Why Reshore?

The question of where to manufacture is not strictly an issue of labor cost. Kent Bicycles' CEO cites a number of factors that contributed to this company's decision to relocate production to the United States.

Kent Bicycles, a U.S.-based company that currently manufactures bikes in China, will be building a plant in South Carolina so it can serve American demand with American production. This Washington Post article details the company’s move. The article paints an interesting picture of reshoring, identifying the many factors that contributed to the move. According to Kent CEO Arnold Kamler, the reasons for reshoring include all of the following:

1. SHIFTING OPINION
In the 1990s, he says, offshoring was fashionable. “Made in the USA” was not. For a manufacturer to be regarded well by important commercial partners (retailers, for example), it helped to look to offshore production even for small cost savings.

2. CUSTOMER ENCOURAGEMENT
Related to point 1, Wal-Mart recently expressed its new preference to Kent. The big retailer enouraged the bike maker to shift some production to the U.S. Wal-Mart’s encouragement gave Kent the confidence to press ahead.

3. FOREIGN DEMAND
International business is doing so well that Kent expects to be able to sell all of its current overseas production outside the U.S. Therefore, this shift in production will not subtract production from overseas. Instead, U.S. production is the alternative to an overseas increase.

4. COST
Cost of labor in China is increasing. The difference between U.S. and Chinese labor cost is not as great as it once was.

5. WORKER COMMITMENT
Mr. Kamler found what he regards as a serious attitude toward production-floor work in Clarendon, South Carolina. Many of the workers he observed were single mothers basing their families’ livelihoods on this work. By contrast, he has noted what he views as an increasingly “apathetic” attitude among personnel in overseas facilities. He cites the distraction of cell phone use by production employees as a significant problem.

6. STATE COMPETITION
State governments recognize the value of manufacturing and are pursuing manufacturing facilities. New Jersey and South Carolina competed for Kent’s plant. Part of the winning offer from South Carolina was the commitment to train Kent’s workers for free.