August 10, 2022

Returning mass production from China to American shores is a complicated job

Michael Araten knows about bringing the manufacturing industry back to the United States. Araten and his business, known as the Rodon Group, got many praises and even a visit from Obama. A few years back, Barack Obama transferred K’nex’s brand of plastic toys for construction from China to Rodon’s facility located in Montgomery County, Pennsylvania

When global supply chains broke down in the recent epidemic, Araten ratcheted his advocacy to bring production back to America. This process is known as reshoring. Araten and Rodon are informing other U.S. manufacturers to evaluate the actual costs of manufacturing overseas, such as rising costs and shipping delays, and to return specific manufacturing processes to American firms such as Rodon, which employs 128 workers who create precise plastic parts.

“All suddenly everything you thought you could save on travel, you’re no longer saving any money,” said Araten, who is director for Sterling Drive Ventures. This family-owned firm controls the Rodon Group. “I observed this during the Great Recession: There’s a shock to the economy which forces people to examine their entire costs of owning.”

Reshoring efforts have attracted renewed interest since the outbreak, caused by discontent with supply issues and price hikes. This week, Intel revealed plans to create “the biggest silicon production site in the world” close to Columbus, Ohio. This $20 billion investment will address the shortage of computer chips, whose production is controlled by Asia.

Some experts believe that manufacturing in the United States is reaching a tipping point after years of decline. The outbreak has prompted an examination of any weak supply chains and has raised possibilities of offshoring to Asia as a possible solution. But reversing direction after more than five years of outsourcing mainly to Asia is unlikely to happen in a hurry. Reborn U.S. industries will likely require greater automation and create more direct jobs than manufacturing plants that did not compete in the last few years.

The decision to return manufacturing is not a decision made lightly and requires a thorough analysis of every aspect of production, procurement, and packaging, according to Araten. Supply chains across the globe that have developed over the last few decades to provide an impressive array of low-cost products are incredibly complex and cannot be easily removed and rebuilt.

A significant investment in automation

To compete with lower-cost labor manufacturing companies in other countries, Rodon invested heavily in automation and robotics. A large portion of the Araten workforce is specialized in high-skilled positions like the fabrication and maintaining the advanced stainless steel molds used to create plastic parts and the supervision of robots that mold injections. Rodon is home to about 2.5 million square feet of office, manufacturing warehouse, and office space in 2 locations located in Hatfield.

In the typical production cycle, Tammy Shiber, 59, is a quality control inspector who celebrated her 34th birthday at Rodon oversees a collection of automated equipment that makes fine mesh discs that serve as filters within the coffee pods that have a single serving. Robotic arms remove discs out of the hot mold, then run it through an automated examination to make sure the perforations are evident and separate the discs from their trees made of plastic (the remaining runners made of plastic are reused) then turns back to gather a new set of discs. Each time 32 presses create 8 million discs per day.

It’s only fitting that a large portion of Rodon’s business is in the medical sector. One company has employed Rodon to supply plastic parts for COVID-19 test kits. This industry has seen rapid growth because of the emergence of the Omicron variant. Rodon also recently created unique handles for cartons made of plastic to withstand the extreme temperatures of freezers used to store certain vaccines.

After Araten was informed of the shortage of medical swabs required to conduct COVID tests, very few major domestic producers and hospitals rely on imports Rodon created a flexible nasal swab using medical-grade plastic after consulting in conjunction with Fox Chase Cancer Center. It’s currently producing one million of them every week. The company wants to increase production, but the new equipment is in back order and waiting for import parts stuck on the supplier chain.

Most of the plastic components Rodon produces fulfill crucial supporting functions, like the threaded seals used on the containers for drinks and food and parts for doors and windows. Toys account for only 1% of the business. The K’nex brand for Rodon, which is famous, was sold in 2018; however, Rodon still makes the toys under contract.

Rodon’s support role as a distributor for items made by other manufacturers implies some limit to the influence it can exert on the complex supply chains of global supply. “We’re no longer the sole contractor for the entire world,” said Araten.

‘Greater control over our destiny.’

Reshoring and offshoring are not something new. America has lost factories and jobs to countries with lower costs since the 1970s. Offshoring is often a hot issue in the political arena, particularly during an economic recession.

