Supply chain problems prompt US factories to relaunch
Called near-shoring, the move to Mexico parallels Europe with the opening of factories in Eastern Europe to serve Western European markets such as France and Germany.
“We’re starting to see it in Mexico as well as the United States,” said Theresa Wagler, chief financial officer of Steel Dynamics, a steelmaker based in Fort Wayne, Indiana. “Many companies now prefer security of supply to costs. “
Mr. Knizek of EY-Parthenon expects industries with complex, more expensive products to lead the resurgence, including automobiles, semiconductors, defense, aviation and pharmaceuticals. Anything that requires a large amount of manual labor, or that is difficult to automate, is much less likely to come back.
For items like shoes, furniture or Christmas lights, for example, “the economy is intimidating,” said Willy C. Shih, professor at Harvard Business School. “It’s hard to beat a salary of $ 2.50 an hour. “
Although trade tensions and shipping delays grab the headlines, Professor Shih added, China retains huge advantages, such as a gigantic workforce, easy access to raw materials, and factories to low cost. “For a lot of what American consumers buy, there aren’t a lot of good alternatives,” he added.
But as the initiatives of auto and tech companies show, the United States can attract more sophisticated manufacturing. It’s a goal shared by the Republican and Democratic administrations, including that of President Biden, which supports $ 52 billion in subsidies for nationwide chipmaking.
How the supply chain crisis unfolded
The pandemic triggered the problem. The highly complex and interconnected global supply chain is in upheaval. Much of the crisis can be attributed to the Covid-19 outbreak, which has triggered an economic slowdown, massive layoffs and a production shutdown. Here’s what happened next:
“Level of play incentives are key,” said David Moore, chief strategy officer and senior vice president at Micron. “Building a state-of-the-art memory manufacturing facility is a significant investment; it’s not just a billion or two here and there. These are important decisions.