Is Cost-competitive Manufacturing Possible in North America?
Many companies subcontract manufacturing to China, because it was less expensive. But a recent survey shows that American's prefer products "Made in the USA." Can companies bring manufacturing back to North America and still be cost-competitive?
View transcriptWMT-AM Iowa, Host: Doug Donahue is a Managing Partner at Strategic Footprint. They enable companies to take back full control of their brand by moving away from subcontract manufacturing in China. We welcome into the newsmaker line, Doug, how are you on this Tuesday? Doug Donahue, Strategic Footprint: Pretty good and yourself? WMT-AM Iowa, Host: Doing well, sir, thank you for joining us here in the newsmaker line. And now, it's not only you doing this, but there is a survey that shows Americans prefer products made in the USA. And there's a couple of things we need to walk through this. There's the sort of the patriotic portion of this, but I need you to help me with the economics portion. The economics thing is my background. If we offshored this to try it in the first place, because it was less expensive, what's the point of bringing it back? Doug Donahue: Well, it is no longer as less expensive. But the real reason is, is consumer preferences. Consumers want locally made products, they, if you can get the price point that's correct, they would much rather buy it. And more importantly, you know, we do have some macroeconomic things going on that have increased the cost of producing overseas. WMT-AM Iowa, Host: I think there's something else as well, that goes beyond the economics portion of it. We found through PPE, and a couple of other different things that we're just so dependent on foreign, specifically Chinese manufacturing, for critical areas of our economy that we need in the case of things like in a pandemic. But how do we do this where we can bring things back on shore to the United States and still make it economically viable? Doug Donahue: Well, the key is in the supply chain. What China has done terrific over the last 30 years, and all kudos to them, is they've built a supply chain, from the smallest widget all the way up to the final product. So we need small and medium sized businesses to help supply that supply chain locally or at least throughout North America. WWJ-AM Detroit, Host: U.S. tariffs, political issues, and "Buy American" preferences are some of the elements driving U.S. companies to build their product closer to home. That's according to Managing Partner of Strategic Footprint, Doug Donohue, who says many companies turned to subcontracting in China to save money. Doug Donahue: We are absolutely seeing a trend where companies are trying to reshore the work for a couple of different reasons, predominantly economic reasons, but also market driven reasons, consumers wanting it to be made locally, also. WPHM-AM, Detroit, Host: A lot of consumers want to know where the products that they're buying were made, whether it's something you're buying in the store, maybe you're a manufacturer, you want to know the parts you're buying are made in the USA. And so if you own a company that does have any manufacturing and you want to be able to build in the US, but it's just cheaper to do in China, there's a solution to that. Joining us right now, Managing Partner with Strategic Footprint, Doug Donahue. Good morning, Doug. Doug Donahue: Morning, Paul. How are you? WPHM-AM, Detroit, Host: I'm doing well, thank you. Your company is very interesting because it basically helps companies that subcontract out to foreign countries, particularly China, move things back to North America. How do you do this? Doug Donahue: Well, it's quite a large effort. If a company is not manufacturing and they're actually with a subcontractor, there's a lot of work that needs to be done. You have to get the intellectual property, intellectual know-how, out of the subcontractor to be able to do it, then you have to be able to determine your supply chain and set up the supply chain to be able to do it. And then you need to build a manufacturing facility or establish a manufacturing facility. So it is quite a large initiative to take on. But the end result is very simple. You control your product and you control your future as a company. WPHM-AM, Detroit, Host: What do you think the trend is going to be over the next few years? Are we going to see more companies leaving China and building in the US? Doug Donahue: Well, I think we've seen this happening over a number of years. And this is one of the reasons that we started Strategic Footprint is we see a regionalization in the global economy and, Detroit, your area, is a perfect example of it. Cars that are going to be sold in North America are now being made in North America. Cars that are going to be sold in Europe are now being made in Europe. Cars being sold in Asia are now being made in Japan and China. So we've seen this regionalization going on for a long time. Consumers are demanding and manufacturers see a strategic advantage to having things manufactured within the region. WPHM-AM, Detroit, Host: What’s the biggest obstacle for companies that are subcontracting with Chinese corporations? What's the biggest obstacle that they have in trying to return to US manufacturing? Doug Donahue: You know, there's the issues of capturing your intellectual property and getting that down on paper and internal knowledge. There's building up that manufacturing knowledge in your company, but then it's financing. If you are buying your product, and you're not manufacturing, and you're going to put a plan together, that is not an inexpensive proposition. So they have to be able to get the financing to be able to do that. And they're only going to get that financing if they can see a medium to long term to be able to recover. So I think that's where the government has an opportunity to be helpful to these companies is by opening up an opportunity that is more medium to longer term. But yes, it's the establishment of that manufacturing plant. That that is the bottleneck in this move of reshoring. WPHM-AM, Detroit, Host: Doug what size companies do you work with you work mainly with, with large manufacturers, mid-size, small? Doug Donahue: Our clientele is typically mid-size and below privately held companies. So, the larger companies tend to have more internal knowledge and more internal resources. So ours are mid-sized to smaller companies, often privately held, sometimes still family owned. WPHM-AM, Detroit, Host: You're definitely filling a void that a lot of these companies have and the resources that, as you point out, larger companies have but a small company or even midsize company may not have, you know, the staff on hand to handle these issues. Doug Donahue: Absolutely, that building up that knowledge base, as I've alluded to, whether it's in manufacturing or supply chain is the first step and a lot of them are starting from scratch on that.
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