As global supply chains twist and turn amid economic pressures, including the ongoing U.S.-China trade war, much attention has been paid the phenomenon of reshoring.
Simply put, reshoring is the practice of bringing manufacturing back to a country — in this case, the U.S. — from overseas.
Whether as a result of trade deals (e.g. NAFTA) or the rise of China as an economic power, U.S. politicians and labor groups have long bemoaned the loss of manufacturing to other countries.
The U.S.-based Reshoring Institute, which advocates for manufacturing in the U.S., has chronicled reshoring trends in recent years, most recently in its 2019 Reshoring Survey.
“For more than three decades, moving production offshore was a relatively easy decision,” the Institute said in its annual survey document. “With an almost endless supply of low-cost labor, the decreasing costs of transportation, low currency exchange rates, and significant foreign-government incentives, hundreds of thousands of jobs left the U.S. for lower cost nations like China. The once overwhelming cost advantages, however, are not what they once were. A growing number of businesses have rethought their global manufacturing strategies and made the decision to reshore at least some of their production to the United States.”
According to the report, more than half of the executives surveyed said they were planning or considering reshoring efforts, while 97% said they would consider domestic sources if the price and quality of those products were competitive with those of foreign suppliers.
The survey included questions regarding reasons U.S. companies might seek to reshore, challenges related to offshoring and factors that might be preventing companies from reshoring.
In terms of incentives to reshore, the top three reasons came were: international logistics costs (69.74%), proximity to customers and markets (55.26%), and total cost of ownership evaluation (51.32%).
Delays in shipping, production schedule delays and inconsistent quality were the most-cited examples of challenges U.S. companies face when sourcing from overseas.
As such, while many of the executives surveyed indicated they were at least considering reshoring initiatives, there are several factors preventing them from following through.
According to the executives surveyed, high labor costs were the No. 1 reason behind not proceeding with reshoring, followed by the lack of an existing facility in the U.S. and lack of skilled workers.