February 2021 | Commentary | Good Question

Do you expect a resurgence in reshoring to the United States? Why or why not?

Tags: Supply Chain Management, Manufacturing


No. I don't expect a significant increase in reshoring. I do expect a significant increase in multi-sourcing of key products in the supply chain. Reshoring to a significant degree requires huge infrastructure changes that I do not believe today's consumer is ready to fund in price increases and reductions in convenience.

—Bill Denbigh
Senior Director, Product Marketing
Tecsys


Yes. I do expect a reshoring of manufacturing in the United States, though the process will be arduous and expensive. First, I expect this process will be spurred by federal and state lawmaking. There are some industries—most notably defense and pharmaceuticals—in which the United States has sensibly decided it needs more control over the supply chain. Those industries will be reshored first, because they have to be.

The second wave of reshoring will likely be a reaction to the growing trade imbalance between the United States and China—not for any specific policy or principled reason, but rather because that imbalance has made the logistics of procurement from China less reliable.

 The third wave of reshoring will once again likely be legislatively inspired, as I suspect federal, state, and local governments will start contemplating giving tax incentives to reshoring initiatives. Conversely, however, some tech products and industries have come to be literally exclusively made in China. These will be the most difficult to reshore.

—Sarah Rathke
Partner, Squire Patton Boggs


No. Reshoring has not turned out as advertised. A booming China suggests while some things have changed, many supply chains are still the same or in a slow transformation process. A trend toward regional supply chains is intact but may take years to play out.

—Rich Bolte
Chairman & CEO, BDP International


Yes. We will continue to see more U.S. companies move manufacturing closer to their U.S. market—reshoring to the United States and nearshoring to Canada and Mexico. Shorter supply chains will reduce freight costs and time to market. Increasing levels of automation in manufacturing will further accelerate this trend.

—Marcus Karten
Vice President Global Business Development
Arvato Supply Chain Solutions


No. Reshoring will slow. While President Biden enacts legislation supporting American manufacturing, the United States will attempt to re-enter international trade agreements. These countervailing effects will make companies reconsider how aggressively to reshore manufacturing—especially given that the country has proven as susceptible as many other industrial nations to the COVID outbreak.

—Cullen Hilkene
CEO, 3Diligent


Yes. Supply chains will compress. With the need for agility and nimbleness in an ever-changing marketplace, moving production closer to consumption will be an increasingly popular strategy. Control over employee and product safety will also be prioritized, which further suggests a resurgence in reshoring.

—Eric Lien
EVP of Strategic Accounts Arrive Logistics


Yes. Several factors will drive reshoring: the need for supply chain stability, uncertainties about global trade, and increasing automation that is lowering the cost of manufacturing in the United States.

—Chris Nicholson
CEO, Pathmind


No. I don't believe U.S. companies will invest in reshoring anytime soon. The COVID-19 pandemic has revealed gaps in our global supply chains and while some may think reshoring production to the United States could alleviate these challenges, focusing on end-to-end optimization of current supply chains could be more efficient and cost effective. Implementing technology such as material requirements planning solutions to existing supply chains would provide better management and increase visibility into all production planning, scheduling, and inventory controls from a centralized location.

—Scott Deakins
COO, Deacom


Yes. As COVID-19 caused numerous shutdowns, some shippers found themselves high and dry, with no operational facilities. Supply chains that relied mainly on sourcing and manufacturing from China and nearby regions faced huge challenges. By reshoring to the United States, supply chains will diversify their sourcing points, allowing for more robust solutions and effective responses to disruption.

—Rajiv Saxena
SVP of Supply Chain
Solutions and Innovation, Kenco


Yes. Looking at global economic trends, a new U.S. administration, foreign policies, or incentives the United States may offer, manufacturers or brands may look at their total landed cost and decide if it is in their best interest to reshore. Industry clusters will need to be existing to support these moves.

—Katia Axberg
Regional Director, Sales and Marketing
Dimerco Express (USA) Corp.


Yes, but… We may see nearshoring behavior along with a resurgence of domestic hardline items. We anticipate most CPG business will remain domestic. To avoid delays at ports, suppliers may bring in goods earlier and build inventory domestically. Potential tariffs from President Biden's proposed "Buy America" plan may also become a factor.

