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American Companies Continue to Reshore and Nearshore Operations

Sept. 18, 2023
After dealing with some major supply chain disruptions during the global pandemic, companies promised to do more reshoring, nearshoring and onshoring of their operations. Here’s where those initiatives stand.

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The global pandemic, war in Ukraine and a slowdown in China’s economy are just a few of the major events that forced American companies to rethink how they set up and orchestrate their global supply chains. The persistent chip shortage and high transportation costs that took hold during the pandemic were additional drivers, as was the overall mission of gaining better control over end-to-end supply chains.

According to Kearney’s 10th Annual Reshoring Index Report, which was released in April, American companies continue to move “full steam ahead” with their reshoring plans. “Reshoring and nearshoring have finally matured into commercial realities,” the company said in a press release.

In fact, those reshoring initiatives have become so successful that companies that have taken a “wait-and-see” approach to locating manufacturing operations in the past, Kearney points out, are now looking for facilities in Mexico and the United States.

“As for reshoring, what 10 years ago was merely a promise is now a fact,” the company continues. “[Our] latest survey indicated that 96 percent of CEOs are, at a minimum, evaluating the potential to reshore their operations, an increase from 78 percent in 2022, with most already having decided to reshore, or already reshored.”

Keeping Close Tabs on Reshoring Trends

As an organization that helps businesses bring their manufacturing and other operations back to the U.S., Reshore Now also keeps close tabs on the reshoring and nearshoring movement. In its most recent report on that activity, the group said that “2023 reshoring data is coming in, and it’s stronger than ever.”

Reshore Now says that both reshoring and foreign direct investment (FDI) job announcements are once again breaking records. For example, the total number of reshored and FDI jobs increased by 11% during the first quarter of the year (compared to the same period in 2022).

If the current rate continues, reshoring and FDI will total 406,000 jobs in 2023,” Reshore Now reports. It says electrical equipment remains the top industry due to continuing large investments in electric vehicle (EV) batteries. In a more recent report, Reshore Now said U.S. reshoring and FDI job announcements are exceeding the impressive pace of 2022 with upwards of 390,000 jobs announced already this year.

“In contrast to the upward trend in job announcements and construction investment in the US, China is seeing a parallel downward trend in economic activity, trade and openness, illustrating a systemic US shift away from globalization in general and China in particular,” Reshore Now reports.

More CEOs are Talking About Reshoring

According to CNBC, two key drivers for companies that want to bring more production “back home” this year include the Ukraine war and China’s slowdown. Other drivers include the introduction of new incentives (e.g., the CHIPS Act) for domestic manufacturing of computer chips and EV components.

“A new reshoring trend is set to upend global supply chains as firms look to source products — such as clothes and computer chips — closer to home, turning away from manufacturing powerhouses like China,” CNBC points out. “Some executives even appear more concerned about manufacturing domestically than they are about the effect of artificial intelligence on their businesses.”

When Strategas Securities recently analyzed S&P 1500 earnings call transcripts, CNBC says the company picked up on a notable uptick in mentions of the words “reshoring” and “nearshoring.”

“Reshoring continues to outpace foreign direct investment 62% to 38%—the most extreme rate in recent history,” the Reshoring Initiative concludes, “indicating that the country and domestic companies are finally recognizing the value of local production that FDI recognized a long time ago.”

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