In the wake of the coronavirus pandemic and emerging production prices abroad, many U.S. corporations are returning at least some of the production to the United States. But XStream Trucking Inc. wasted no time in doing just that.
Born in the San Francisco Bay Area, XStream is a design and engineering company that sells fuel-saving appliances for advertising trucks. Its flagship product is TruckWings, articulated panels that fill the hole between the tractor and trailer and deploy at speeds of more than 50 miles consistent with the hour to decrease endurance, fuel economy by about 5%. When the truck brakes, the panels fold.
Engineering of the device began in 2015, with extensive studies and development, notes CEO Daniel Burrows. When production began, it was installed in garages in the Bay Area and Phoenix, Arizona.
Soon, production increased to the point where XStream began moving to China, Taiwan and Mexico, following the example of so many other U.S. brands for less expensive materials and hard work. Today, however, the company is in the process of bringing 60% of its production wishes to the United States.
The offshore move made sense at the time. In 2018 and 2019, Burrows says, unemployment was so low that we “couldn’t rent to other people in america.” It had reached the point where the company would give up the needs of grade 10 drug testing and math skills only to lure Americans to the plant.
Even before the pandemic hit, reminding U.S. companies of the fragility of long supply lines in China and elsewhere, change was in the air. Chinese manufacturing wages were on the rise, and turnover in the plants was distressingly high.
Then came the industrial war that broke out between the United States and China, resulting in the threat and authenticity of the high price lists on many imports. The genuine scenario seemed to replace each and every week, as they were announced, postponed and then suddenly rate increases were introduced.
“We were looking to figure out what that meant,” Burrows says of the intermittent tariff war. XStream would be stuck with boxes in the ocean at the time a fare would be announced, resulting in a really significant minimisation of profitability. For a small company, which wasted the time and resources to deal with the complexity of geopolitics, it was “a hammer blow.” Nor can you be waiting for how the dispute will spread in the months and years to come, so it is highly unlikely to identify a reliable source chain.
The coronavirus only served to highlight the disorders that XStream had with manufacturing abroad. The company had some merit on many other companies caught up in the pandemic, as the industry it served, advertising transport, was considered “essential to its mission”. But he was still angry about the varying degrees of action between, for example, the United States and Mexico.
“The Ohio plant would probably be operational, but the Mexico City plant would have another policy and could not satisfy our client,” Burrows recalls. “There were inadequate public policy issues and we didn’t have a lot of inventory.”
XStream knew that the resolution of positioning production was more than a matter of comparing labor positions, even as the China-U.S. pay gap narrowed. The overall load of the nomenclature had to be examined, adding the shipment, operational complexities, and the threat of business disruption. (Once again, the ever-changing price landscape made the latter attention even more critical.)
Finally, there was the increasing complexity of XStream’s own font chain, which required reducing the physical distance between the manufacturer and the customer. Heavy and bulky TruckWings panels require specialized tubes and aluminum supports that want to be cut and laser molded, as well as bundles of cables made from scratch, ultrasonic sensors, an electronic case and a pneumatic system, all of which will have to come from several specialized manufacturers. In addition to the two Ohio providers, XStream works with vendors in Pennsylvania and Phoenix, then assembles the games on a site in North Carolina.
Automation is essential to the ability of many brands to operate plants in the United States, thus reducing their dependence on human labor. Burrows says XStream’s plans are based on a combination of cutting-edge machines and people, on high- and low-rated jobs.
By relocating much of its production to the United States, XStream has reduced order times and overall costs, and has at least partially moved away from formula shocks caused by price lists and coronavirus. But only a few years ago, such a technique would not have been possible.
“Frankly, [American] suppliers are a little more labor-hungry today,” Burrows says. “In 2018 and 2019, many of them didn’t rent enough people for the paintings they had.”
As to whether XStream intends or even strengthens its position in domestic production, Burrows says the company doesn’t have a long-term strategy for this. “It will have relationships with our individual suppliers,” he says. “It wasn’t like I told my source chain manager, “We got here on the ground.” Eventually, it made sense. American brands have produced a greater combination of price, time and quality.”
Next: How the pandemic affects procurement strategies.