When manufacturing started leaving America en masse for China, Vietnam, India, –offshore– in the 1990s, America lost more than the occasional manufacturing plant, they lost control of entire supply chains. Many companies have spent the last few years realigning their supply chains to be less reliant upon offshore manufacturers.
The decision for US vs. offshore manufacturing has always been profit, (cheaper offshore) vs. availability/time. Our research has repeatedly indicated the ability to save customers time and make things more convenient is trending to the top of buying attributes in many industries. Most will pay for the confidence they can get supplies/goods when needed.
It is well known Taiwan chip makers have American companies frightened by hovering China threats to take control of the island. While there is some race to bring chip manufacturing stateside, is it enough?
The U.S. share of global semiconductor manufacturing capacity has decreased from 37% in 1990 to 12% in 2021, according to the Semiconductor Industry Association (SIA)
Yet almost half of the chips are designed in the USA. Intel is racing to get production up by 2025. Will it be fast enough? Why didn’t companies proactively assess this risk sooner? Too much focus on shareholder returns today vs. a predictable future?
Recently the Wall Street Journal highlighted Bath & Body Works for its investment in manufacturing in the U.S. It wasn’t just that they were investing in manufacturing, but they worked with their vendors to ensure their supply chain was in a narrow geographic region around their USA headquarters. This allows them much greater flexibility to respond to popular products and shifts in buying priorities. The result – an increase in revenue of more than $2 billion since 2019.
In a world where online ordering and rapidly shifting consumer preferences are the norm, Bath & Body Works made a strategic decision to build its company around being flexible, responsive, and with high quality. It did not fall down the rabbit hole of building an organization around being the lowest cost provider.
Saving your customers time and making things more convenient does not just rank high in manufacturing. It is true for distribution, service, and retail as well.
Building an American-based supply chain may be a competitive advantage. Before investing heavily, find out how important time and convenience are to your customers. If they top the list, as we continue to see in research, you might want to get busy. Playing catch up is no fun. Ask the Intel folks!
August, 2023
