Offshoring has been a staple of the manufacturing industry for decades, but trends have been changing. Over the past few years, reshoring — bringing jobs and processes back to America — has grown steadily. This effort impacts manufacturing as well as the economy as a whole.
Non-durable manufacturing accounts for 4.8% of the GDP and has proved crucial in creating jobs amid COVID-19. That figure doesn’t even account for the entire industry. It’s clear that manufacturing has a considerable impact on the economy, so reshoring in the sector is a big deal.
This effort towards domestic manufacturing isn’t the result of a single factor, but several. As these trends continue to grow, so will their impact on manufacturing. Here are five of the most prevalent.
Comparatively cheaper production costs in foreign countries are one of the most substantial factors behind offshoring. Now that automation is more widely available for manufacturers, offshoring may no longer be more affordable. The savings from automation allow manufacturers to keep their operations domestic.
Many people cite automation as a threat to American jobs, but it may actually create more. General Motors brought more than 15,000 jobs back to the U.S. in a period of massive digitization. Even though the auto industry uses more robots than any other manufacturing sector, it also leads the field in job creation.
Without the savings advantages of automation, manufacturers may outsource entire factories to foreign nations. An automated factory may mean fewer jobs than a traditional one, but it does provide more local jobs than offshoring. Counterintuitive as it may seem, the industrial world’s trend towards automation can help increase American jobs.
The Amazon Effect
Changing customer expectations are also influencing the manufacturing industry’s move towards domestic production. One of the most substantial changes is something called the Amazon Effect, where consumers expect faster service. Since Amazon delivers fast shipping and has exploded in popularity, people expect the same from all sources.
Companies need to fulfill orders fast, so products have to move from the factory to the logistics chain quickly. Manufacturers that have to ship parts and products from overseas are at an obvious disadvantage here. Domestic manufacturing enables companies to move fast enough to account for the Amazon Effect.
The Amazon Effect is about more than just fast shipping, too. It also entails adapting to sudden market shifts. Shorter lead times from domestic manufacturing enable factories to keep smaller inventories, which improves flexibility. They can then shift to making new products and meeting new demands faster than an offshoring company.
Global supply chain issues
Over the past few years, international tensions have been rising, especially between the U.S. and China. As Americans have grown more suspicious of China, it casts doubt over products outsourced there. That, combined with global supply chain disruptions from COVID-19, is starting to impact manufacturing.
China was the United States’ primary source of medical PPE but had to reduce PPE exports to address COVID-19 in their country. As a result, the need for American-made PPE became all the more clear. As more companies faced supply chain disruptions from shutdowns overseas, it revealed the shortcomings of offshoring.
Domestic production is more reliable in a crisis, especially one as impactful as COVID-19. On top of that, negative views towards China have risen sharply among U.S. citizens recently. As the nation grows more distrusting of China, manufacturers who don’t offshore there become more appealing.
Another prominent issue fueling the domestic manufacturing movement is product quality. Many foreign nations could offer lower material costs because the materials were of lower quality. Similarly, production was often affordable because these countries didn’t hold manufacturers to the same standards.
While these factors made outsourced manufacturing affordable, they typically led to poor-quality products. As American consumers adopted higher quality standards, these cheap products became less desirable. If these goods don’t sell well, then any cost savings from outsourced production don’t matter as much.
Just 35% of Baby Boomers say they’d pay more for high-quality products, but 55% of Millennials would. As millennials and like-minded Gen-Zers make up a more substantial portion of the market, these opinions impact manufacturing. Companies that want to appeal more to modern consumers have to ensure higher-quality goods, which is easier with domestic manufacturing.
When talking about industry trends impacting reshoring, it’s hard not to mention environmentalism. Across the past few years, environmental concerns have grown, both in severity and in public awareness. As consumers become more concerned about sustainability, manufacturing in countries with lower environmental standards becomes less favorable.
While U.S. CO2 emissions have decreased since 2006, China’s emissions have grown, making Chinese-made products less eco-friendly. Offshoring’s environmental impact goes beyond national differences in emission levels, too. A longer supply chain means more transportation, so even sustainably made goods can lead to higher emissions thanks to shipping.
