COVID helps ‘Made in the USA’ products compete with Chinese exports
As China’s COVID lockdowns block goods en route to price-conscious American consumers, New Jersey manufacturer Mitch Cahn is finding traces of gold in broken links in the global supply chain.
Eleven miles from Manhattan, business is booming at Cahn’s textile business, which boasts a 100% local supply chain.
“We manufacture everything from scratch here in North Newark. We’ve been in business for 30 years, now have about 155 workers and hope to hire 25 more immediately,” said Cahn, Founder and President of Unionwear. .
Founded in 1992, Unionwear manufactures custom baseball caps, scarves and backpacks in the northern neighborhood of New Jersey’s most populous city.
“Business is very strong this year. We’ve seen an increase in business from companies that are no longer able to import goods, and now they’re buying products domestically,” Cahn told VOA Mandarin.
For its customers, the “Made in USA” price is right after decades in which American stores were filled with less expensive Chinese-made products.
Its buyers aren’t the only ones supporting products made in the United States. In a 2020 survey by the Reshoring Institute, which advocates for the return of manufacturing to the United States, about 70% of American respondents said they preferred products made in the United States. Among them, 83% said they would pay up to 20% more for domestically produced products.
COVID supply chain kicks in
China has imposed strict COVID containment measures that are disrupting the supply chain. Export goods are going nowhere as shipping companies hike freight costs and pandemic-related labor shortages compound delays.
According to the BR Logistics website, container rates for China-US routes are now between $15,000 and $18,000 per 40-foot container, two to three times higher than pre-pandemic prices.
Moreover, the Ukrainian crisis has disrupted global energy supplies, pushing up oil prices, and therefore transport costs. Cahn’s baseball caps and other products are gaining an advantage as its products travel shorter distances to reach US shoppers, a cost saving that helps counter China’s lower labor costs.
Cahn said before the pandemic, his baseball caps cost about 30-40% more than imports from China.
Currently, a baseball cap bought for $2.50 in China will end up costing $8 to $9 a piece when it arrives in the United States, he said, once tariffs, shipping, packaging and the cost to meet testing requirements for products manufactured overseas will be added. According to just-style.com, an industry website, US tariffs of 10% to 15% imposed on textile products explain part of this price discrepancy.
On average, Unionwear baseball caps cost around $8-10 per unit wholesale.
“Now we’re competitive,” Cahn said.
Now focused on supply chain resilience due to the pandemic, companies bigger than its own are seeing the benefits of using suppliers closer to their customers. “Many American companies are realizing that keeping processes closer to home can be much more reliable and secure,” according to an April Thomasnet.com article.
General Motors announced on January 25 that it would invest $7 billion in its plant in the U.S. state of Michigan to advance production of electric and autonomous vehicles through 2025, according to a Michigan Economic Development press release. Corporation.
Although the announcement made no mention of China, it said the investment would solidify and strengthen the supply chain throughout Michigan, long known for its concentration of auto-related manufacturers and suppliers. As Governor Gretchen Whitmer boasted, it’s “the place that put the world on wheels.”
Some non-US companies have also committed to investing in the United States to serve their customers in the North American market. South Korea’s Samsung announced in November that it would invest $17 billion in a new factory in Texas to produce advanced semiconductors and ensure the “stability of the global semiconductor supply chain”. The plant is expected to be operational by the end of 2024.
Samsung, which has operated a memory chip factory in China since 2014, is part of a larger trend. According to the latest Kearney Reshoring Index published in 2022, “79% of executives who have manufacturing operations in China have already moved part of their operations to the United States or plan to do so within the next three years, and an additional 15% evaluate similar movements.”
William Reinsch, an international trade expert at the Center for Strategic and International Studies, a Washington think tank, said many U.S. companies have been considering localizing their supply chains for some time.
“It’s not new. It’s at least [a] Trend over 10 years. [The companies] want to have shorter supply chains. They want to be close to their customers. They are worried about volatile energy prices and rising shipping costs, both by sea freight and air freight,” he told VOA Mandarin.
Tariffs imposed under the Trump administration on most Chinese imports have created price spikes that have made it more expensive to import these goods, Reinsch said, and COVID-19 has exposed flaws in the supply chain. business supply.
Harry Moser is the founder and president of Reshoring Initiative, a non-profit group focused on bringing manufacturing back to the United States. their profit margin, recognizing all the costs they previously ignored.”
Some examples of products ready to be relocated, Moser said, include those that incur high freight costs or involve frequent design changes, or those with volatile demand, such as seasonal clothing.
“The idea here would be to shorten supply chains,” said Nick Vyas, associate professor of operations and supply chain expert at the University of Southern California’s Marshall School of Business.
The customer-centric supply chain would benefit businesses in multiple ways, Vyas told VOA Mandarin. “It will be much more resilient, and it would certainly be much more sustainable. We will have much less carbon footprint than what we have produced in the last 30 years.”
Vyas said that over the past three decades, business leaders have run companies with a results-oriented mindset that only considered the cost of manufacturing.
“We need to get into the triple bottom line mindset: cost is a variable, but we also need to think about resilience and sustainability,” he said.
Unionwear’s Cahn is optimistic about the relocation. He thinks the era of cheap imports is over and has some advice for companies looking to strengthen their supply chains: “I think it makes sense to develop a relationship with the domestic source of supply…and also to develop relationships with suppliers” in places such as the Caribbean Basin, South America and Canada. With closer ties, manufacturers can “isolate [themselves] ever-increasing costs of transporting goods across the oceans. »