Shifting Forces Continue to Drive Reshoring Higher
Multiple Supply Chain Risks Drive Reshoring Opportunities
In 2021 the private and federal push for domestic supply of essential goods propelled reshoring and foreign direct investment (FDI) job announcements to a record high. Reshoring Initiative 1H 2022 data shows reshoring and FDI continuing these gains. The current 2022 projection of jobs announced is around 350,000 – another record, up from 260,000 in 2021. If the projection is achieved, 2022 will bring the total jobs announced since 2010 to over 1.6 million. Supply chain gaps and the need for greater self-sufficiency continue as major factors driving reshoring. The possibility of a Taiwan-China conflict and the threat of China decoupling are focusing those concerns. Destabilizing geopolitical and climate forces have brought to light our vulnerabilities and the need to address them. Subsequently, great opportunities have arisen for a continued meaningful rebound of U.S. manufacturing. Continuing the current trajectory will reduce the deficit, add jobs, and make the U.S. safer, more self-reliant and resilient.
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There are many reasons for American manufacturers to reevaluate offshoring and consider reshoring. Companies are increasingly recognizing that costs, risks and strategic impacts previously ignored are large enough to overcome the shrinking emerging market wage advantages. They are seeing the benefits of proximity, i.e. producing in the market, especially when the home market is the U.S., still the world’s largest.
The top reasons that companies reshore include:
- Lead time
- Higher product quality and consistency
- Rising offshore wages
- Skilled workforce
- Local tax incentives
- Image of being Made in USA
- Lower inventory levels, better turns
- Better responsiveness to changing customer demands
- Minimal intellectual property and regulatory compliance risks
- Improved innovation and product differentiation
Why Reshoring Makes Sense for America
Reshoring is the fastest and most efficient way to strengthen the U.S. economy because it:
- Helps balance the trade and budget deficits
- Reduces unemployment by creating productive jobs
- Reduces income inequality
- Motivates skilled workforce recruitment by demonstrating that manufacturing is a growth career.
- Helps maintain the broad industrial capability required for national defense
About Reshoring Initiative
Reshoring is gaining momentum throughout the country. Many companies have already repatriated some of their manufacturing efforts, and the Reshoring Initiative is continuing to spread the “return-manufacturing-home” message to help other manufacturers realize America is an advantageous place to produce goods.
The United States used to be the world’s industrial powerhouse, and Harry Moser, founder of the Reshoring Initiative and former president of machine tool maker GF AgieCharmilles, grew up experiencing its glory.
Moser’s father, a manager, and grandfather, a foreman, worked for the once sprawling Singer sewing machine factory in Elizabeth, New Jersey. Moser himself spent summer vacations from high school and college working at the plant.
But times changed. The Singer factory is now gone as are a long list of other American manufacturing plants due to decades of offshoring. Not wanting to see any more U.S. manufacturing jobs disappear, Moser found it critical to start an industry-led initiative to prove offshoring is not always the best economical decision for companies.
In fact, American companies considering sending their manufacturing offshore often don’t consider all of the costs, e.g. inventory carrying costs, travel costs to check on suppliers, intellectual property risks and opportunity costs from product pipelines being too long.
The Reshoring Initiative, founded in early 2010, takes action by helping manufacturers realize that local production, in some cases, reduces their total cost of ownership of purchased parts and tooling. The Initiative also trains suppliers how to effectively meet the needs of their local customers, giving the suppliers the tools to sell against lower priced offshore competitors.