It has been for years, he says. Around 2008, he came to realize that on large items -- like, say, dishwasher size and up -- the savings earned by eliminating overseas shipping could outweigh the extra money spent on labor here. The key, he determined, was to wring maximum efficiency out of the factory floor to keep those labor costs down. A year later, he decided to test the thesis out and moved some of GE’s water-heater production to Louisville. Other product lines followed.
It’s all been such a success for the company -- which is now, ironically, owned by China’s Haier Smart Home -- that Nolan has been waiting for other CEOs to follow his move. It took a pandemic to convince them to do it.
“I’ve always said, this is just economics, people are going to realize that the savings they thought they had aren’t real,” Nolan said in an interview, “and it’s going to be better and cheaper to make them here.”
For some companies, the first nudge they got to revamp their supply-chain lines came two years before Covid, when then-President Donald Trump began slapping tariffs on Chinese products again and again.
Generac Holdings, a maker of power generators, started mapping out plans to shift some production from China, and when the pandemic hit, those plans got supercharged. The company now gets more of its parts from suppliers in the US and Mexico, produces more generators near its headquarters outside Milwaukee and runs a brand new plant in a small town just north of Augusta, Georgia.
“We wanted to be closer to our customers in the southeast,” said Chief Operations Officer Tom Pettit. Low shipping costs and quick delivery times are proving a hit with clients and paving the way for the company to keep growing, he said. Opened just a year ago, expansion work on the plant is already underway.
Russia’s invasion of Ukraine also got Pettit’s attention.
Not just because the war further snarled global trade and added to the surge in freight costs but because it reminded him that China could try something similar in Taiwan. And in the same way that business ended for most Western companies in Russia, so too it could end in China. Suddenly, that benign geopolitical backdrop that had helped encourage so many executives to globalize their operations over the past few decades was vanishing. And this, Pettit said, added to his sense of urgency to change things up.
“President Xi Jinping has not been shy about wanting to reunify China and Taiwan,” Pettit said. “We still think China is incredibly competitive. However, we need to have dual sources outside of China.”
This article was provided by Bloomberg News.