Episode 9 - U.S. Manufacturing Today

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In this episode of U.S. Manufacturing Today, sponsored by Veryable, host Matt Horine discusses critical trends in American manufacturing with Rosemary Coates, the Executive Director of the Reshoring Institute and President of Blue Silk Consulting. Coates, a seasoned supply chain consultant and bestselling author, shares her extensive experience and insights on reshoring, nearshoring, and global supply chain strategies. The discussion delves into the driving forces behind reshoring, such as geopolitical tensions, supply chain disruptions, and rising overseas labor costs. Coates also highlights the complexity of exiting Chinese manufacturing, setting up new manufacturing locations, and the importance of automated and sophisticated manufacturing processes. The episode emphasizes the need for flexible supply chain strategies, the economic benefits of domestic manufacturing, and the future landscape of U.S. manufacturing.

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Timestamps

00:00 Introduction to U.S. Manufacturing Today
00:19 Meet Rosemary Coates: Reshoring Expert
01:09 The State of Reshoring
05:11 Challenges of Leaving China
06:54 Establishing New Manufacturing Locations
13:39 The Complexity of Supply Chains
19:41 The Future of U.S. Manufacturing
25:28 Conclusion and Resources

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Episode Transcript

Matt Horine: [00:00:00] Welcome back to U.S. Manufacturing Today, sponsored by Veryable, the podcast where we dive deep into the forces reshaping American industry innovation and the future of our economy. I'm your host Matt Horine, and today our guest has been at the forefront of reshoring global supply chain strategy and building a more resilient US manufacturing base.

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Rosemary Coates is the executive director of the Reshoring Institute and President of Blue Silk Consulting. She's a bestselling author of five books on supply chain management, a seasoned consultant to more than 80 clients worldwide, and an expert witness in legal cases involving complex supply chain issues. Rosemary's passion for reshoring has driven her career, and today we're going to tap into her expertise on topics like moving manufacturing. To other markets, the rise of Nearshoring, alternative global markets, and the powerful benefits of bringing production back to the United States.

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Rosemary, thanks for joining us today.

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Rosemary Coates: My pleasure. Thank you.

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Matt Horine: Before we jump into the strategy side of things, I'd love to set the table a little bit. Reshoring used to feel like a [00:01:00] buzzword, but today it's becoming a real strategic necessity between geopolitical tension, supply chain disruptions, and rising labor costs overseas. The world is changing fast.You've seen these global shifts firsthand for decades. To kick things off, can you tell us a little bit about how you view the state of reshoring right now?

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Rosemary Coates: So the Reshoring Institute was formed in 2014, so we've been around 11 years and have seen all the trends and have a, I think, a pretty good understanding of what's happening in the marketplace. Over that period of time, we saw slow and steady growth and interest in bringing manufacturing back, and then the pandemic hit, and there was a lot of interest because so many people suffered with their supply chains as a result. And now with the tariffs, there's certainly serious consideration being given to reshoring or nearshoring. I wouldn't limit it just to reshoring. A lot of companies, a lot of our clients are considering Mexico also as an alternative. So right now there's a lot of chaos out there [00:02:00] about the tariffs and you know what to do next. And I think in most companies are in a holding pattern waiting to see how it shakes out before they make a move.

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Matt Horine: From your perspective outside of just tariffs, this was something that predated tariffs. Even your institute being founded in 2014 predated pandemic. You saw the long version of this, and we talked to many manufacturers of the long arc, long horizon times of their planning strategies. From your perspective, outside of those two things, what are some of the biggest forces pushing companies to rethink and maybe reshore nearshore as opposed to doing it overseas?

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Rosemary Coates: That, that's an interesting question. I spent the better part of 15 years helping companies offshore to China, and so I became a Chinese manufacturing expert and did that for a long time before we turned around and thought, Hmm, this is not a good idea and we should focus on reshoring. My perspective is very long over about a 40 year career in global supply chains, and I think what we're [00:03:00] seeing now is a lot of emphasis being placed on doing the analysis. In the past, I'd have clients come to me and just because they knew I was doing work in China, they would say, just get me to China. My competitors are all there. I'm pretty sure it's cheaper. Let's just go, just get me there. Um, and there was very little analytical thought or any analysis done at that period of time.So that was in the, from about 2000 to maybe 2015 or so. Not so today. I think there's been a significant uptick in sophistication in the last couple years. Supply chain people are now at the C level, so you see chief supply chain officers. You see the decisions are being made, are much more strategic in nature and involve much more thoughtful approach to both the analysis and how to make the economics work, but also taking into consideration the [00:04:00] geopolitics of the world. These days now we're seeing people in supply chain management just really rise to the occasion and a lot of really smart people making the right decisions now.

