By Sourcing Journal
This article was published in Sourcing Journal March 24, 2022.
Many U.S. brands looking to bounce back from supply chain disruption are considering the benefits of Made in the USA while weighing the pros and cons of bringing production closer to home.
The Reshoring Initiative has been examining industry shifts since the Sarasota, Fla.-based group launched in 2010 with the goal of bringing 5 million manufacturing jobs back to the U.S. “We document the trends, so we know what industries and companies have come back from other countries, to what states, for what reasons, and for how many jobs,” said Harry Moser, Reshoring Initiative’s founder and president.
While the trade deficit with China continues to grow, so do new American jobs, Moser added. “The overall return trend has surged” from 160,000 jobs in 2020 to about 240,000 in 2021, based on Reshoring Initiative’s research, he said, adding that the U.S. could see “a huge, record increase” this year.
Moser believes America needs to do a better job of offsetting the jobs lost to sourcing competitors, but the good news is simply that companies are even considering reshoring, “driven significantly by the recognition of a lack of self-sufficiency.”
“We have too many products that we don’t make, or we don’t make anywhere near enough of, like PPE,” Moser said. “The country, companies and consumers have decided that’s not a good idea to be so dependent, especially on a potential adversary like China.”
Moser believes that much of the 80,000-job increase between 2020 and 2021 can be attributed to U.S. companies, and the federal government, trying to avoid getting caught flat-footed as they were when the pandemic struck. There’s also a growing awareness of the risk of over-reliance on trans-Pacific trade. “There’s a general understanding that their survival might depend on being locally sourced, or at least not dependent [on overseas sourcing] because of the risks and issues there,” Moser said.
But sourcing costs will likely determine if reshoring takes off. U.S-based production might finally make financial sense for some companies, according to Moser. Using the proprietary Total Cost of Ownership estimator (TCO) tool he developed for the Reshoring Initiative website, companies can conduct an in-depth analysis of their sourcing costs, including price of production duties, freight, packaging, transport, warehousing and more. Moser said the breakdown can help larger companies make more informed decisions about sourcing, while helping domestic suppliers highlight their upsides and promote their businesses. “They can use it as a sales tool to convince a big company to look at all the numbers and see that they’re offering, in some cases, a better choice,” he said. “If you don’t do the math, you don’t find that out.”
Reshoring Initiative’s data suggests that examining total expenditures, rather than just production costs, has driven individual TCO users to reshore up to 30 percent of their business—“if they can get people to do it,” Moser said.
For now, however, America lacks the “skilled workforce” needed to support a reshoring influx, Moser said, adding, “There’s real challenges in terms of capacity and workers, which will unquestionably take years to change.”
The talent gap and industry-wide labor shortage present the largest hurdle to onshoring business, Will Duncan, executive director of sewn products trade group SEAMS, said. “If you had asked me eight years ago, I would have said it was lack of available textiles,” he said. “Pre-pandemic, I would have told you it was lack of available cut-and-sew, and that’s still true today.”
Demand far outstrips capacity in the current American manufacturing landscape, despite interest growing pre-Covid. Though the pandemic “helped shine a spotlight” on the issue of foreign dependence, Duncan believes the mismatch in domestic skills gap and reshoring interest are at a tipping point. “I have members within the cut-and-sew sector and the textile supply sector that could probably double their business if they could hire people,” he said.
American producers must learn to work smarter and more efficiently to survive, he said. “You have to embrace lean, and you have to get your workers involved in the day-to-day decision making.” Manufacturers must also accept that some of the workers who left their posts during the pandemic are unlikely to return, and would have aged out at a certain point anyway. “Everybody within our sector wants to hire people with past experience, but we have to learn to train differently than we’ve trained in the past,” he said.
Suppliers must also avoid working in siloes, he said. “A lot of the cut-and-sew guys are now offering full-package” production, meaning they manage product development and upstream relationships rather than relying on brands to orchestrate each step in the supply chain.
“If you want to do business today, you better get into full package, and understand what that means for brands and retailers,” Duncan said. “You have to service them like they’ve been serviced offshore, in the Far East in particular.” Many brands have long operated on limited knowledge beyond their Tier 1 suppliers, who’ve been tasked with managing material sourcing relationships.
“That’s one of the keys to talking about change” for American producers, Duncan said. “They have to move from being 80 percent focused internally” on their businesses, “to being 80 percent focused externally” on the needs of their clients.
“I think there’s tremendous opportunity for companies who embrace that change, rather than just trying to keep doing what we’ve been doing for the past 100 years,” he added.
Suppliers Weigh In
At the recent Sourcing at Magic show in Las Vegas, stateside producers noted an uptick in inquiries from brands looking to bring some sourcing stateside. California apparel manufacturer Calison, which owns three facilities outside of Los Angeles in El Monte, said the pandemic has created “pros and cons.”
