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Tale of Two Factories: Automation and Reshoring Examples - Part 2

August 7, 2023

 by David Collins III

outside of a factory

Automation and reshoring are significant topics in the manufacturing world, with companies considering reshoring as an option to improve their factory operation. Various factors often lead companies to consider reshoring manufacturing operations, including rising costs, political instability, and de-risk supply chains. Costs in North America are much higher, so companies are turning to automation to match pricing from Asia. While automation is a valuable tool, its success depends on proper implementation; if done poorly, it can fail. This is the last part of our 2 part series on successful reshoring and automation. You can read part 1 here

 

Bath and Body Works' Reshoring Efforts

Renaud Anjoran, one of our partners, sent me two interesting reshoring case studies from the Wall Street Journal that illustrate this point well. The first is about Craftsman Tools’ efforts to build a highly automated factory in Texas and how that failed. You can find the original article here and our blog: Reshoring Success and Automation Failure: A Tale of Two Factories. I recommend you read our blog before continuing. 

The second article is about the success of Bath and Body Works (BBW) in its efforts to reshore and automate production. If you do not have time to read it or do not want to use a free article from WSJ, below is a summary:

Bath & Body Works implemented a groundbreaking production initiative to bring all production steps to a single location, creating a dedicated "beauty park" near Columbus, Ohio. Previously, their products traveled more than 13,000 miles from various countries, causing delays and inefficiencies. Now, multiple factories manage distinct aspects of production, reducing the time to get products to distribution from 3 months to just 21 days. The success of this model during the pandemic and a desire to boost domestic industries have caused a factory-building building boom in the US. However, replicating this model may be challenging for industries with specialized supply chains deeply rooted in Asia, where land, labor, and compliance costs are lower.

 

The Decision to Change and the Challenges Faced

Before we go into how BBW made this transition and what the company did right, let us examine why it decided to change. Plastic soap bottles (and related products) seem like the perfect fit for overseas manufacturing. They are inexpensive, disposable, and change products often. Additionally, production can be very manual as the production process involves the assembly of large volumes of a complicated pump. 

While this model has worked well for other companies and comparable products, it presents several challenges. Lead times are long and reactivity to customer preferences is low. To quote from the article: “A $7.95 bottle of Bath & Body Works foaming hand soap used to take three months to put together. The pieces had to travel more than 13,000 miles from China, Canada, and Virginia to the company’s Ohio distribution center.” Now the entire production process is clustered together in one complex.

 

A Proactive Approach to Lead Time and Planning Challenges

The lead time was a real issue for BBW. It is difficult to tell in advance what aromas will be the most popular, and the 3-month lead times mean that the company would have difficulty reacting to sales. It would be left with considerable unsold stock and insufficient amounts of the desired products. Building a manufacturing complex with all the necessary suppliers means that the company can react quickly and collaborate effectively to changing market conditions. Contrast the situation to Craftsman. While it is good marketing, there is no similar need to change the production location as the fundamental project does not change as readily.

How BBW did this was through careful long-term planning. Craftsman was building a new process with new equipment in 18 months (a challenging task for any company). BBW started the process in 2008 and did not open the first factory until 2011. New suppliers, such as Rieke Packaging which made the plastic bottles, moved in over time. 

 

Investment Strategies for Overcoming Supplier Challenges with Automation

BBW was determined to remake its supply chain in North America to serve its customers better and give the company more agility. The process was not easy and took time. Suppliers, unsurprisingly, resisted the push to move their manufacturing out. For example, making the pumps would require a $12,000,000 investment (employing 10), whereas a similar facility in China employing 50 would need $2,000,000 in investment. 

Guaranteed orders from BBW allowed the supplier to take the time to develop the machinery that could make its soap pump at the same price point as China. That was critical for the supplier’s decision to spend the time and resources to develop the automated process that would make the effort worthwhile. 

Automation was a tool that BBW used to reshore successfully, but it was only one part of the effort. As we discuss in detail in our blog: “How To Get Your Manufacturing Automation Timeline Right”, you need to understand what automation is meant to accomplish and if it is the best solution. The article did not cover it, but it is safe to assume that BBW and its suppliers worked to eliminate waste in the process first before making the transition to automation. 

 

Reaping the Benefits of Reshoring

Reshoring is complex and will only work for some companies and some products. However, if done well, reshoring can bring a multitude of benefits. BBW was more successful because they understood their situation and spent the time, energy, and resources to make it a reality. With automation, the company reach their goal. The work paid off as well. While other companies struggled during the pandemic, BBW increased production, changed its focus as needed, and increased its profits while its competitors struggled.

Recently, we held an AMA event focused on factory relocation. Read our blog on the key takeaways of the AMA event


plant relocation

Topics: Plant Relocation

David Collins III

David Collins III

David was a Senior Strategy Consultant for Deloitte, served in Iraq as a Special Operations Civil Affairs soldier, and as a Governance Advisor to the Afghan Government with the Department of State. At CMC, David advises clients on strategy and investments.

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