Leadership lacking in competition for manufacturing leaving China

By Bart Taylor | Jan 22, 2019

The Wall Street Journal's John Stoll touched on a topic last week that's occupied us for years: factors motivating companies to reconsider manufacturing in China. As Stoll points out, today's dust-up involving tariffs largely reinforces "sentiment that has simmered for years over the low flame of China's rising labor costs, forced technology transfers and intellectual-property theft."

Stoll also quotes Bill Lewis, a partner at New York-based AlixPartners, who increasingly sees retailers that sell Chinese goods providing additional impetus: "'These companies, especially retailers, have gotten good at taking their production out of China,' Mr. Lewis said. 'Now China needs to get better at convincing them to stay.'"

U.S. destinations need to get better at convincing them to reshore domestically. And while more and more companies are doing just that, and others are in the process of assessing whether it's feasible, for many it's simply not in the cards. Most brands would gladly invest in more local production, in facilities, in people, if a supply chain attuned to their needs was here. When it's not, it's hard even for Harry Moser at the Reshoring Initiative and others to help companies make a business case.

Developing the ecosystem to grow manufacturing is a deliberate thing, and while most communities value a growing manufacturing base, not many have developed the secret sauce to catch the attention of even the most fed-up companies.

Most of the shortcomings involve infrastructure or services. Companies are keen to a specific mix, a formula, of community assets, workforce, R&D, access to materials and transportation, and service and supply. Charismatic support for U.S. manufacturing -- leadership, in other words -- is a bonus.

The leadership piece is elusive. The WSJ's Stoll notes that many companies are not giving up on China, per se. He sites Crocs, once a Colorado company, and their sustained commitment not only to China but to Asia. Crocs requires shoes factories, and to build more here would require a huge undertaking. More than that, it takes corporate leadership committed to a new brand, one informed by American manufacturing. It's possible, not probable.

Making it work for brands that prefer never to leave the U.S. is an easier path, but the leadership piece is no less important. Planners, community leaders, and trade partners must rally around the idea of manufacturing becoming an economic game changer. Some have. Until more do, China -- and, more broadly, Asia -- will be a destination for as many companies as for those that decide to leave based on politics of tariffs, or the weariness of managing quality and IP.

"Made in China" may not be the slam dunk for brands that it used to be. It remains to be seen which communities in the U.S. will coalesce resources and sustain efforts in pursuit of an alternative for companies that want it.

Leadership will tell the tale.

Bart Taylor is publisher of CompanyWeek. Reach him at btaylor@companyweek.com.

On the topic of leadership: The Colorado Manufacturing Awards will recognize a Manufacturing Advocate of the Year, to be presented at the April 4 event. If you have recommendations, let me know.