Renaud Megard knew he would have to make some key operational changes to his company, NFI Corp., when the coronavirus hit in March.
While all manufacturers concentrated on establishing remote work for front-office employees and social distancing on the production line, Megard, CEO and president of the New Bedford-based commercial digital printer, also has looked outside the company.
He wants to reassess his suppliers, vendors and partners to minimize the amount of outside people his employees interact with and to prevent the delays that shipments from overseas can cause.
Where it makes financial sense, Megard said he is looking to shorten his supply chain, making it more agile by working with more U.S. suppliers.
However, making that shift raises the question: will customers accept that change and pay the higher prices that these changes might bring?
“They just want the lowest price,” Megard said of his customers. “So we have to educate them.”
While most local manufacturers have remained operational during the COVID-19 pandemic, it hasn’t been easy. In addition to taking steps to prevent outbreaks within factories, many companies switched gears and produced personal protective equipment such as masks, shields and gowns that have been in heavy demand and in short supply.
‘Companies are starting to recognize all the costs and risks ... with offshoring.’
HARRY MOSER, Reshoring Initiative founder and president
Some manufacturers have been dealing with supply-chain disruptions that have delayed the arrival of raw materials and components – in many cases, that are being shipped from overseas – and have slowed the manufacturing of their own products, potentially causing issues for other companies downstream.
Such problems are adding fuel to the movement of “reshoring,” the practice of bringing manufacturing companies and jobs back to North America from abroad, according to Harry Moser, founder and president of Reshoring Initiative, a nonprofit business advisory group based in Sarasota, Fla.
“Companies are starting to recognize all the costs and risks associated with offshoring that they hadn’t recognized when [wanting] to offshore decades ago,” Moser said. “Then [COVID-19] came to the U.S. and now the U.S. inability to produce the things it needs became a life or death issue, or job or poverty issues for millions of people.”
Moser said reshoring has been happening for years now as companies see benefits to shifting at least some operations back to the U.S. The movement has grown from about 6,000 jobs returned to the U.S. in 2010 to about 180,000 in 2017, according to Moser.
Moser said that the next wave of reshoring has already begun as companies started to make masks, gowns, gloves and ventilators on their own here in the U.S. in order to meet the demand of the health care sector.
The next wave, he said, could be in the defense sector because the pandemic has highlighted a vulnerability if products and materials are manufactured outside of the U.S.
“You need consumers to choose ‘Made in America’ whenever feasible,” said Moser. “They won’t pay $2,000 for a $1,000 product. That’s not reasonable. But most say they will pay 10 or 20% more.”
David Chenevert, executive director of the Rhode Island Manufacturers Association, said he sees the trends as bolstering the regional manufacturing sector and helping Rhode Island’s economy in the long run.
“The reshoring is going to definitely bring added business to the state,” Chenevert said.
John Carrier, senior lecturer in systems dynamics at Massachusetts Institute of Technology’s Sloan School of Management, said supply chains were historically built for lowest-cost production under stable conditions. But the pandemic has sent a shockwave through supply chains across the world, which has shifted views.
“Now companies aren’t going to compete on productivity anymore,” Carrier said. “They’re going to compete on lead time. If the market changes every two to three weeks, [companies] can’t get stuck with three weeks of a product that a customer doesn’t want in their supply chains.”
Carrier said this will create pressure for companies to bring key parts of their supply chain closer to their customers, and companies will carry less inventory so they can react quickly to changes.
According to Carrier, some manufacturing companies won’t survive in a post-COVID-19 environment, such as those who keep too much inventory sitting around, those with complex supply chains that aren’t close to home, and those who haven’t adopted digital technology and automation.
Chenevert said he’s already seen Rhode Island-based manufacturers shift workflow by streamlining personnel to become leaner and more efficient.
Megard has kept his 108 employees employed, 16% of them working from home, and his production lines have been spaced out for safety. While much of his supply chain, he acknowledged, could be reshored to the U.S., many of his customers would balk at the additional costs.
“You have to be realistic about what can be reshored and what cannot be [reshored]. That will be a delicate balance,” he said.
Alexa Gagosz is a PBN staff writer. Contact her at Gagosz@PBN.com.
