For decades, many American companies have relied on facilities in Southeast Asia to manufacture products that are then shipped over for dometic sale. Along with reducing production costs, firms also saved on inventory space through “just-in-time” ordering that allowed them to quickly bring in materials from overseas when necessary. But while relying on long-distance industrial suppliers has always been risky, the worst case scenario for this approach became a reality during the pandemic.

The global economy nearly shut down for a few months in 2020, which in turn set off a chain of events that has now led to massive traffic jams in docks as well as shortages of trucks, ships, and even shipping containers. As a result, countless companies that depend on global suppliers are struggling to get their goods on home shores. For instance, a game maker in Florida placed an order of custom board games that was supposed to arrive at Target retailers by the first week of June at the latest. Instead, his inventory was delayed for weeks in port and did not arrive until mid-July. 

Faced with more potential delays if he places another overseas order, the game maker’s company is considering moving production back to the U.S. or Mexico. Other companies are looking to make similar moves, with one survey finding that 52 percent of manufacturers had reported buying more American supplies during the pandemic. Another 47 percent claim that they plan to reduce their reliance on purchasing supplies from a single factory or overseas nation. “When you give up your own manufacturing and let somebody manufacture for you — if it all goes well, you can make more money. But the reason you can make more money is there’s more risk,” said trade lawyer Michael Taylor. “And that risk is supply disruptions, labor issues, quality control, [and intellectual property] theft.” 

Questions:

1. What are the advantages and disadvantages of relying on overseas manufacturers?
2. Do you think more American companies should bring production back from overseas as a result of the pandemic? Why or why not?

Source: Paul Wiseman, “Shipping Snags Prompt U.S. Firms to Mull Retreat From China,” Associated Press, August 5, 2021.