?’”
Although there is still a gap in what it costs to produce items in China when compared to the U.S., Moser encourages product suppliers and retailers to go beyond looking at only the price of the product being made. The focus, he said, needs to be on total cost of ownership that includes freight, cost of carrying inventory and even availability of labor, the latter of which has been a long-term issue that was exacerbated by the pandemic.
“For years, manufacturing has had (labor) shortages,” Moser said. “The challenge today is that if one wanted to increase U.S. manufacturing by 40%, which is our goal and would balance the trade deficit, we would need upwards of 6 million people to hire. Unfortunately, they’re not there.”
Related to labor shortages, Detwiler noted that her team is also challenged to find suppliers that can take on additional business as many are running at capacity.
“There are some situations where a company’s production facility can’t handle much more while others are in need of updating,” she explained. “But suppliers are challenged to find enough people to finish production runs. I heard about this very issue from a supplier during a recent meeting. They are continuing to face labor shortages.”
Moser noted recent statistics show that college enrollment is down 15% while enrollment in apprenticeship programs are up nearly 50%. Although much of that growth with apprenticeship programs is in construction, there is growing recognition that more needs to be done to attract high school graduates to careers that traditionally have been considered blue collar jobs.
He also pointed to an effort by the federal government in recent years to work with local colleges to train workers. For example, Moser said if a company builds a new factory in a given community, funding from the federal government will be used to support programs at a nearby
community college to train workers for jobs in the factory.
Worker shortages are also impacting supply chain, forcing some to develop solutions that ensure the flow of goods is continual and cost effective.
For example, Detwiler noted that when looking for a specific product, AWG may work with multiple suppliers in the same category that are in specific parts of the country and located close to the company’s warehouses. Doing so cuts down on travel time and also helps keep transportation costs in check.
As retailers work to overcome challenges of moving goods from domestic manufacturers to their distribution centers, the role of third party logistic (3PL) providers could grow further. In addition to providing solutions to current-day labor shortages through the use of technology, retailers are now shipping less than full loads of products in an effort to contain costs and suppliers are looking for ways to meet this demand.
“A lot of manufacturers have realized that outsourcing their supply chain to a 3PL has been really beneficial,” said Kevin Williamson, chief executive officer at RJW Logistics Group. “The suppliers are experts at manufacturing and not necessarily supply chain.”
He noted that 3PLs are laser-focused on dealing with supply chain issues and are able to reduce the cost of moving goods through the network. This cost reduction could further balance the total cost of supplying products to retailers and make domestic manufacturing more competitive with overseas suppliers.