Reshoring Manufacturing To The US Is A Gradual Process
Lonnie Kane is the CEO for California-based Karen Kane, a fashion designer of women’s clothing founded in 1979 & carried in department stores throughout North America. In a recent interview with Bloomberg Business, he shared the motivations that led his company to repatriate its production – now at 80% – back to the US, the impact of the US and Chinese economies on those decisions, and the role of government on supply chains & manufacturing.
His thoughts, experiences and advice apply to manufacturers within many industries and demand chains – not just textiles & apparel. Here are some salient highlights from the interview, my take on their importance in assessing a reshoring strategy, and the full video of the interview (you can watch it below).
- The process Kane’s of repatriation of production to the US happened gradually, from a point of a 50%-50% (US-China) production mix to an 80%-20% mix. The process began about 2 years ago.
- Rising costs of labor and materials in China were the catalysts for the decision to repatriate manufacturing to the Los Angeles area. The volatility of these costs reduced the company’s ability to effectively estimate pricing & revenue.
- The company, says Kane, found that its previous experience in manufacturing domestically made the shift ‘not that difficult’ when they reached out to contractors and suppliers with whom they’d previously worked. NOTE: US Suppliers in all industries need to understand that many of their current and former customers are or will be examining reshoring and should capitalize on this momentum by marketing their strengths as domestic sources.
- Not all production of the company’s products or categories was repatriated – each process and product was examined to determine the correct rationale and strategy (this sounds to me like something that might be a good idea to do prior to offshoring).
- Costs related to duties and transportation – Total Landed Costs – made the seemingly higher costs to manufacture in the US actually more competitive. Kane says they’ve been able to maintain the prices for consumers despite repatriating 30% of production.
- Best ‘Duh’ Moment (2:53): A stronger economy means consumer demand rises which creates more manufacturing jobs which creates more demand …
- According to Kane, the government’s role should be to encourage manufacturing through reforms of sectors such as immigration and trade agreements that focus more on exporting rather than leaning more toward imports.
Kane’s observations are, of course, tailored (pun intended) for the unique characteristics of his industry. But the general push of his experiences could apply to any manufacturer, within any supply or demand chain.
Companies can and will make decisions that best serve all stake-holders if given the chance – manufacturing closest to consumption, creating jobs, building sustainable supply chains and delivering value to their markets. But its a coordinated effort between the manufacturers that are willing to innovate, and a government whose policies often impede or redirect that will, and turn it more toward desperation instead.
But the process of offshoring the US manufacturing base took decades, and the solutions won’t come overnight. Kane is on a journey, but it’s one that was instigated by costs rising in another economy – something we had no hand in. It ‘just’ happened. Can’t we take a more proactive position here? I believe we can.
In Kane’s interview, I couldn’t help but return to the same root cause and solution:
A comprehensive national manufacturing policy that enables rather than restricts, and gets government out of – instead of in – the way of US businesses to revitalize our manufacturing base.
(In case you’re having trouble viewing the video below, click here to watch it on Bloomberg’s site.)