The often singular reliance on Chinese manufacturing has been controversial for years, but it has been put to the test during the COVID-19 pandemic and supply chain crisis. While it seemed like some companies were working to bandaid the breakdown of outsourced manufacturing by doing more at home, a recent article in Bloomberg suggests that these changes may not be all be temporary. Indeed, many companies may be looking to pull a significant amount of manufacturing out of China for the long term.
Rattled by the most recent wave of strict Covid lockdowns in China, the long-time manufacturing hub of choice for multinationals, CEOs have been highlighting plans to relocate production — using the buzzwords onshoring, reshoring or nearshoring — at a greater clip this year than they even did in the first six months of the pandemic, according to a review of earnings call and conference presentations transcribed by Bloomberg. (Compared to pre-pandemic periods, these references are up over 1,000%.)
Some companies have been at this for a while.
To Kevin Nolan, the CEO at GE Appliances, all this fretting about high costs in the US is overdone.
It has been for years, he says. Around 2008, he came to realize that on large items — like, say, dishwasher size and up — the savings earned by eliminating overseas shipping could outweigh the extra money spent on labor here. The key, he determined, was to wring maximum efficiency out of the factory floor to keep those labor costs down. A year later, he decided to test the thesis out and moved some of GE’s water-heater production to Louisville. Other product lines followed.
It remains to be seen how much this trend will continue and to what industries it will most apply. Read the whole article here.
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