So, have you heard much about the ongoing supply chain issues in the manufacturing industry?
In all seriousness, pandemic-related shutdowns, rising shipping prices, and fluctuating trade agreements have all wreaked havoc on the US supply chain, which has affected companies’ ability to provide the products consumers need. For years, US companies have outsourced manufacturing of key parts to countries overseas, where they could get large volumes and a low price. However, due to the significant delays and struggles to find freight (let alone affordable freight), businesses have started to prioritize control over low costs.
As a result, some of the largest American companies have started to reshore their manufacturing sites in hopes of regaining control and security over their own processes. As these organizations pave the way, we expect more domestic manufacturers to follow suit in the months to come – especially because struggles with overseas plants have already been going on for years.
The Trade War
This shift to bring manufacturing back to the US has been in process for years. In 2018, President Trump introduced tariffs on $50 billion of product from China and other countries in hopes of encouraging American companies to keep their business in the US. Though the tariff rate was reduced in 2020, they have remained in place until China meets its goal of increasing its US purchases by $200 billion.
President Biden has recently echoed the need to bring manufacturing back to the US, particularly in light of the semiconductor chip shortage that left Americans in short supply of goods like cars and electronics. The shortage has not only resulted in low inventories of essential products, but also increased their prices and slowed overall US economic recovery. Biden subsequently encouraged Congress to pass legislation that would provide up to $52 billion in subsidies to companies who invest in semiconductor manufacturing within the US.
Manufacturers Begin the Reshoring Process
Even before a semiconductor manufacturing bill passed through Congress last month, some of the country’s largest manufacturers had already taken semiconductor chip manufacturing into their own hands. Earlier this year, Intel announced plans to invest $20 billion into a semiconductor chip plant in Ohio, while Samsung plans to build a $17 billion plant in Texas. Similarly, GM and Toyota have both invested billions into electronic battery production in the US, products that have typically been manufactured overseas. According to Toyota’s Group Vice President for Enterprise Strategy, bringing semiconductor production back to the US is a “big endeavor, but it’s the future.”
As construction for the new plants are set to kick off in the coming year, these facilities have an opportunity to ensure that their processes are fully optimized and highly efficient from the beginning. If the goal is to prevent future shortages and backups, companies must put in safeguards against other potential delays that could impact production. A planning, scheduling, and capacity analysis tool like VirtECS can identify the most beneficial investments, maximize throughput, and increase overall production capacity in a new plant. Implementing VirtECS from the beginning will help production start smoothly and avoid time-consuming changes down the line. If you’re interested in learning more about the benefits of using VirtECS in your organization, one of our experts would love to chat with you about your plant’s unique challenges and needs.