I am reading Truck, a Berks County, Pennsylvania manufacturer that produces distinctive toolbox service bodies attached to truck chassis. The company was looking to get back manufacturing that it contracted to China around a decade ago, amid concerns over its quality aluminum and steel fabrication carried out by suppliers from overseas. The company brought the fabrication work into its manufacturing facilities in Pennsylvania and Oklahoma and is not regretting it.

“Having the manufacturing performed locally within Reading as well as in Claremore, Oklahoma, gives us greater control for our own lives and is especially important in the constantly changing environment in which we’re operating in,” stated Balint Peto, the vice director of procurement at Reading Truck. Reading Truck employs 1,200 people across 22 sites, but most of them are located working in Reading.

Peto claimed that Peto said that the “Made from America” distinction is crucial for its customers and field mechanics, and tradespeople who use Reading trucks for mobile workshops. However, Reading Truck’s success is dependent on worldwide supply chains. Its sales are contingent upon getting truck chassis, most notably from American manufacturers such as Ford and General Motors, whose production is limited due to the lack of supply of crucial components imported from overseas, such as computers.

“The absence of chassis availability affects our users,” Peto said.

The cost-intensive nature of American workers and the need to comply with more strict U.S. environmental and workplace rules could result in American items being less competitive in the marketplace. Americans have enjoyed having access to cheaper products at lower costs that were unavailable to the previous generations, due in part to affordable overseas products. However, offshoring has caused an erosion of American income and jobs and disrupted local economies.

Despite advocates’ claims for the resurgence of reshoring, those who doubt the report’s validity said the nation’s trade deficit was record-breaking in the last year due to booming demand for imports. The global consultancy firm Kearney created the annual reshoring index to assess whether manufacturing jobs are returning to America from low-cost Asian countries revealed factories grew in Asia in 2020 to close to the highest level since 2008.

“Our recent research shows how the U.S. has not reclaimed manufacturing jobs in any significant any way,” Kearney reported last year.

A political dimension

There’s often a massive divergence between the claims made of executives in the business world about outsourcing and what’s happening in reality, said Morris Cohen, a professor, retired from Penn State’s Wharton School. Cohen is a specialist in logistics and manufacturing and claims to have been “working on global supply chain strategies for years before supply chains were trendy.”

Companies frequently announce reshoring plans with great enthusiasm to be seen as responsible business leaders, Cohen stated, about Apple’s announcement in 2019 that it would be moving the manufacturing of its premium Mac Pro laptop from China to Texas.

“Well, when you examine the figures, the majority of that they still create was made from China,” he said. “There’s an element of politics to this that is impossible to ignore.”

Cohen collaborated on research in 2015 and 2016, which showed that the majority of manufacturing advertised by the industry as “restored” could be new investments from foreign companies looking to gain access to American markets and new ideas. The study found that supply chain movements worldwide were more overlapping than ever before. One might be outsourcing within the same business departments, while another might be shifting. The conclusion is that there wasn’t any significant improvement in U.S. manufacturing.

“A shift in balance’

However, Cohen acknowledged that there is to be “a shift in the balance” due to the massive disruptions to the supply chain that result from the epidemic.

He explained that the need for efficiency and cost-effectiveness had led businesses to establish worldwide supply chains, frequently assigning all production to massive overseas factories. But the pandemic has demonstrated to managers “that it is possible to take too long down this route” and that maintaining inventory levels that are just-in-time poses a lot of risks.

Managers are currently discussing trade-offs of risks and efficiency to create their supply chain’s resilience and establish regional secondary supply chains, the source stated.

“There’s seen a change in the attitudes of companies,” Cohen said. “But the talk isn’t worth the cost. What are they doing? As we’ve already seen, it’s not an all-out returning of manufacturing to the U.S. or Western Europe.”

Araten affirms that most companies he’s contacted are looking at local factories to support the production they have overseas, a kind of insurance policy to protect against supply-chain interruptions, such as the threat of political instability in other countries.

“It’s difficult to unplug the supply chain when you’re into China completely,” he said. “A majority of businesses are looking to create their supply chain in the U.S. a portion of their supply chain to ensure that when things begin to take place in another country, they’ll be able to do it in the U.S.”

Araten hopes that manufacturers will return all of their production to America one day.

“I am aware that it took more than five decades of offshoring, and we’re not going resolve it in a calendar year,” the man said. “If you can do all of your necessities here in your country, it makes your country richer, it provides you with more choices and makes it easier for you to prosper.”