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Matt Horine: That's good to hear. It's really well informed, and a lot of times what we hear about is either the Made in America movement or bringing reshoring back or reindustrialization. All of those things are really big buzzwords, and they're great because there's real things to it and real people behind it. But it's fascinating to see the analytical approach that people have taken over the past couple of years, even prior to pandemic, and being informed by the actual analysis of what's going on and what makes for a better business. You hit something really interesting as an early part of your career, people looking to outsource to China, and we saw that all types of ways with labor, cost outs being concerns and lower cost of production in theory over the first part of the decade in the two thousands. But what are some of the most realistic paths companies can take to transition their supply chains out of China? And we know that's a little bit more complicated [00:05:00] than it sounds. It's not just a a light switch flip and everybody makes their decision on the fly. What are the key risks and some of the common mistakes companies makes? When they try to do that.

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Rosemary Coates: There's two parts to that question. First of all, how do you leave China? And secondly, how do you establish in a, a new location? Leaving China is a lot more complicated than people think. You often have to make considerations. For example, You have to apply to leave or shut down your factory. In China, you can't just turn off the lights and lock the door and go away. The government requires that you apply for a permit to leave. You also may have supplied your Chinese factory with tools or dyes or molds, and you think they belong to you. Ha. Once you have sent machinery or equipment or molds to a Chinese factory, it's considered part of the infrastructure. And really difficult and rare to to get that back to you, even though it may have your name on it and you may think you own it under contract [00:06:00] and so forth. No, it's not gonna happen. Plus the Chinese government often won't allow you to export used goods. That's another issue. Then you've got employment contracts. So I don't know if you knew this or how many people out there know this, but most workers in Chinese factories are on employment contracts for a year or two years. So if you decide to shut down your factory, guess what? You have to pay out all those contracts, and that's a big surprise. I've had a few of these kind of tough conversations with CFOs saying, guess what you got? Big chunk of change out there, you gotta pay. The other thing is once you announce that you're leaving, you're gonna have all kinds of quality issues and sabotage, and then all sorts of stuff goes on. You really need help and guidance of somebody who has done this before and can help you watch out for the gotchas when you're leaving. Now on the other side, coming to a new location you have to consider, [00:07:00] you don't just snap your fingers and magically begin to manufacture. We usually tell our clients it'll take you 18 months to get set up or to find domestic suppliers. So you've, you've gotta find a factory location. You have to buy equipment, you have to try to find workers, and there's a terrible worker shortage across America already. And to have new manufacturing come back, it's gonna make it even worse. Then you've got to other considerations and a lot of people thinking about manufacturing in the US haven't considered power. For example, I had a conversation with an investment banker. A couple weeks ago was in the power sector, and he said, we're trying to build power as fast as we can, especially to keep up with the requirements for ai. But if we were to have a giant leap forward in terms of manufacturing, there's not enough power in our grid to support it. So that, that was a surprise to me, but can certainly see how that would be a difference. And then beyond worker [00:08:00] availability and the power, you still need to think about where are your raw material suppliers, your parts suppliers. This whole process, not only leaving a a country like China or other locations and then reestablishing in a new country is not simple and not straightforward, and I think that's a nuanced point that sometimes our politicians overlook.I. He seemed to think you can snap your fingers and start manufacturing tomorrow, and that's not the way it works. It's more complicated than that,

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Matt Horine: certainly, and certainly for the best outcomes. You hit a couple of interesting points there. One, the power issue. I became aware of it a couple of weeks ago when I was talking with a manufacturer and they had moved facilities and one of his biggest constraints at the time was working with the county and the utilities to get the right.Amount of power delivered to his building to set up these machines, and it was a cross town move, not a international move or a US relocation or a site selection issue. This was a real business that said, I have to just move facilities because I like it [00:09:00] better. They found it really challenging. It's a fascinating thing that people don't get into the details on that.As far as China goes, also very interesting. What took, one of the things over the past 50 years has been the rapid globalization and standup of the industrial machine in China. They're certainly not willing to let go very quickly or shift to more of a consumer economy, which is what I believe. There's some strategy around trying to balance out the consumerism between our countries as well.But one of the things that people are looking to do is to shorten that chain, and a lot of the work that your organization does looks at other places for nearshoring and places like Mexico, Latin America. How do you compare those to sourcing maybe in Southeast Asia or Vietnam or Malaysia? These are all those second level countries that everyone's talking about.Were caught up in the reciprocal tariff by surprise. Vietnam was initially at 46 to 50%, somewhere in that range. I think that will change. But those were the fallbacks and it goes to show, you know, what else do people need to take into consideration as they're [00:10:00] making these, as they're making these decisions?

