Industry in the United States currently has its best chance to invest, increase productivity and reshore. From 2010 to 2019, increasing understanding of the routine logistics costs of offshoring drove an upward trend of reshoring. Starting in 2020, a more substantial accelerator has been the accumulating perception of risk driven by the COVID-19 pandemic, the geopolitical forces of the Russian invasion of Ukraine, rapidly changing supply chains due to the growth of clean energy and the risk of China decoupling. Supply-chain gap pitfalls coupled with the advantages of domestic manufacturing are rapidly accelerating the reshoring trend.
Record Number of Companies Reshoring
In 2021, the private and federal push for domestic supply of essential goods drove reshoring and foreign direct investment (FDI) job announcements to a record 261,000, bringing the total jobs announced since 2010 to over 1.3 million. For the second year in a row, reshoring exceeded FDI by 100%, in contrast to 2014-2019 when FDI exceeded reshoring. Additionally, the number of companies reporting reshoring and FDI set a record of over 1,800. The Reshoring Initiative® Data Report dis-cusses the trend and how reshoring will continue to be vital to U.S. manufacturing and economic recovery (Fig. 1).
Fig. 1. Over 1,300,000 reshoring and FDI manufacturing jobs have been announced from 2010-2021.
Time is Right for Capital Investment
Manufacturing capacity has fallen steadily since the 1970s as manufacturing offshored from the U.S. to low-cost countries. In April 2022, capacity utilization reached 80.4%, which was the highest since 2000, the first time above 80% since 2000 and 19.5% above the pandemic low in April 2020. When capacity exceeds 80%, investment increases since companies need additional capacity and can afford to pay for it.
U.S. CEOs Accelerating Reshoring
CEOs in the U.S. are accelerating their efforts to shorten supply chains due to the causes listed above. CEOs highlighting plans to reshore or nearshore are up 1,000% versus pre-pandemic. A 2022 UBS study of C-suite executives found 90% of companies were moving production out of China or had plans to do so, with 80% considering some reshoring to the U.S.
Investment in U.S.-based production is evidenced in the construction of new manufacturing facilities increasing by 116% over the past year. Kevin Nolan, GE Appliances CEO, said, “I’ve always said this is just economics. People are going to realize that the savings they thought they had aren’t real, and it’s going to be better and cheaper to make them here.”
We need to take advantage of this unique opportunity.
Manufacturers are Optimizing Operations
Manufacturers are increasing capabilities, capacity and innovation, with carefully chosen process improvements, strategies and new technologies. For example, smart manufacturing, also known as Industry 4.0, encompasses coordinated physical and digital processes both in factories and across sup-ply chains to optimize operations. On average, companies undertaking smart technologies have seen an increase in production output (10%), capacity utilization (11%) and labor productivity (12%).
A Smart Conclusion
When new processes, technologies and strategies are factored into a reshoring project, companies can amplify resiliency benefits and reduce or even eliminate any offshore cost gap. For help, contact me at 847-867-1144 or email@example.com.