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.
Bay Area co-living startup strands hundreds of renters at dire time
(BUSINESS NEWS) They’re blaming COVID for failing as a co-living space, but it looks like trouble was well established even before now.
Over the last few years, “co-living” startups have become increasingly common in tech-rich cities like San Francisco. These companies lease large houses, then rent individual bedrooms for as much as $2,000 per month in hopes of attracting the young professionals who make up the tech industry. Many offer food, cleaning services, group activities, and hotel-quality accommodations to do so.
But the true value in co-living companies lies in their role as a third party: Smoothing over relations, providing hassle free income to homeowners and improved accountability to tenants… in theory, anyway. The reality has proved the opposite can just as easily be true.
In a September company email, Bay Area co-living startup HubHaus released a statement that claimed they were “unable to pay October rent” on their leased properties. Hubhaus also claimed to have “no funds available to pay any amounts that may be owed landlords, tenants, trade creditors, or contractors.”
This left hundreds of SF Bay Area renters scrambling to arrange shelter with little notice, with the start of a second major COVID-19 outbreak on the horizon.
HubHaus exhibited plenty of red flags leading up to this revelation. Employees complained of insufficient or late payment. The company stopped paying utilities during the spring, and they quietly discontinued cleaning services while tenants continued to pay for them.
Businesses like HubHaus charge prices that could rent a private home in most of the rest of the country, in exchange for a room in a house of 10 or more people. PodShare is a similar example: Another Bay Area-based co-living startup, whose offerings include “$1,200 bunk beds” in a shared, hostel-like environment.
As a former Bay Area resident, it’s hard not to be angry about these stories. But they have been the unfortunate reality since long before the pandemic. Many urbanites across the country cannot afford to opt out of a shared living situation, and these business models only exacerbate the race to the bottom of city living standards.
HubHaus capitalized on this situation and took advantage of their tenants, who were simply looking for an affordable place to live in a market where that’s increasingly hard to find.
They’ve tried to place the blame for their failure on COVID-19 — but all signs seem to indicate that they had it coming.
Las Vegas’ largest dispensary gets massive Infinity Wall expansion
(BUSINESS NEWS) Las Vegas’s largest dispensary is getting a big, expensive makeover, thriving while other brick-and-mortar shops are struggling.
Have you ever heard of an Infinity Wall? If I were you, I’d check it out right now because it’s utterly mesmerizing.
An 80-foot version of this wall is just one of the new features that Planet 13 (or The Company) announced it will be implementing in Las Vegas’ largest dispensary, The SuperStore, this past Monday. In addition to the futuristic entertainment feature (I honestly can’t get over that thing), they will be doubling the sales floor and expanding the dispensary to ~23,000 sq. ft. For reference, the entire Planet 13 SuperStore complex is 112,000 sq.ft.
Why expand an already massive dispensary during a pandemic, when most brick and mortar stores are suffering? Well, according to Larry Scheffler, Co-CEO of Planet 13, The Superstore is actually thriving beyond belief.
“We are achieving record sales even with Las Vegas at ~50% tourist occupancy. As Las Vegas returns to normal and this industry continues to grow, we anticipate that this will be first of many expansions we will undertake to keep up with demand.”
The expansion adds 40 points of sale to uphold the outstanding customer service reputation Planet 13 has. If you do have to wait, you have a state-of-the-art entertainment system to enjoy. It’s win-win for any and all visitors.
The CapEx cost of the expansion between is $1.5 – $2.5 million. The project is expected come to completion by the end of Q1 2021.
Las Vegas has become a sort of cannabis mecca. After all, it’s home to MJBizCon, the industry’s largest networking event attended by thousands from around the world. And the popularity and overall acceptance makes it an easy choice for any cannabis aficionados. The SuperStore, like most things in Las Vegas, is huge, glamorous, and caters to tourists.
I have no doubt that when the city bounces back from the pandemic, this new-and-improved dispensary will be a must-visit destination.
The future of work from home will be a hybrid, says Google CEO
(BUSINESS NEWS) Google is looking to adapt a more flexible, long-term hybrid work model for their employees, which includes partially working from home and partially being on-site.
Google, the world’s largest search engine company (yes I know they do other things), is positing that the corporate office will look completely different post-COVID-19.
In September Google’s CEO, Sundar Pichai said that the organization was making changes to its offices that would better support employees in the future. This includes “reconfiguring” office spaces to accommodate “on-sites”, days when employees who regularly work from home will come into the workplace. The move comes after Google was one of the first major tech companies to announce that employees could possibly work from home through next summer.
“I see the future as definitely being more flexible,” Pichai said during a video interview for Time 100, “We firmly believe that in-person, being together, having that sense of community, is super important for whenever you have to solve hard problems, you have to create something new,” he said. “So we don’t see that changing, so we don’t think the future is just 100% remote or something.”
It was reported that Google’s decision to work remotely into mid-2021 was originally in part to help employees whose children might be learning remotely during the coronavirus pandemic. Pichai said that several factors went into the decision, stating that improving productivity was a major concern.
“Early on as this started, I realized it was going to be a period of tremendous uncertainty, so we wanted to lean in and give certainty where we could,” Pichai said. “The reason we made the decision to do work from home until mid of next year is we realized people were trying hard to plan… and it was affecting productivity.”
Pichai also mentioned that the decision would help the firm embrace the reality that remote working wasn’t going anywhere once things returned to normal. A recent survey at Google found that 62% of employees felt they only need to be in the office on occasion, while 20% felt they didn’t need to be in the office whatsoever. While the work from home trend had already been growing over the past several years, the pandemic accelerated that movement greatly.
With housing costs surging in the San Francisco area, where Google headquarters resides, many employees have been forced to move outside of the city to afford a mortgage. This caused many to commute long hours into the office, something Pichai realized was a problem.
“It’s always made me wonder, when I see people commuting two hours and away from their families and friends, on a Friday, you realize they can’t have plans,” Pichai said. “So I think we can do better.”
It’s too early to tell whether or not Pichai’s vision of a “hybrid model” will be adopted by other companies when the pandemic ends. One thing is for certain though—work will never be what is pre-COVID-19.
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