Michael Stumo \ December 23, 2021 \ Inside Sources
Much has been made in the news lately regarding America’s shortage of consumer goods. Increased consumer demand in the wake of the COVID pandemic has led to global shortages of many industrial products. And with cargo ships backed up and waiting to enter America’s congested west coast ports, there’s now a bottleneck. Not only are consumers waiting for imported goods but many domestic producers are also waiting on inputs from overseas—which has left them unable to assemble final products.
It doesn’t have to be this way, however. Rather than remain dependent on imports, the U.S. must start manufacturing more goods at home. Significantly, some domestic producers are already proving that this is the smart path forward. In fact, companies that source their materials in the U.S. are enjoying a boom in business.
A good example is Kason Industries, which makes equipment for the foodservice and trucking industries at its two Georgia manufacturing plants. Despite the slowdown affecting many businesses, Kason is continuing to crank out products.
Kason’s work requires plenty of steel, zinc, and aluminum. And given the current supply chain crisis, the company should be left in the lurch as much as everyone else. But Kason vice president Burl Finkelstein explains that the company simply doesn’t rely on China as heavily as its competitors. And so Kason is currently doing record business instead of waiting on supplies from China.
It helps that Kason is vertically integrated. That means the company simply needs to buy the raw metals needed for its metal stamping and die casting operations in order to make products—such as handles, latches, and hinges—that are in high demand right now.
However, other U.S. companies—the ones that depend on China and other countries—are waiting months at a time just to get manufactured components.
Why is delivery from China so slow right now? One problem is that production in China has slowed due to the COVID pandemic. But also, U.S. consumers have grown more reliant on online retailers such as Amazon. And so, factories in China have shifted to cranking out more consumer products—rather than manufacture industrial components needed by U.S. assembly plants.
There’s also the challenge of higher shipping costs. Cargo delivery from China now costs roughly five times more than it did a year ago, thanks to COVID disruption. As a result, Finkelstein says that Kason has seen a number of delays on specialty items. But the company is generally insulated from such shipping concerns. And Kason has also stocked up on American-supplied steel and other inputs.
There was a time when Kason contemplated moving its supply chain to China—since its competitors were all moving offshore. But Finkelstein says that relying on China offers its own problems. Not only did U.S. companies inevitably transfer valuable industrial know-how to their rivals in China, but they subsequently experienced serious quality problems from unreliable Chinese vendors. Those quality problems are often compounded when companies find themselves waiting months just to get corrected parts from China. In contrast, U.S. companies that source from domestic suppliers are often able to get updated versions in mere days.
It doesn’t have to be this way, however. U.S. producers should follow the example of companies like Kason that are thriving because they’ve wisely opted to source materials from domestic U.S. companies.
It’s past time for Washington to rethink this import dependence. For too long, policymakers have championed cheap imports as a cure-all for the economy. But that needs to change if Americans are to enjoy reliable access to the products they rely on every day.