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Rosemary Coates: One of the first things that we do with our clients is to have them work through their cost to bill materials, and so that we have a fundamental understanding of how much labor is involved in their product. And that's the first step in determining where you might consider manufacturing. You also look at the total cost of ownership.Everybody's got a TCO model that they would look at, and those are important considerations too. But really the cost of your materials and the labor cost is a critical first step. I like to use the example of men's shirts. If you're making men's shirts in a sewing factory, you're gonna have thousands of people sitting at on plastic stools, sewing all day long at sewing machines.That kind of manufacturing, which includes a lot of labor, is likely to stay in a foreign location where there are a lot of workers and they're willing to work for low wages. On the other hand, if you make fabric that goes into that men's shirt, the development and [00:11:00] manufacturer of textiles is fully automated.If you've ever been to a textile factory, there's nobody there. It's just machines making stuff, making fabrics. In that case, there's very little labor involved and you have more options in terms of location, including the us. So there's actually quite a bit of textile manufacturing in North and South Carolina and in Georgia.So, you know, you have to understand your product to structure the profile and then choose an A location appropriately for that. If you're fully automated, then you know, perhaps you could evaluate coming back to the US and we did a recent study on the minimum wages across the country as of January, 2025.And obviously what you would expect, the minimum wages are in rural areas or in the rural south, and you're making something that you have automation. You don't need a lot of people. Then perhaps one of those locations is a good spot for you. Otherwise you need to think about sending your [00:12:00] sewing to Bangladesh or Central America or somewhere where the wages are low and people are willing to work long hours on sitting on plastic stools. I've visited a number of factories in China where man, you walk in and there thousand people sitting at sewing machines. It's just unbelievable and so different from what we would experience in America.

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Matt Horine: You bring up a really timely point. I saw the Treasury Secretary mentioning today and talking about the tariff strategy and talking about the manufacturing strategy saying we're trying to bring advanced manufacturing processes. We talk about semiconductors, we talk about those things, but there's this core things that America used to produce, and we look at the automotive sector. You mentioned textiles, which have advanced rapidly over the last 25 years. People think that it, oh, it was just offshore because of labor. We work all the time with companies on their labor strategy because it's the critical constraint from our point of view of reshoring and finding flexible models to do that. But it's also fascinating to think in those 25 years, 30 [00:13:00] years, that things have moved offshore, how much the progress has been made in those raw material sectors in places where there really is the capacity to build. And it's all about site selection for sure. Speaking of buzzwords, we hear about agility and it feels like one, but it's a modern supply chain strategy. You've probably seen it used countless times over the past five to 10 years with pandemic era supply chain strategies and what we're talking about today with tariffs. What are some of the ways that companies can bake more flexibility into the manufacturing and sourcing decisions? I think sourcing's a fascinating topic because we had a guest on recently talking about where do they buy their raw materials from? What kind of analysis goes into it? Would love to get your insights on that.

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Rosemary Coates: We know from some recent research we did in interviewing 18 C-level executives that there is a strong interest in domestic sourcing. So trying to increase domestic sources as in one approach that I think's gonna help our economy and the most likely interim step to bringing some other manufacturing [00:14:00] back to the us. So there's some of that going on. People would ask me what I did for a living. I used to say, oh, I'm in global supply chain. And their eyes would glaze over and they'd like, let's move to the bar. And then the pandemic hit. And people realized that supply chain is ourAchilles heal in us getting in products and so forth. And now there's a realization, there's a lot more complexity to what happens in supply chain chains. Like we were talking before. It's one thing to go to to target or Walmart and buy a shirt, and it's another thing to understand that somewhere there was a textile manufacturing going on and then there was a sewing shop, a sewing factory somewhere that made those, and then there was a button factory and all of a sudden a simple product like a shirt becomes incredibly complex and globally sourced as well. The acknowledgement that there's high complexity in most supply chains is really important when you're thinking about where in the world to, to manufacture or how to be flexible about it.

