For years, manufacturers talked about reshoring without taking much action. Now reshoring, the practice of bringing manufacturing and production back to a company’s home country, has been growing for real. The COVID-19 pandemic accelerated this trend, as companies have faced unprecedented supply chain disruptions and shortages of critical goods. This has caused many businesses to re-evaluate their supply chains and consider reshoring as a way to improve resilience and reduce risk.
Offshoring just doesn’t work any more
One of the main drivers of reshoring is the realization that supply chains have become too complex and too reliant on a few key suppliers. This was highlighted during the pandemic, as many companies found themselves unable to source critical goods and components when their suppliers shut down or faced production delays. This caused significant disruptions to business operations and led to lost revenue and profits.
Reshoring can help to mitigate these risks by reducing reliance on overseas suppliers and shortening supply chains. By bringing production back home, companies can have greater control over their supply chains and be more responsive to changes in demand or disruptions in supply. This can help to improve resilience and reduce risk, as companies are better able to manage unexpected events and adapt to changing market conditions.
Savings are less impressive
Another driver of reshoring is the rising cost of labor in many overseas markets. While outsourcing to countries with lower labor costs was once seen as a way to reduce costs and improve profits, this advantage has diminished as wages have risen in many parts of the world. This has made it more expensive to produce goods overseas and has eroded the cost advantage of outsourcing.
In addition to these factors, government policies have also played a role in encouraging reshoring. Several recent bills in the United States have implemented policies aimed at incentivizing companies to bring production back home. These policies include tax breaks, subsidies, and other forms of support designed to make reshoring more attractive to businesses.
According to a survey by the Boston Consulting Group, 69% of companies are now considering reshoring as a way to improve resilience and reduce risk. This represents a significant shift from just a few years ago, when many companies were focused on outsourcing and offshoring as a way to reduce costs.
Examples
One example of a company that has embraced reshoring is Apple. The tech giant has announced plans to invest $430 billion in the United States over the next five years, including a new manufacturing facility in North Carolina. This move is part of a larger effort to bring more production back to the United States and reduce reliance on overseas suppliers.
The trend toward reshoring is also being driven by changes in consumer behavior. As consumers have become more concerned about issues like environmental sustainability, labor practices, and supply chain transparency, they have begun to demand greater accountability from the companies they buy from. This has put pressure on companies to re-evaluate their supply chains and consider reshoring as a way to improve sustainability and transparency.
As companies look to the future, reshoring is likely to play an increasingly important role in improving supply chain resilience and reducing risk.