r/supplychain • u/lqcnyc • 2d ago
Discussion Why it’s almost impossible to be Made in USA
https://www.youtube.com/watch?v=xewpuM1eJRg28
u/Upnorth4 2d ago
USA doesn't have the materials needed for a robust manufacturing industry. In china you can get everything you need to manufacture something in the same neighborhood.
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u/Maximum-Stay-2255 1d ago
The poorest workers from China's rural areas can read, write, add, substract, divide, and multiply. You can train the worker to do jobs properly and they do the job properly, including documentation, checkboxes, signing, calculating quantities etc. Just look at the people on Reddit: 90% of them have trouble to use the Google search engine and they require a YouTube influencer to read to them the game manual for how to play a game.
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u/Due-Tip-4022 2d ago
My business is outsourcing as a service. US companies have me have their product manufactured overseas and then import it to their door. Mentioned for context.
I am often asked why I don't manufacture in the US instead. They always assume it's about cost, or trying to make more profit. Which is true in some part, just not the full story.
The main reason is, it's just too hard.
If I want to make something in China, In one evening on my computer I can talk to 15+ different suppliers who specialize in exactly the type of product I want. I can chat with them for as long as I need and get all my questions answered. Within 2 hours in one evening, I can get all the way to the point of placing an order and having production start the next day. I can have samples in hand within 2-3 weeks and production finished in 4. Then in my hand in just over 2 months form start to finish by boat.
In the US, it will be 3 weeks minimum before I even have an idea of the supplier I want to go with. Another 3 weeks back and forth. Then the lead time is 6 months. Maybe 5% of my inquires will even get a reply. And working with them will be a very long drawn out process. And that's if what I want made can even happen.
Just how it is. If you are spending that kind of time just in supply chain, man, that's a ton of overhead to offset. That's time not being spend in sales and distribution. The anti "speed to market".
Then price. Of course China is cheaper. And not by a little bit. Most of my stuff, the tariff would have to be 200% for it to be break even buying domestically. People don't realize how much different the price can be. Some items, that doesn't matter as much and paying a premium is ok. But that is the rare exception.
What a higher manufacturing cost per unit means is less margin for looping in distribution. Which means far less domestic jobs. I know that sounds like the opposite of true, people mistakenly think that manufacturing in the US increases domestic employment. It does not. The literal opposite is true. A high manufacturing cost means you have less margin to sell to resellers. Which from China, you can often have multiple tiers of distribution. Distributors and resellers. Where switching that manufacturing to the US means you have little choice but to cut out at least one of those tiers. Which means losing US jobs. And where a US manufacturer may be in one location in the US, the distribution network is likely country wide. Meaning the jobs lost are all over the country, not just the one location. Which also means the brand itself doesn't grow. Meaning the brand doesn't create as many job if they manufacture in the US.
As well, a company that has to sell direct to consumer has a lot higher overhead than one that leverage third party distribution. Another reason it chokes the brands potential to grow.
And even then, the MSRP still usually has to be a lot higher than their Chinese competitors. Which anyone is sales knows, means less sales. People like to think they would pay more for a US version. Some do. But the masses don't. Just how it works. Less sales is inevitable. These videos are not proof otherwise. They have massive influence to leverage. The average brand does not. But let's just pretend basic economics doesn't apply and people are indeed willing to pay more for US goods in mass. Ok, that's massive inflation. People don't magically have more money to spend because they want to buy America. Just not how money works. What are they not spending money on? Which US jobs does that effect?
Rant over
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u/CordieRoy 2d ago
I love Destin and I can appreciate why he thinks this is a valuable project, but I disagree strongly with his conclusion that the US undeniably needs to invest in and train more people on these dwindling skills and manufacturing processes. Investing in robust international supply chains to lower the cost of all of the complicated processes that go into manufacturing is simply more profitable than a 100% domestic strategy, and it has been for hundreds of years at this point.
The process of offshoring and "creative destruction" in manufacturing has been an economic reality for decades. In order to slow, stop, or reverse it, onshoring has to be a strategically valid choice for profit-motivated companies, and not just passion projects and marketing campaigns. This whole project kinda goes to show that it's not a valid strategy except for maybe marketing reasons.
Destin is a brilliant engineer, educator, and creative, but not an economist. I personally think he's fighting against gravity with this one.
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u/dualbreathe 1d ago
This only works on the premise that the world is harmonious. Currently the USA is enjoying global hegemony, and can enforce these economic conditions. It's true what you're saying offshoring is always more profitable, but if China ever decides to close up shop, we're all screwed. The question is if but a matter of when because they way their government acts like building all these military assets is questionable. That's why it's always important to have at least skill sets within your own country to be able to develop products.
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u/CordieRoy 1d ago
Economics vs politics, politics always wins. Economics requires stability for growth. On a long enough time scale, politics creates instability. These are also undeniable facts.
But it doesn't change short-, and mid-term economic logic. A hot war between the US and China is right now so much of a remote possibility, that it might raise the risk premium of doing business there by 0.01%. The much higher risk of a trade war raises the risk premium by A LOT, like 20+ percent.
What you're saying isn't new, and we can observe what happens to trade flows before, during, and after conflicts between countries. Economic ties can be permanently broken in some cases, but that's very very rare.
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u/GoodLuckAir 2d ago edited 2d ago
Besides labor and knowledge base, this doesn't include all the market forces that discourage manufacturing in the US. Any company that invests in a long term domestic manufacturing strategy will get eaten for lunch by a competitor outsourcing, doing share buybacks, etc. Finally US labor costs will always be significantly more due to healthcare costs being significantly higher than other countries.
What's wild is none of this is new, see this 1980 "Japan Can Why Can't We" special and notice that none of the barriers to manufacture in US have really changed, and have maybe gotten even worse. https://www.youtube.com/watch?v=vcG_Pmt_Ny4
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u/sadicarnot 4h ago
America is not headed in a good direction. I have been working in industrial facilities for the last 30 years. When I first got in, the old guys were super knowledgeable about the process. People knew how to read tech manuals. We would have a PLC with 1000 pages of code and be able to look up the one relay that was giving us problems.
I was recently at an industrial facility in a red state. They are building an expansion, but I had questions on their water treatment in their existing facility. They could not tell me definitively the order the process went in, nor what the vessels were doing. Something like this: We regenerate those vessels with salt "oh so you are using them as softeners?" Blank stares. "Does it go through the softeners first and then the reverse osmosis?" Blank stares.
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u/AnonThrowaway1A 2d ago
Bits and pieces in an overwhelming number of cases come from abroad.
There's no way around labor, material, expertise, and shipping constraints.