The Reshoring Challenge: Why and How CEOs are Moving Jobs Back to America

Reshoring 2This strategy appears to be much more than a publicity stunt aimed at improving the image of Walmart as the giant retailer that destroys smaller retailers and good jobs in the communities where it operates. Walmart is finding that the Made in USA initiative makes solid business sense because it can move production closer to its customers, allowing its suppliers to respond faster to new designs or new trends. It can also manage inventories more efficiently.

Many companies that have reshored jobs discover big gains in reducing the “coordination costs” of having multiple executives on long business trips and trying to communicate across 12 time zones. Others, like NCR, found that locating production closer to customers improves the company’s ability to innovate because customer needs can be more rapidly communicated to engineers and others who design products.

At the same time, the macroeconomic conditions that encouraged wholesale outsourcing are changing. “Labor conditions and wages are rising overseas,” Marsiglio says. Transportation costs, muted at the moment by cheap oil, also have risen over time. “When you do the math, it became clear that the U.S. was highly competitive again,” she says.

THE PATRIOT FACTOR
Another funny thing happened on the way to the forum; some Americans are now saying they care where their products are made. “They are telling us that that is impacting their purchase decisions,” Marsiglio says.

She declines to say that American consumers don’t trust Chinese products—because Walmart still sells billions of dollars’ worth of goods made in China. Instead, she puts the emphasis on the positive—Americans want anything they eat themselves or feed to their children or pets to be made in America.

So Walmart is putting “Made in USA” labels on the front of packages of those products. “When I walk through the aisles of a Walmart today, I can much more easily find things that are made in the USA,” she says.