Reshoring Now: Boom or Bust?
The 2021 Reshoring Index from global consulting firm Kearny reports US companies are relying more heavily on manufacturing from low-cost countries (LCC), but sentiment is quickly changing.
Sometimes, the numbers don't tell the whole story. That's the case with the 2021 Reshoring Index from global consulting firm Kearney. Released each year, the Reshoring Index tracks trends in manufacturing returning to the United States from the 14 Asian typical low-cost countries (LCCs) and regions where sourcing, production, and assembly have been offshored. Kearney's 2021 Reshoring Index found that US companies were relying even more heavily on manufacturing operations in LCCs: American imports of manufactured goods from the 14 LCCs totaled 14.5% of US domestic gross manufacturing output, up from 12.95% in 2020, resulting in a negative 2021 Reshoring Index of -154.
However, Kearney analysts see strong indications that attitudes and strategies about reshoring and nearshoring are changing. Thanks to the pandemic, trade wars and tariffs, and ongoing resulting supply chain disruptions, American companies are getting more serious about adopting expanded versions of reshoring, according to the Index.
CEOs and manufacturing executives of American companies report a positive and growing sentiment for reshoring compared with last year, despite the continuing drop in the Reshoring Index. And, companies are seeking to invest in manufacturing assets in the United States and in Mexico, hoping to eventually build a manufacturing ecosystem here that could rival what exists in China.
The report also points to an evolving definition of reshoring, incorporating and leveraging models where, for example, components and materials supplies are nearshored and final automated assembly and testing is done in the United States.
Key findings from the survey include:
- 92% of executives express positive sentiments toward reshoring.
- 79% of executives who have manufacturing operations in China have already moved part of their operations to the United States or plan to do so in the next three years.
- Starting in Q4 2020, U.S. reliance on China diminished as the other Asian LCCs started to recover from the pandemic and American companies began to again diversify away from China as they had begun to do before the pandemic.