Re-shoring is picking up steam, according to a recent survey of manufacturing executives. Both the ... [+]
The supply chain disruptions and product shortages of the pandemic era have been supplanted by other big news. But the critical re-evaluation of where America manufactures by businesses large and small that was driven by those production and product flow nightmares not only hasn’t subsided, but appears to be gaining momentum.
Apple, for example, made news early this month with the revelation that its suppliers have invested more than $16 billion over the past five years to relocate production away from China to several other countries, including the United States.
Trade figures point to a larger trend. In 2022, the most recent complete year for which data are available, China’s exports to the U.S. increased, but its relative share of both imports and exports fell while America’s trade with other Asian nations strengthened.
When it comes to reshoring production to the U.S., recent data are telling. Medius, an accounts payable automation solutions provider, conducted a survey recently in conjunction with market research consultancy Censuswide that showed that 69% of U.S. manufacturers have begun reshoring their supply chains, with 94% reporting success in doing so.
Harry Moser, founder and president of the Reshoring Initiative
“In the face of a tougher business landscape, US manufacturers are navigating a maze of challenges, from interest rate hikes to supply chain complexities and consumer demand shifts,” said Don Holm, global vice president, value consulting for Medius. “[A] remarkable 69% of manufacturers are reshoring their operations, spurred on by tech advancements and the opportunity of having greater security within their supply chains, without the hefty price tag which used to be associated with onshore production.”
Recent news certainly adds to the drive to simplify and harden far-flung supply chains. The Hamas terror attack last October and the resulting Israeli military operations in the Gaza Strip have once again heightened concerns about OPEC oil flows, while the related Yemeni Houthi rebel attacks on Red Sea shipping are a new threat to international goods transport. “We see the biggest issue being geopolitics,” said Harry Moser, former president of GF AgieCharmilles, a machine tool maker, and founder of the Reshoring Initiative, which has been supporting American businesses interested in bringing production back to the U.S. since 2010. “Hanging over everything is the situation between China and Taiwan. One thing we’ve done to help is our geopolitical risk measure.”
While almost all business owners and executives are concerned about the fragility of their supply chains, many nonetheless struggle to justify bringing production back to our shores. Moser gets that. “On the face of it, it is more expensive to reshore,” he said. “For example, labor costs can be three times as high. But you have to look at the costs beyond simple prices and look at the total cost of ownership.”
When companies are given the analytical tools to make the financial case for reshoring, at least ... [+]
Toward that end, the Reshoring Initiative offers the TCO Estimator, a tool companies can use to quantify the total costs and risks involved in sourcing from various countries. It factors in calculations of 30 cost elements for each source, accumulating all costs into individual categories and calculating the TCO for each provider. “At least 50% of cases shift from offshore to the U.S. if people look at TCO,” said Moser.
Further, he sees the business case for reshoring only improving despite the America’s demographic shift in labor supply as the baby boomers retire. “The same condition, or worse, is true almost everywhere in the world,” he explained. “China is facing a shortfall of 30 million manufacturing workers. Other countries’ skilled workforces are going down while America’s is gradually increasing.”
The figures over time seem to bear his optimism out. “Reshoring jobs created in the U.S. were about 6,000 in 2010 when we got started,” he said. “They totaled over 350,000 in 2022. Ten years ago, nobody expected that to happen but Harry!”
He sees his optimism for the U.S. industry labor force only being bolstered as well. “One reason kids didn’t go into manufacturing is that they were afraid there would be no jobs,” he said. “For years parents and teachers were telling students that manufacturing was going to disappear. But that’s another reason we’re stressing reshoring–so students know the jobs will be there.”