—Kevin Williamson, CEO, RJW Logistics Group


Yes. Although global maritime trade was down about 4% in 2020 primarily due to COVID constraints, global container shipping rebounded during the last two quarters due to greater reliance on automation and blockchain efficiencies. Warehousing, container availability, and government policies are potential influencers of supply, nearshoring, and reshoring.

—Grady S. Hurley
Leader of the maritime litigation and arbitration team
Jones Walker LLP


Yes. There will absolutely be a resurgence of reshoring to North America. Mexico should be in a good position to benefit from interest in moving operations closer to the U.S. market. Operations will move back or start up in the United States as well. Overall, this may not result in a large operational net increase, due to ongoing automation efforts.

—Mary Long
Professor, Master's of Science in Supply Chain Management
University of Tennessee


Yes. Disruption caused by the U.S.-China trade war and by the coronavirus pandemic has caused many businesses to revisit the logistics of their supply chains and examine how resilient their supply networks actually are. Some are asking whether reshoring may be beneficial because when businesses bring different parts of the supply chain closer to home they reduce risk and improve the likelihood of goods arriving when and where they need to be.

In the past, lower labor costs attracted companies to source from abroad, but the difference in cost between countries is being eroded with automation. CEO's are also facing pressure from consumers around environmental concerns which may push some to explore reshoring because bringing the supply chain closer to home reduces carbon emissions. While reshoring of supply chains may make sense for some businesses, there will always be a need for global supply chains. We expect to see businesses examine ways to improve resilience, reduce complexity, and improve sustainability—which might mean bringing all manufacturing stages closer together.

Antony Lovell
VP of Applications
Vuealta


Yes. Many manufacturers that have benefited economically as a result of the pandemic, including home gym equipment manufacturers, home office technology companies, and many critical suppliers have also had to deal with demand that has exceeded their standard output of supply. To meet this demand and to service these needs closer to point of sale, they've moved or added manufacturing and distribution centers throughout the United States, Canada, and Mexico. While some companies have had to take a haircut on margin to accommodate this demand (such as Peloton's margin trim from 43% to 33% due to its longer-term goal to build a bigger stock of items in the United States), they feel the investment is worth the return in brand equity and revenue.

Peter Edlund
Chief Solutions Evangelist
DiCentral.com


YES DEFINITELY… Reshoring manufacturing back to the United States has been steadily growing for the past 10 years, but since March 2020, reshoring has dramatically accelerated. The latest Thomasnet.com survey shows more than 60% of U.S. manufacturers are actively pursuing reshoring some or all of their manufacturing. Over the past 30 years, ongoing investment in advanced manufacturing technology and innovation has helped make U.S. manufacturing competitive on the global stage.

The massive supply chain disruptions caused by the pandemic forced almost every company to reevaluate their supply chain risk and as a part of this analysis many companies found that reshoring is a smart, cost-effective alternative. Reshoring will continue to accelerate, creating the strongest market opportunity for North American manufacturers and the related ecosystem in the past 70 years.

—Tony Uphoff
President and CEO, Thomas™
Thomasnet.com


IT DEPENDS… There is a lot of talk about nearshoring of supply chains to avoid the supply chain disruptions we saw in 2020. This won't be the case for some industries—with cost returning as a decisive factor in many supply chains quicker than you might expect and lean inventory once again being favored by some industry sectors due to competitive pressure from other regions.

But for strategically important sectors such as life sciences and healthcare, there will be a marked shift to nearshoring. This will push companies and their supply chain providers to seek higher efficiencies through technology, leaner inventory, and network design, to offset the increased costs in warehousing and labor. For North America, this will likely also benefit competitive labor markets such as Mexico.

3PLs will have an important role to play in this process. The expertise they bring in change management and process re-engineering will help companies adapt their networks and operations to the new configuration. They can offer access to infrastructure, resources, technologies, and an established supplier base to ease the transition closer to home.

And perhaps most importantly, they can help achieve productivity improvements and identify cost saving opportunities to offset the likely impact of carrying more stock, having higher labor unit costs, and sourcing from local suppliers at less competitive rates.

—Scott Cubbler, President, Life Sciences & Healthcare, North America
DHL Supply Chain


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