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Matt Horine: It's amazing [00:15:00] how complex even just a shirt can be sometimes There was a online surge of talk on X, which was formerly Twitter, about high-end luxury items and where they were made in China, and how many different points those go to, and the repackaging of it.And people don't think that they go to a retail outlet. They buy online, they buy a finished product. And so that consumer mindset, that finished product mindset really has to shift into what are each component. And I always like to use that analogy 'cause as we're consumer first, right? That's something that we experience. It hits the pocketbook first, but if you apply that across the board to industrial space, it's really complex. One of the things that we have talked about extensively, and we say those words like reshoring. When you look at companies who successfully reshore to the us, which you have certainly seen, what advantage are they seeing beyond just the supply chain component of this? Because that's the big topic, but what is some of the great success stories that you've seen when people bring that back to the United States?

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Rosemary Coates: Yeah, a lot [00:16:00] of companies that we've worked with just have a desire to expand or to manufacture in the US because it's the patriotic thing to do or to help our economy, or it's just a preferred approach. We also know that consumers buy a fairly wide margin, prefer products that are made in the USA. We did a survey a couple years ago. We interviewed 500 people across the US and almost a person. They said they feel they would rather buy products that are made in the US and there's a perception that they're higher quality. And then also we know when you have manufacturing in the local area, in the local economy. It contributes overall to building that economy. So there's about a four x times enhancement for every manufacturing job in the local economy because people who work in manufacturing make a living wage or a good wage or middle class wage, buy houses, and they buy cars and they buy, they get [00:17:00] their hair done at the local salon, and they shop at the grocery store, and all these things contribute to fueling the economy in those local areas. So that that's a really big benefit of manufacturing as well. We look at that and flexibility. I think you had mentioned also looking at where in the world are you manufacturing today and what could you bring back? We're not thinking that everything is gonna come back and probably shouldn't, and secondly, if it doesn't pay a living wage.We have to supplement with welfare and we don't wanna create a welfare state what we want to manufacturing with skilled labor that pays a good wage, a good middle class wage, and helps us strengthen that middle class in America.

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Matt Horine: You hit the nail on the head with that because so often many of the conversations I have manufacturing is synonymous with the middle class.What people remember it as part of this kind of nostalgic look back and what we mean by reshoring and what we mean by re industrializing and what that does to lift up local economies and communities. So that's a huge [00:18:00] important component of this. And you're right, there are things that probably should not come back and things that we really do want back and for the future, if we look out to the next 10, 25, 50 years, what do we want that to look like?And part of our reshoring story.

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Rosemary Coates: And manufacturing has evolved. We shouldn't be thinking about going back to 1960s manufacturing. My, my grandfather worked at a, a steel production facility at Zy Taylor to makes drinking fountains in Morton, Ohio. And I can remember him coming home from work and he was dirty and smelly and he had grease under his fingernails and it was growth, right? That was manufacturing. Today, it's more likely you get out of your bunny suit. You've been working in a high tech clean room, and that's a completely different kind of approach. It requires more sophisticated skills, more thoughtful input, the use of computer and so forth. It's completely different today.

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Matt Horine: It's funny that you mentioned that because I think of my grandfather and him being what I would call the classic greatest [00:19:00] generation profile, and somebody who fought in World War II came back, got a great manufacturing job at a BF Goodrich Tire plant in northeast Oklahoma, and he worked that job for 25 plus years and received a pension and unfortunately was forced retired and was lucky enough to retire when they shored that that factory and what it did to that town and that part of the world, and so much of that industrial base. There is so much opportunity in the modern world and what we think of, we've moved 60 years into the future, what we can make, what we can do, and what we will need to make and do.It is pretty fascinating to think about and what the good effects of that are on the total population and how that brings back real wealth in the country. If you could tell us a little bit about the Reshoring Institute, the research, the consulting work, and how you're helping companies make smarter, more informed decisions.

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Rosemary Coates: As I mentioned, we've been around for 11 years now and we have a dual mission. So one is to help companies rethink their global manufacturing strategy, and that doesn't mean [00:20:00] just strictly bringing everything back to the us. It really includes thinking through alternate locations, whereas the best match for your manufacturing and so forth.So that's one of them. We do. Consulting projects there. We do site selection, location, we do labeling of your product made in the USA, which is a lot more complicated than you would think. Uh, there are all kinds of regulations and different requirements. We do other strategy work, we do domestic sourcing work, all of that.And then the other 50% of our mission is to help graduate student interns be exposed to manufacturing. So we take. Paid internships, mostly grad students from MBA programs and masters in engineering. But we also take undergraduates as well, and we put them to work helping us with our research, and they become junior consultants on our projects.We send them out to factories to learn about what's going on and because these people are going to be the [00:21:00] manufacturing managers of the future. And we're trying to get our hands on 'em early and teach 'em about manufacturing. There's been a dearth of education and operations and manufacturing for about 25 years at the university level, and then we publish all of the research.Everything is on our website and it's all downloadable. It's all free. It's a free public service. We have that dual mission today. We are affiliated with 19 universities in America, so we take interns from those universities and we work 'em hard for a hundred hours.

