Re-shoring, the process of bringing manufacturing operations back to the United States, is gaining momentum. A recent survey conducted by Medius, in collaboration with market research consultancy Censuswide, revealed that 69% of U.S. manufacturers have initiated the reshoring of their supply chains, with an impressive 94% reporting success in doing so. This shift can be attributed to several factors, including supply chain disruptions during the COVID-19 pandemic and recent geopolitical turmoil.
The COVID-19 pandemic exposed the vulnerabilities of global supply chains, causing severe disruptions and product shortages. These challenges prompted businesses, both large and small, to re-evaluate their manufacturing strategies. As a result, many companies have taken steps to relocate production away from China and other countries and bring it back to the United States. A notable example is Apple, whose suppliers have invested over $16 billion in the past five years to diversify production locations, including increasing their presence in the U.S.
Trade figures further support the trend of reshoring. In 2022, China's relative share of both imports and exports with the U.S. declined, while America's trade with other Asian nations strengthened. This shift not only reflects the desire to reduce dependence on Chinese manufacturing but also demonstrates a move towards regionalizing supply chains.
One of the driving forces behind reshoring is the increased focus on supply chain security. Recent geopolitical events, such as the Hamas terror attack and resulting military operations in the Gaza Strip, have reignited concerns about oil flows and posed new threats to international goods transport. As a result, businesses are seeking more secure supply chains to ensure uninterrupted operations. This is where reshoring to the United States offers a distinct advantage.
While reshoring generally entails higher labor costs compared to offshoring, it is essential to consider the total cost of ownership (TCO) when making such decisions. The Reshoring Initiative, an organization supporting American businesses in bringing production back to the U.S., offers a TCO Estimator tool. This tool enables companies to quantify all costs and risks associated with sourcing from various countries, taking into account factors such as labor costs, transportation, intellectual property protection, and more. Surprisingly, at least 50% of use cases turn out to be positive when companies consider the TCO.
Moreover, the demographic shift in the U.S. labor supply, with baby boomers retiring, raises concerns about the availability of skilled workers. However, this issue is not unique to the U.S. but rather a global phenomenon. China, for instance, is expected to face a shortfall of 30 million manufacturing workers. In contrast, America's skilled workforce is gradually increasing. Therefore, despite initial concerns, the labor force in the U.S. remains promising for the manufacturing industry.
The results over time reinforce this optimism. When the Reshoring Initiative began in 2010, only about 6,000 reshored jobs were created in the U.S. However, by 2022, this number had soared to over 350,000. The positive impact of reshoring on job creation was unexpected but has proven to be a reality.
Encouragingly, reshoring also helps address the perception among students that manufacturing jobs are disappearing. For years, parents and teachers have guided students away from manufacturing careers due to the belief that these jobs are being outsourced. However, emphasizing the importance of reshoring assures students that there will be ample job opportunities in the manufacturing sector.
As businesses re-evaluate their manufacturing strategies, reshoring to the United States appears to be an increasingly attractive option. The desire for a more secure and resilient supply chain, combined with the total cost of ownership analysis and the gradual growth of the American labor force, provides compelling reasons for companies to bring production back home. The ongoing momentum of reshoring indicates a positive future for domestic manufacturing and job growth.
