Reshoring promises Memphis logistics jobs boom
‘So much manufacturing and distribution of product has gone offshore. But it’s going to come back. Is it a long-term trend? I don’t know. I do know reshoring will be a trend for the next 4 or 5 years,’ says Dan Wilkinson
Dan Wilkinson has seen every Memphis trend in industrial real estate going back to the end of the Eisenhower era. And what does he see for Memphis coming out of the pandemic?
More jobs.
Some things we buy from overseas will come back to be made in the United States.
That’s called reshoring.
“So much manufacturing and distribution of product has gone offshore. But it’s going to come back. Is it a long-term trend? I don’t know. I do know reshoring will be a trend for the next four or five years,” said Wilkinson, 82, a real estate broker at Colliers International.
All this might come as a surprise amid the dire talk about the coronavirus outbreak.
Once the virus was loose in the country, shelter-in-place orders grated on the entire U.S. economy, idling more than 33 million workers, including an estimated 100,000 in metropolitan Memphis.
Times are tough.
Why would someone build even one distribution depot here much less the entire fleet Wilkinson predicts?
Bringing it home
The pandemic exposed a supply chain issue.
Americans rely on medicines, health care and other products made abroad or dependent on key materials imported from thousands of miles away.
When the pandemic roiled China’s manufacturing base in January – cities there shut down like here -- product flow to the United States was disrupted. For example, the Wall Street Journal reported health devices, including face masks made in China, were diverted to China’s own citizens.
“I’m not smart enough to predict who will come back and produce here,” Wilkinson said. “None of us just a few weeks ago could foresee the sea changes coming in how things are done. But the changes are coming. It’s going to happen.”
President Donald Trump’s America First strategy wielded tariffs and trade wars, but did not sharply lift U.S. manufacturing employment.
Since 2002, the number of machine shops open for business nationwide has dropped 19%. Over the same years, Tennessee lost 17% of its industrial jobs, although dozens of auto-parts plants followed Volkswagen’s mega-plant into East Tennessee. Tennessee reflects a broader industrial decline. Nearly five million U.S. manufacturing jobs have vanished since 2002, the year after Washington ushered China into the World Trade Organization, fueling Beijing’s prosperity-through-exports policy.
Hit hard by the virus, however, Americans are mulling trade flows. Serious talk in business and political circles has focused on reshoring. This would alter the global supply chain fashioned by manufacturers and Wall Street to lower production costs for U.S. companies.
“I do think at the local, state and even at the federal level we’re going to look into how can we change manufacturing to make sure the critical products we need are made here in the United States,” said Bradley Jackson, chief executive of the Tennessee Chamber of Commerce & Industry in Nashville. “In the future, manufacturing will bounce back.’’
Build the Memphis logistics sector
Wilkinson grew up at Boston, graduated from Dartmouth, loved playing the banjo. He wandered into the real estate business. The year was 1960. Memphis was a manufacturing and cotton-trading city. He didn’t really know it.
Banjo in hand, he was a young musician riding commercial buses home to Boston from Los Angeles. The interstates had not been built. Crossing the continent on the federal highways took 89 hours.
Weary when the bus stopped in Memphis, he found his way to the home of Russell Wilkinson, an uncle, and asked for a place to sleep and $20. Russell obliged. He also offered him a place in his commercial real estate firm.
The young man stepped into Wilkinson Snowden precisely when the firm was pushing the city’s boundaries. Memphis then was oriented north and south. Industrial districts holding big plants including E.L. Bruce, Memphis Furniture and International Harvester were positioned close to U.S. 51, an artery running roughly parallel to the river.
Wilkinson Snowden helped lead commercial development into the country about 10 miles to the southeast off U.S. 78, an area now defined by the distribution centers and truck terminals spread around the Winchester-getwell roads intersection.
Other than time fulfilling his ROTC commitment to the U.S. Army, Dan Wilkinson’s young years were spent seeing Memphis come into its own turning its cotton-shipping talent into shipping goods. After Fedex and its jet fleet arrived in the 1970s, Memphis International Airport would become the world’s largest cargo airport after Hong Kong’s.
What comes next is reshoring. He said a new tide of production and distribution centers could equal in economic impact the early rise of the Winchester-getwell area.
Catch your breath, proceed
That’s a lot of impact.
Sound farfetched?
Maybe.
No one is certain reshoring will take hold and if it does how much work might return.
Trade expert Kellie Meiman Hock notes the move of supply chains out of China was under way before the pandemic and even if reshoring gains ground there’s a logic to keeping some output offshore.
“The issue is even if countries attempt to regionalize supply chains, for high-tech goods there will always be certain parts that for cost and supply reasons are sourced in limited localities,” said Hock, managing partner of .Washington consultant Mclarty Associates.
But one point made by Wilkinson rings true.
In Greater Memphis, the 55,000-employee logistics sector hardly faltered.
Hotels and museums, bars and restaurants, shops and stores all closed or scaled back sharply as the pandemic set in, while the demand to move the nation’s cargo continued.
In Memphis, air freighters flew, trucks rolled, barges sailed, trains went down the tracks, terminals loaded and unloaded and construction went ahead on new distribution depots.
Of the dozen new depots planned, potentially covering almost 10 million square feet, three are definite and nine are maybes, said commercial real estate broker Kemp Conrad, who predicts the construction on the dozen will proceed.
What is bringing the depots to Memphis – access to next-day air shipments, abundant land, proximity to the Midwest, Southeast and Northeast cities, operations costs about 5% less than most other cities – will also work in the region’s favor once the reshoring begins.
“This will be a drastic change,” Jackson said. “It won’t happen overnight.”
But the pandemic sent manufacturers a message.
If you can’t get hold of raw material, you can’t manufacture.
Time will tell if that message gets acted on. Jackson figures it will.
“Once we get through this crisis and manufacturers have time to catch their breath,” Jackson said, “they’ll be considering how to bring critical parts of the supply chain back.”
Ted Evanoff, business columnist of The Commercial Appeal, can be reached at evanoff@commercialappeal.com and (901) 529-2292.