An impressive 73% of Millennial consumers say they’re willing to pay more for a sustainable product. That’s too considerable an advantage for manufacturers to ignore. Manufacturers that want more success with today’s consumers have to be more eco-friendly, and outsourced manufacturing is far from sustainable.
Government environmental laws aside, it’s more challenging to regulate a factory that’s thousands of miles away. Similarly, while manufacturers can access clean power for facilities in the U.S., green transportation isn’t available at scale yet. Considering all of these challenges, it’s far more sustainable to make goods in the U.S.
The reshoring movement shows no signs of stopping
The manufacturing industry’s move back to America has been growing steadily over the past decade. In 2014, the U.S. saw a net gain of 10,000 reshored jobs for the first time in 20 years. Since then, these factors that drive the movement have only grown, leading to more manufacturers favoring domestic production.
Automation, the Amazon Effect, quality standards, distrust of the global supply chain and environmentalism are still growing. As these trends continue to rise, the domestic manufacturing movement will do the same, bringing jobs with it. Offshoring may have been the industry standard for years, but it won’t be for much longer.
Big retailers are opting for refunds instead of returns
(BUSINESS NEWS) Due to increased shipping costs, big companies like Amazon and Walmart are opting to give out a refund rather than accepting small items returned.
The holidays are over, and now some people are ready to return an item that didn’t quite work out or wasn’t on their Christmas list. Whatever the reason, some retailers are giving customers a refund and letting them keep the product, too.
When Vancouver, Washington resident, Lorie Anderson, tried returning makeup from Target and batteries from Walmart she had purchased online, the retailers told her she could keep or donate the products. “They were inexpensive, and it wouldn’t make much financial sense to return them by mail,” said Ms. Anderson, 38. “It’s a hassle to pack up the box and drop it at the post office or UPS. This was one less thing I had to worry about.”
Amazon.com Inc., Walmart Inc., and other companies are changing the way they handle returns this year, according to a report by The Wall Street Journal (WSJ). The companies are using artificial intelligence (AI) to weigh the costs of processing physical returns versus just issuing a refund and having customers keep the item.
For instance, if it costs more to ship an inexpensive or larger item than it is to refund the purchase price, companies are giving customers a refund and telling them to keep the products also. Due to an increase in online shopping, it makes sense for companies to change how they manage returns.
Locus Robotics chief executive Rick Faulk told the Journal that the biggest expense when it comes to processing returns is shipping costs. “Returning to a store is significantly cheaper because the retailer can save the freight, which can run 15% to 20% of the cost,” Faulk said.
But, returning products to physical stores isn’t something a lot of people are wanting to do. According to the return processing firm Narvar, online returns increased by 70% in 2020. With people still hunkered down because of the pandemic, changing how to handle returns is a good thing for companies to consider to reduce shipping expenses.
While it might be nice to keep the makeup or batteries for free, don’t expect to return that new PS5 and get to keep it for free, too. According to WSJ, a Walmart spokesperson said the company lets someone keep a refunded item only if the company doesn’t plan on reselling it. And, besides taking the economic costs into consideration, the companies look at the customer’s purchase history as well.
Google workers have formed company’s first labor union
(BUSINESS NEWS) A number of Google employees have agreed to commit 1% of their salary to labor union dues to support employee activism and fight workplace discrimination.
On Monday morning, Google workers announced that they have formed a union with the support of the Communications Workers of America (CWA), the largest communications and media labor union in the U.S.
The new union, Alphabet Workers Union (AWU) was organized in secret for about a year and formed to support employee activism, and fight discrimination and unfairness in the workplace.
“From fighting the ‘real names’ policy, to opposing Project Maven, to protesting the egregious, multi-million dollar payouts that have been given to executives who’ve committed sexual harassment, we’ve seen first-hand that Alphabet responds when we act collectively. Our new union provides a sustainable structure to ensure that our shared values as Alphabet employees are respected even after the headlines fade,” stated Program Manager Nicki Anselmo in a press release.
