Manufacturers Are Coming Home. Are U.S. Workers Ready?

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The coronavirus pandemic spawned all kinds of predictions in March and April that now look a bit overdone in September: Cities aren’t dead (yet), commercial office buildings aren’t relics (yet) and we will likely board planes again for both vacation and business (although the frequency of this is still up for debate). But one area where long-lasting change is already underway is in supply chains.

We talked last week about a Bank of America Corp. survey that found a growing number of manufacturers were looking to “widen the scope” of plans to relocate, or reshore, factory work closer to where products are actually bought and used. That wording is telling: this isn't a new idea. The Covid-19 shock to cities, real estate and aviation was impossible to predict in January, much less a year ago, but the risks embedded in far-flung parts networks have been growing increasingly apparent for a while now. “While disruptions from the pandemic might have acted as a catalyst to accelerate reshoring, we believe that the underlying structural reasons are grounded in an ongoing shift to 'stakeholder capitalism' where corporations focus on shareholders’ interests, as well as the broader community of consumers, employees and the state,” the Bank of America researchers said. In other words, the pandemic is just adding a lot of grease to wheels that were already in motion for various other reasons, including the U.S-China trade war and the growing importance of environmental, social and governance initiatives.

Indeed, electrical and automation-equipment company Schneider Electric SE was already focused on shortening its own parts networks as part of a commitment to reduce its carbon footprint, Ken Engel, senior vice president of global supply chain in North America, said in an interview this month. Schneider is still a global company with a global supply chain, but the logistical logjams caused by the pandemic have made it more imperative for both the company and its customers to build in more resilience and consider localizing certain kinds of manufacturing work, Engel said. Schneider actually purchased face-mask machines for facilities in North America, Europe and Asia to make sure it could protect its workers, Engel said. The “just-in-time” mindset that kept inventories as lean as possible and arbitraged labor costs across wide-reaching parts networks is being replaced by “just-in-case” planning for factory disruptions or emergency surges in demand. Backup vendors are becoming more important for even lower levels of the supply chain, Engel said, and that includes lining up capacity in multiple geographies.