What does it take to reshore manufacturing successfully?

Online sales have exploded during the coronavirus pandemic, as consumers try to stay home more. Online sales at Walmart, Target, and Best Buy in the first quarter increased by 74%, 141%, and 155%, respectively. Meanwhile, the 800-pound gorilla that is Amazon (NASDAQ:AMZN) continued its steady march, growing global online sales by 24%.

The coronavirus pandemic has led to a massive fallout for the world economy. Just in the US alone, over 36 million people have filed initial claims for unemployment benefits over the last seven weeks. The restrictions that were instated to stop the spread of the virus have devastated in-store businesses of all sizes and exposed the vulnerabilities of our global supply chains.

The supply chain disruptions have created longer delivery times. This increased delivery time amid political uncertainties and complicated national trade policies has fostered a strong renaissance towards reshoring, local manufacturing and fulfillment.

In an effort to to blunt recessions many governments are pushing businesses to reevaluate long established supply chains. A lot of energy appears to be focused on stimulus programs aimed at reshoring and strengthening local production and supply networks.

Last month alone, Japan earmarked over $2 billion of its economic stimulus package to help its manufacturers reshore production out of China. French President Macron, a former champion of globalization, has said that their supply chain will need to be focused more locally, while his Minister of Economy, Bruno Le Maire, urged citizens to stock French products. German Chancellor Angela Merkel recently said that the pandemic required a level of sovereignty obtained through a “pillar of domestic production”.

The U.S. Government for some years has been strongly advocating corporations to bring offshored manufacturing back to the US. The COVID-19 pandemic has highlighted the importance of having access to not just essential goods, but even to seemingly simple products like masks and gloves locally.

Professor Beata Javorcik, chief economist at the European Bank for Reconstruction and Development, recently told BBC, “They will re-shore activities that can be automated, because re-shoring brings certainty. You do not have to worry about your national trade policy, and it also gives you an opportunity to diversify your supplier base.”

Jonty Blum of the BBC added, “Although, some factors such as 3D printing, automation, the demand for customization, quick delivery, as well as protectionism were already driving this trend, it seems that Covid-19 has only accelerated that process.”

Many economists are echoing this sentiment: Automation will likely accelerate as companies look to reduce their reliance on low-skill, low-cost labor in other countries while supporting less contact among employees and consolidating steps along the value chain. According to a report published by analyst company Forrester, automation could become the key for businesses to survive the looming recession brought on by COVID-19.

On-demand manufacturing is a key area that has seen unprecedented growth amid demand uncertainty and scarcer resources. The recent demand for face masks is one example: Due to the difficulty involved in anticipating how long the need for masks will continue, or at what rate, the traditional model of producing and keeping stock does not work. With on-demand manufacturing, the products are made after purchase and that ensures the materials and resources aren’t wasted on inventory. Since the product is made bespoke and on-demand, it is possible to add customization. Customization, in turn, increases what consumers are willing to pay and reduces returns, giving companies the ability to sell more products at a higher price. The catch is to do this while maintaining the same operating expense, which is where automation and on-demand manufacturing technology make all the difference between success or failure.

In times of uncertainty, it is only natural to speculate on the future. The one sliver of a silver lining that can be viewed amid this tragic crisis, outside of our reduced contribution to ongoing climate change, is the potential way in which we can recover from this. Hopefully, we will emerge with a stronger industrial strategy and more sustainable, resilient supply chains.

vPersonalize focuses on technologies for mass-customization and on-demand manufacturing at scale. Our technology helps apparel brands and their manufacturers bring designs to market significantly faster and make those products on demand.

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