The Supply Side: Reshoring interest picks up from manufacturers

As Walmart wraps up its ninth year of what is to be a two-decade-long manufacturing jobs initiative, more manufacturers are showing interest in onshoring some of their overseas production, according to Harry Moser, founder of Reshoring Initiative (RI).

Moser estimates that more than 300,000 jobs were created in the first decade of Walmart’s U.S. manufacturing jobs push. During that decade ending this year, Walmart invested $250 billion to purchase more American-made products. Walmart will spend another $350 billion over the next decade, adding more U.S.-made products. This latest initiative is expected to support around 750,000 U.S. jobs, an estimate that includes direct and indirect support.

In June, Walmart held its ninth annual Open Call event, seeking out U.S.-made products from entrepreneurs around the country. Walmart recently made deals for 330 of the products pitched to buyers at the Open Call, and 280 other business owners are involved in talks with merchants for potential deals, the company noted in a release.

Last year, Walmart was also the largest retail importer of goods in the U.S., with 930,000 containers. According to the Journal of Commerce, Target was second with 775,000 containers and Home Depot was third with 590,000 containers. Walmart said two-thirds of what it sells is made, grown or assembled in the U.S, but that is mostly food or consumables. A large portion of what Walmart sells is still imported from other countries.

Walmart has said much of what it imports is not made in the U.S., and the retailer is seeking to change that with its American Lighthouse initiative announced last summer. It’s a collaborative effort with private and public stakeholders to break down the barriers to reshoring industries like textiles.

Deanah Baker, head of apparel at Walmart U.S., said at the recent Open Call event that textiles were one of the most challenged categories to onshore. But that is where Walmart chose to start. She looked at Classic Fashion based in Jordan and sought a partnership and plan for reshoring.

Classic Fashion employs 30,000 in 22 facilities in Jordan and India. Sanal Kumar, founding chairman, said he started the company in Jordan in 2003 with 300 people. He said his plants employ more than 6,000 workers in rural areas. When Walmart in 2015 asked him to consider trying to establish a U.S. apparel manufacturing line, Kumar agreed to the challenge. Classic Fashion has also established a U.S. design office and pledged to open a U.S. manufacturing line creating 100 jobs to start and growing to 300 jobs over the next two years.

The Lighthouse initiatives will also focus on plastics, food processing, motors and metals and pharmaceuticals/medical supplies.

RI reports that the pace for onshoring is picking up following the pandemic of the past two years. Moser estimates that 260,000 new manufacturing jobs will come back to the U.S. in 2022 in various sectors, from microchip makers to diaper makers and steel production. He said the math makes sense for many manufacturers to initially reshore at least 20% to 30% of production.

Given the ongoing supply chain challenges of the past two years, Moser said more manufacturers now see the need to look at reshoring if they intend to have adequate, just-in-time inventory.

RI found that the private and federal push for the domestic supply of essential goods led to 230,000 U.S. manufacturing jobs in 2021, which brings the total number of reshored jobs announced since 2010 to 1.3 million. The study states that reshoring efforts grew by 100% in 2021, and in 2020, a record number of companies (1,800) reported efforts to bring jobs back to the U.S.

Historically, Moser said that the most active reshoring has been those companies that left and probably should not have done so, including machinery, transportation equipment and appliances. Recently added to that list are essential products on which the U.S. relies, such as electric batteries, semiconductors, medical equipment, and pharmaceuticals.

In the past year, the construction of new U.S. manufacturing facilities jumped 116% with efforts by Intel to bring two chip factories to the Phoenix area. Steel is also coming back with U.S. Steel investing $3 billion in Osceola to create 900 jobs in northeast Arkansas. Gov. Asa Hutchinson said Arkansas would soon surpass Pennsylvania as the top steel-producing state in the nation.

A Novelis aluminum plant is going up in Bay Minette, Ala., a $2.5 billion investment that will create 1,000 new jobs in that market. The plant will address the growing demand for aluminum beverage can sheets in North America, driven by consumer preference for more sustainable packaging.

Moser said many smaller projects are underway that expand capacity to help meet the growing demand to get products and component parts that go into finished goods without a three to four-month travel lag. He said the pandemic and the supply chain crunch were catalysts for companies to look at the economics of reshoring. Many have found it’s as cheap to make goods in the U.S. and be able to bank on the quality and delivery of their orders.

In January, a UBS survey of C-suite executives revealed the magnitude of this shift. More than 90% of those surveyed said they either were in the process of moving production out of China or had plans to do so. About 80% said they considered bringing some of it back to the U.S. or nearby Mexico.

GE Appliance began moving some of its water-heater production to Louisville, Ky., in 2009 and other lines soon followed. GE Appliance CEO Kevin Nolan said the savings earned by eliminating overseas shipping outweighed the extra money spent on U.S. labor. Ironically, GE Appliance, based in Kentucky, is owned mainly by the Chinese multinational group Haier Smart Home which has a 90% stake in the business.

Russia’s invasion of Ukraine has also been a catalyst pushing more interest in onshoring as supply chain delays continue. Moser said that with the ongoing geopolitical threats to supply chains and ongoing tariff concerns, almost every industry manufacturing parts or goods in China or Asia should make a reshoring comparison.

Editor’s note: The Supply Side section of Talk Business & Politics focuses on the companies, organizations, issues and individuals engaged in providing products and services to retailers. The Supply Side is managed by Talk Business & Politics and sponsored by Propak Logistics.