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Matt Horine: That's great. You hit something really important there.We talk a lot about the workforce and the future of the workforce, and. People have not been exposed to manufacturing in any kind of formal way outside of classic management training or working in the actual manufacturing sector themselves. We had a guest on recently who said, Hey, we've moved to a service economy in a lot of ways, and that's good because we export services, we, we do these types of things.We're service-based economy in a lot of ways. We're [00:22:00] particularly hard on people when we see that gap, but it's great that there are organizations that are saying, Hey, let's close that knowledge gap and get people in there early because it's an exciting time to be in manufacturing. I don't re recall a point over the last 15, 20 years of my career where people are genuinely excited about it.People are acquiring and buying businesses. They're going into the sector and learning it from the ground up. They're doing all that type of work to make it a reality, which does bring up a great question. We're doing all this work. We're doing all this research and working through things. If you could paint a picture of US manufacturing five years from now, if companies make the right moves, what does that look like in five to 10 years?What's a great end state of this?

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Rosemary Coates: It's hard to predict the future, obviously, but I, I think there's gonna be a growth of domestic sourcing, some growth in domestic manufacturing, but I think what we're gonna see is an uptick in. Sophistication and making those kind of decisions. I think it's very likely we're gonna see growth in contract manufacturing also.So companies decide to outsource their [00:23:00] manufacturing. There are a lot of contract manufacturers out there that have multiple facilities around the world. So being able to move your production from facility to facility based on the conditions and cost and abilities and so forth is really a nice option.You, it's good to have options. There's a fire or flood or hurricane or terrace or whatever it is. You may have the ability to be flexible and move around, so I think we're gonna see a pretty big growth in contract manufacturing as well. And then definitely the march toward automation. I just don't see those, those 23 cent an hour t-shirt production or the low level manufacturing in America anymore.I think what we want is the more sophisticated manufacturing and more sophisticated workers, more skillful workers that have some crossover knowledge between day-to-day manufacturing and engineering and math skills. Which are all required in manufacturing. It's a little [00:24:00] surprising how much math is involved in manufacturing, but that's a skill that we need to emphasize more, I think.

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Matt Horine: Absolutely. No, that's a, it's a great outlook and something that we kind of phrase is a rising tide. People talk about automation or ai, they're scared of these things sometimes or they're trying to fill the void with talking through and what it means. In most cases where I've seen automation implemented, usually it's upskilling workers as well, and so that pairs up really nicely with a vision for the future.What's your advice to a company that's been thinking about reshoring but keeps putting it off? And there probably aren't too many putting it off right now, but there maybe a few holdouts. What would be your advice to them?

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Rosemary Coates: I think every company should have a plan A, plan B, and plan C, and have thought through the details of each of those plans and applied the financials to it.It's not enough to just have a big idea and write it down, but you also need to know what the costs are going to be and what is gonna be viable and what won't. So I think thinking about reshoring. A company should have options [00:25:00] available and certainly reassuring is our favorite idea because we are the reassuring institute.We also recognize that you really have to think about manufacturing on a global scale these days. It, it's not gonna be all domestic and it never will be. That stuff is never coming back. I think you need to think appropriately. What's your product? What's the cost structure? Where is it appropriate to manufacture that? What are my options and really be more sophisticated in terms of thinking through those ideas.

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Matt Horine: That's great advice. Where can our listeners find out more about the Reshoring Institute?

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Rosemary Coates: We're at www.reshoringinstitute.org, and you can send us an email at info@reshoringinstitute.org or reach out to me at rcoates@reshoringinstitute.org.

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Matt Horine: Rosemary, thank you so much for joining us today and sharing all those insights.

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Rosemary Coates: Uhhuh. Thank you.

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Matt Horine: Absolutely. And to stay ahead of the curve and to help plan your strategy, please check out our [00:26:00] website at www.veryableops.com and under the resources section titled Trump 2.0, where you can see the framework around upcoming policies and how it will impact you and your business. If you're on socials, give us a follow on LinkedIn, X, formerly Twitter, and Instagram. And if you're enjoying the podcast, please feel free to follow the show on Apple Podcasts, Spotify, or YouTube, and leave us a rating and don't forget to subscribe. Thank you again for joining us and learning more about how you can make your way.

Episode #9: Strategic Reshoring-Navigating the Modern Manufacturing Landscape with Rosemary Coates of the Reshoring Institute

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Episode Transcript