Bringing Manufacturing Back Home or The Re-Industrialization of America

Chicago Innovation Award Nominee 2023

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But First —
We are so honored to be nominated for a 2023 Chicago Innovation Award! A deep and sincere thank you to the Chicago Innovation Award Team.

And now let’s develop a new, re-invigorated, innovative manufacturing engine in the USA!

Sources: IndustryWeek.com; Forbes.com, US Navy and others

It Sounds Good. It Sounds Patriotic. But Is it Real?

Over the coming weeks, we’ll take a deeper look into Re-industrialization and explore the background; the rationale; the challenges, and investing opportunities.

The Background

For two generations the United States has slowly, but surely dismantled the manufacturing engine of this country.

The manufacturing powerhouse that helped us win WWII and rebuild Europe and Japan was slowly dismantled leaving behind what is today referred to as the “rust belt”, better known as Pennsylvania, Ohio, Indiana, Illinois and Michigan.

Some of those jobs just disappeared, but most simply moved to lower cost producers in the pacific rim, Japan for a time and eventually China.

The United States Navy, the most powerful Navy in the world after WWII, actually made such international trade possible by guaranteeing safe passage for shipping across the world’s oceans.  It provides maritime security not just for the US but for all global shipping.

Soon countries found that they could now rely on lengthy supply lines which allowed them to begin to buy products overseas cheaper than they could make them.

And so, it began, the ability for American companies to move manufacturing offshore by building plants in other countries or by shutting down plants in the US and buying from foreign entities.

Trust

At the end of the day as they say, it was all based on “trust”.  Can you trust in the continuous flow of those goods?  The supply chain would now not be from Tennessee to Michigan but from Kobe, Japan to Michigan.

The US Navy provided the maritime security and manufacturing partners around the world did their part to deliver component parts or finished goods on time.

There would be problems from time to time, such as labor issues in critical US ports, or typhoons in Japan.

The basic trust was there and soon China became a very critical link in the supply chain.

Questioning Trust

Recently the trade relationship between China and the US has been strained.

China’s leader, Xi, announced his plan to retake Taiwan, a country that manufactures a large percentage of the world’s most powerful computer chips, by war if necessary.

China has been literally building islands in the South China Sea and has grown it’s Navy to the point where it could seriously limit shipping in that critical passage. This sent shock waves through the countries who depend on it for their supply chain.

Supply chain disruptions caused by the Pandemic were catastrophic and pointed out many vulnerabilities.  Now the Russia-Ukraine war has put many countries food supply at risk.

These factors have caused some companies to rethink globalization.

Couple that with China’s willingness to weaponize and politicize supply chains and you can understand the concerns.

Re-industrialization

Companies in the US and other countries have started moving work out of China.

However, most are not reshoring the work to the US. They are moving it to another supplier other than China in Southeast Asia.

Re-industrialization, means moving the manufacturing back to America.

What is it going to take to accomplish that?  For starters it is going to take money, and lots of it, to construct the plants and the supporting facilities needed to re-establish a manufacturing base.

And there are lots of other challenges.

Much of the raw material used in many manufacturing processes, especially electric vehicles, actually comes from China.

Neither the US nor the rest of the world are going to move everything out of China.

Let’s face facts.  We live in and will continue to live in a globalized world and have do the best we can within those constraints.

However, we have some very important choices to make.

Re-industrialization in America will require selective investment in those areas that are in our best interest and make the most sense.

These are risk-reward decisions. How much disruption to supply chains can be tolerated?

Trusted partnerships lead to mutual growth and can reduce many, but not all, supply chain risks.

Home Work

In order to be successful America will have to commit to recruiting, educating and training a new industrial workforce.

We will need qualified and committed people to initiate new industries and run factories.

This is perhaps the most challenging and most exciting part of Re-Industrialization and will provide the greatest investment opportunities.

Many students will have a path to good jobs and a fruitful career without the requirement of a college degree.

Enhanced education through trade schools will be a boon to the economy.

The toughest task of all will be to convince Wall Street to modify its focus on short term gains and bigger margins, as the only measure of progress.

For now, remember to always “Ride Your Winners and Cut Your Losses.

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