Spokesperson Jeff Lu told Sourcing Journal that the past two years have seen “more clients looking for USA-made products, solely because of our turnaround time compared to overseas.” However, “the downside would be the shortage of labor that we’ve seen within the U.S.—and wages are going up.” In July, California will become the first state to enact a $15 minimum wage.
Calison has been operating for a quarter-century creating contemporary apparel and streetwear, mostly for local brands. The family-owned supplier has recently seen more newcomers to apparel, like entrepreneurs and direct-to-consumer startups, looking for a local partner to execute their visions. The full-service shop guides emerging brands through the product development process, Lu said. Relationships with local mills allow the supplier to source much of its fabric domestically.
Larger brands are also exploring their domestic options. “We’ve heard from a lot of different people about how they’ve been doing things overseas, but the supply chain has been really unfavorable,” Lu said. There’s also been more interest in the cachet of American-made products and the perception of quality that comes with domestic production. In light of the high transport pricing and long lead times for producing in Asia, the company’s two-week turn times and relatively low MOQs at 300 units to start are garnering interest.
“I think more people are trying to get a feel as to how USA manufacturing would be, and that’s what we’re trying to bring back,” said Lu, who along with his brother Brian will soon inherit their parents’ business and continue the Calison legacy. “I mean, we’ve been doing this from the start.”
In nearby Vernon, Calif., screen-printing shop Royal Textile PrintInc. came to the show to raise awareness about U.S. makers with niche specialties. Using wet-printing processes to create patterns and motifs on fabrics mostly used for apparel, Royal Textile works with U.S. fabric vendors and wholesalers selling to big corporations like Whole Foods and Disney for both commercial apparel and employee gear, sales and marketing coordinator Albert Huh said.
“I feel like there’s a lot of people that don’t understand or don’t realize there are still printing companies and a supply chain within California that can handle a large order quantity,” he said. “So we’re here not so much getting orders, but getting the word out that L.A. is still somewhere people can make apparel. It doesn’t have to be imported.”
Huh described the U.S. manufacturing landscape as “discouraging,” with many of of Royal Textile’s competitors closing as business moved to cheaper pastures. “I mean, there used to be tons of print houses in California,” he said. “Now, we’re one of the last ones left.”
Historically, a large printing company with an early-in-the-supply chain role would not have to market itself, Huh said—opportunities would come from local material vendors or manufacturers. But those players have also struggled to maintain their clientele.
“What I realized is a lot of people are really surprised that there’s still this kind of business happening in the United States,” Huh said.
Huh hopes the tide is turning as business values and priorities shift. While the high cost of doing business in California remains a challenge, some vendors are intent on producing and marketing premium, locally sourced goods. “The majority of our customers used to be large corporations, but now, they’re smaller vendors who want to focus on U.S.-made quality rather than having the cheapest possible process,” he said.
One barrier to self-sufficiency for U.S. manufacturers is the domestic lack of synthetics and stretch fabrics that feature in contemporary apparel and athleisure.
Covid disruption has buoyed Carr Textile’s business, for example. The St. Louis, Mo. importer and converter stockpiles fabric and sells it to producers with no minimums. “That helps a lot of small-and-medium-sized companies that really can’t go overseas and buy large amounts of material,” sales representative Thomas Oviedo said. “If you only need 10 yards to make a garment prototype, you can buy it from us, and then come back and buy larger quantities for your actual production.”
Asia’s Covid-related production problems “brought a lot of emphasis and attention to bringing production into the U.S.,” Oviedo said. These headwinds affected finished products and inputs alike, creating ripple effects up and down the supply stream.
Carr Textiles’ business has grown because companies are looking for hard-to-get fabrics, Oviedo said. Retailers grappling with America’s reopening faced “a huge surge in demand, but so much of the supply chain had already broken down,” Oviedo said.
“There are a lot of companies that are missing deadlines, and therefore they’re coming to us,” he added. Carr stocks more than 5 million yards of material in more than 100 different fabrications and 2,300 SKUs. And while the company has faced its own issues with product delays from Asian partners—with about 30 containers of fabric stuck at ports for eight weeks or longer—its broad selection has helped meet demand.
The pandemic led Carr to re-shore some of its operations—namely, its fabric-printing services. “We opened our own digital printing division at our facility in Missouri, and we’re able to print on pretty much any fiber,” from nylon to polyester, linen, cotton and more, Oviedo said. A graphic design team helps turn around pattern and artwork development in five to eight days. “It gives full creative control over customization to the client, and that’s invaluable,” Oviedo added.
Many of Carr’s clients see the pandemic as a reason to reexamine their dependence on foreign sourcing—and Oviedo believes sourcing and the supply chain aren’t finished evolving.
“Once you start changing your business, you just don’t go back to the old,” he said. “You stay with the flow of what you’ve been doing, and just try to just try to improvise and make things better and more efficient.”
“I think that’s what’s going to happen,” he added. “Some companies will probably go back, but at the end of it all, it’ll be a plus for America where more and more things will be done here.”