Broker Check

Why Manufacturing is Coming Back to The US

February 16, 2022

Empty shelves. Long delivery times. We, as consumers, haven’t been happy.

Since the infamous month of March 2020 and the infamous toilet paper outage around that time, we have seen empty shelves and long wait times on deliveries consistently no matter the product we are trying to buy.

Why? How does it get solved? 

Why? Globalization of manufacturing and supply chain. As companies worked to keep costs low they found that exporting these parts of their business was a great way to do so. Being able to produce more at a cheaper rate, giving them the ability to sell more at the same price. Win win for businesses. Until… Covid. 

Covid shook the world like nothing has before. You don’t need me to tell you that. But, the one thing that most people didn’t consider is how much of our “stuff” was no longer going to be readily available. That’s because we all know it is produced elsewhere, but we never put thought into how that impacts us if those facilities stopped producing. That is until now. 

As the consumer’s headaches grew just as much as the businesses’ did, there was bound to be some sort of change. We are still going through this change but it is happening. 

Businesses found that keeping every aspect of their manufacturing and supply chain, from raw materials to end product, primarily in foreign locations is a quick way to be disrupted and not have those products readily available. 

So, how does this get solved? 

Businesses move parts of their processes back to the United States. I don’t expect a wholesale change and for them to bring every part of it back. But, we are seeing that companies are taking a more hybrid approach of having parts of their process here and other parts remaining offshore. This way, they can manage disruptions that may be caused abroad by having more foundations domestically to manufacture and supply their products. 

Maybe the best example of this is how finding a new car at this time is tough and buying a used car is coming at much higher prices than normal. Car companies see this and some are beginning to take the steps to lessen the impacts they have felt. Both GM and Toyota announced plans to spend a significant amount of money to build production facilities here in the US. With GM spending $7 billion to do so and Toyota spending $1.3 billion. Both showing us that they are willing to spend a lot of money to avoid what they are currently experiencing in the future. 

Other companies like Intel, Taiwan Semiconductor, and Samsung have also all announced plans to bring manufacturing plants into the US in an effort to avoid future potential disruptions. 

I expect that this is a trend we will continue to see over time but it will take some time for the plants to be up and running and for other companies to join in with similar investments. 

There are hurdles with doing so for companies. With one being that their manufacturing process will cost them a bit more now because of US laws around wages and manufacturing facility conditions. 

However, companies are showing they are ok with the increase in cost if it means consumers can actually go out and buy their products or they can get the products where they need to be faster. Which is both better for them and better for us.