Small businesses in the U.S. are overcoming lingering supply chain challenges by building their own, bringing manufacturing home and gaining new advantages.
Boyden's perspectives on the news and trends that are transforming industries
Pandemic-era supply chain snags wreaked havoc on companies of all sizes, often leaving them emptyhanded amidst peak demand. For many small businesses the challenges were insurmountable. Lacking the leverage of a multinational in terms of order size, capital or relationships, they were typically relegated to the back of the supply line. Unable to fill orders, some folded. Others started following the lead of multinationals and reshoring. As supply chain pressure remains high, a growing number are going further, setting up their own manufacturing plants and creating more self-contained ecosystems.
“I always wondered what would happen if the global supply chain suddenly ground to a halt,” said Amy R. Broglin-Peterson, an industry consultant and instructor at Michigan State University. “We were spread too thin to continue working to the degree we do with our supply centrally located in Southeast Asia.” Building a domestic supply chain brings businesses closer to their customers. This gives them the agility to react to market demand, while the “Made in the USA” label gives them a competitive edge.
The process has its hurdles, such as labor shortages and costs, as well as suppliers and manufacturers that lack transparency. “I can’t stress how few companies, even big companies, really know where their materials come from, all the way back to the earth,” Broglin-Peterson said. “You’ve got to understand your supply chain. You’ve got to understand your raw materials, your components. Can you even get them locally?”
Innovation and creativity can help. If a material or component is unavailable or too expensive domestically, the company may be able to come up with a substitute without compromising the quality or performance of its products. Or, if a material costs more and cannot be replaced, it may be possible to offset that cost by producing another component in house rather than going to a supplier. “If we can invent a process or shrink development time or reduce costs by doing it ourselves, that’s what we’re bringing in house,” said Scott Colosimo, CEO of Land Energy, an electric motorcycle startup.
Crucially, a small business may not necessarily have the in-house expertise to develop and execute a new supply chain strategy. Experienced leadership talent with supply chain expertise, and ideally a network of domestic manufacturers to tap into, will know how to navigate the process of developing a supply chain capable of manufacturing the product that the company wants in the local market.
Building a domestic supply chain is becoming more accessible, helped in part by “recent policy moves by the federal government to promote reshoring and the growth of U.S. production,” The New York Times reports. “The Inflation Reduction Act, for example, is encouraging investment in domestic battery production for electric vehicles.” Honda and LG Energy announced plans in August to build a $4.4 billion battery plant by the end of 2025.
“There is much more intent to have economic policy that promotes onshoring, reshoring, growth of production in the United States,” said Scott N. Paul, president of the non-profit Alliance for American Manufacturing.