AWU is the first union in the company’s history, and it is open to all employees and contractors at any Alphabet company in the United States and Canada. The cost of membership is 1% of an employee’s total compensation, and the money collected will be used to fund the union organization.
In a response to the announcement, Google’s Director of People Operations, Kara Silverstein, said, “We’ve always worked hard to create a supportive and rewarding workplace for our workforce. Of course, our employees have protected labor rights that we support. But as we’ve always done, we’ll continue engaging directly with all our employees.”
Unlike other labor unions, the AWU is considered a “Minority Union”. This means it doesn’t need formal recognition from the National Labor Relations Board. However, it also means Alphabet can’t be forced to meet the union’s demands until a majority of employees support it.
So far, the number of members in the union represents a very small portion of Google’s workforce, but it’s growing every day. When the news of the union was first announced on Monday, roughly 230 employees made up the union. Less than 24 hours later, there were 400 employees in the union, and now that number jumped to over 500 employees.
Unions among Silicon Valley’s tech giants are rare, but labor activism is slowly picking up speed, especially with more workers speaking out and organizing.
“The Alphabet Workers Union will be the structure that ensures Google workers can actively push for real changes at the company, from the kinds of contracts Google accepts to employee classification to wage and compensation issues. All issues relevant to Google as a workplace will be the purview of the union and its members,” stated the AWU in a press release.
Ticketmaster caught red-handed hacking, hit with major fines
(BUSINESS NEWS) Ticketmaster has agreed to pay $10 million to resolve criminal charges after hacking into a competitor’s network specifically to sabotage.
Live Nation’s Ticketmaster agreed to pay $10 million to resolve criminal charges after admitting to hacking into a competitor’s network and scheming to “choke off” the ticket seller company and “cut [victim company] off at the knees”.
Ticketmaster admitted hiring former employee, Stephen Mead, from startup rival CrowdSurge (which merged with Songkick) in 2013. In 2012, Mead signed a separation agreement to keep his previous company’s information confidential. When he joined Live Nation, Mead provided that confidential information to the former head of the Artist Services division, Zeeshan Zaidi, and other Ticketmaster employees. The hacking information shared with the company included usernames, passwords, data analytics, and other insider secrets.
“When employees walk out of one company and into another, it’s illegal for them to take proprietary information with them. Ticketmaster used stolen information to gain an advantage over its competition, and then promoted the employees who broke the law. This investigation is a perfect example of why these laws exist – to protect consumers from being cheated in what should be a fair market place,” said FBI Assistant Director-in-Charge Sweeney.
In January 2014, Mead gave a Ticketmaster executive multiple sets of login information to Toolboxes, the competitor’s password-protected app that provides real-time data about tickets sold through the company. Later, at an Artists Services Summit, Mead logged into a Toolbox and demonstrated the product to Live Nation and Ticketmaster employees. Information collected from the Toolboxes were used to “benchmark” Ticketmaster’s offerings against the competitor.
“Ticketmaster employees repeatedly – and illegally – accessed a competitor’s computers without authorization using stolen passwords to unlawfully collect business intelligence,” said Acting U.S. Attorney DuCharme in a statement. “Further, Ticketmaster’s employees brazenly held a division-wide ‘summit’ at which the stolen passwords were used to access the victim company’s computers, as if that were an appropriate business tactic.”
The hacking violations were first reported in 2017 when CrowdSurge sued Live Nation for antitrust violations. A spokesperson told The Verge, “Ticketmaster terminated both Zaidi and Mead in 2017, after their conduct came to light. Their actions violated our corporate policies and were inconsistent with our values. We are pleased that this matter is now resolved.”
To resolve the case, Ticketmaster will pay a $10 million criminal penalty, create a compliance and ethics program, and report to the United States Attorney’s Office annually during a three-year term. If the agreement is breached, Ticketmaster will be charged with: “One count of conspiracy to commit computer intrusions, one count of computer intrusion for commercial advantage, one count of computer intrusion in furtherance of fraud, one count of wire fraud conspiracy and one count of wire fraud.”
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