Most things in nature live in tension. For example, take business. As companies grow larger, their need for growth requires leaving behind an outlook on a city, region, and even country. Managers see a need for a global presence in order to meet financial objectives.
Companies also have a historical physical location in a country. That nation has a vested interest in the strength of the companies within its borders. Therefore, a dynamic tension.
Another tension within a company and within a market is the interplay of cost and price.
Shortsighted corporate managers looking only at financial spreadsheets and not at strategic value began moving jobs and factories to countries where workers could be paid a fraction of US (or European) workers and health and safety standards did not suck up additional cost.
We reached a point around 2010 when this trend had gone too far and even financial managers realized that the total cost including logistics and insurance of “offshoring” was costing more in direct cost and in customer satisfaction than any assumed value.
Although I don’t think that anyone in Washington can much more than spell manufacturing, the need for jobs and taxes and even military strength has made accelerating this reshoring a big political play.
Therefore, the two news items I’ve received this month reflect the efforts of the past decade at bringing jobs back to America. The first report is from the Reshoring Initiative and the other from a survey by Thomas.
Reshoring Initiative 2020 Data Report: Reshoring Surges to Record High. Cumulative Jobs Announced Surpasses 1 Million.
Despite COVID, reshoring numbers were up in 2020. Reshoring and foreign direct investment (FDI) job announcements for 2020 were 160,649, bringing the total jobs announced since 2010 to over 1 million (1,057,054). Also of significant importance: reshoring exceeded FDI by nearly 100%, the first beat for reshoring since 2013. Additionally, the number of companies reporting new reshoring and FDI set a new record: 1,484 companies. Reshoring will continue to be key to U.S. manufacturing and economic recovery in 2021 and beyond.
About the Report
The Reshoring Initiative’s 2020 Data Report contains data on U.S. reshoring and FDI by companies that have shifted production or sourcing from offshore to the United States. The report includes data for 2020, cumulative data from 2010 through 2020, as well as projections for 2021. The report provides data and analysis in 10 categories, ranging from the number of manufacturing jobs gained, to reasons cited for reshoring, to a breakdown of data by industry, country, region and state. See the full report:
Top Takeaways from the Report
- In 2020 U.S. reshoring set a record of 109,000 jobs and outpaced FDI for the first time since 2013. COVID uncertainty has resulted in companies emphasizing operations in their home countries.
- In order to make the U.S. less vulnerable, there are now national initiatives to shorten and close supply chain gaps for essential products. The following industries are most likely to benefit: PPE, medical, tech and defense. Medical equipment and PPE are the first responders of new reshoring and FDI, with cases up nearly 2000% and jobs up 400% from 2019.
- President Biden is prioritizing reshoring highly but applying different methods than President Trump. The gaps in Biden’s plans need to be addressed in order to achieve his goal of returning 5 million more jobs.
- There is continued growth in efforts by MEPs, EDOs and states to enable reshoring. The Reshoring Initiative is deeply involved in these efforts with its Import Substitution Program (ISP). As a measure of corporate interest, the demand for this service is more than 10 X the rate of 2019.
- We anticipate 2021 reshoring + FDI job announcements to be near 200,000, up by at least 25%.
“We publish this data annually to show companies that their peers are successfully reshoring and that they should reevaluate their sourcing and siting decisions,” said Harry Moser, founder and president of the Reshoring Initiative. “With 5 million manufacturing jobs still offshore, as measured by our $900 billion/year goods trade deficit, there is potential for much more growth. We call on the administration and Congress to enact policy changes to make the United States competitive again. Our Competitiveness Toolkit is available to help quantify the impact of policy alternatives, including a stronger skilled workforce, competitive corporate tax and regulatory structures and a lower U.S. dollar.”
Reshoring Could Drive $443 Billion in U.S. Economic Value Over Next 12 Months
Thomas, the leader in product sourcing, supplier selection, and marketing solutions for industry, today released its 2021 State of North American Manufacturing Annual Report sharing groundbreaking insights from its latest survey canvassing the North American manufacturing an d industrial sectors. While the report reveals multiple shifts in domestic sourcing trends and supply chain demands, the key takeaway is the industry’s growing prioritization of reshoring in the aftermath of COVID-19 and the associated benefits of this shift for the U.S. economy.
According to the survey, 83% of North American manufacturers are likely or extremely likely to reshore (up from 54% in March 2020). If these manufacturers with plans to reshore bring on just one single-contract domestic supplier, the shift would drive as much as $443 billion in U.S. economic value.
“We are witnessing the wholesale reexamination of supply chain relationships, which will realign global manufacturing for decades to come. With North American businesses accelerating reshoring and replacing some of their overseas suppliers with domestic alternatives, U.S. manufacturers are being presented with an unprecedented opportunity,” said Tony Uphoff, Thomas president & CEO. “The insights from this year’s State of North American Annual Report further underscore the need for increased investment in skilled labor and manufacturing technologies to ultimately improve the trade deficit and future-proof supply chains to protect against potential disruptions.”
Leading the charge toward U.S. and Canada-based operations are the automotive and oil and gas sectors, the most motivated verticals to add North American suppliers to their supply chains. Additional sentiment from survey participants reveals a strong interest in reshoring due to obstacles with overseas suppliers, such as availability of technical support and time zone differences. While the procurement professionals surveyed did identify challenges to sourcing materials locally, including barriers of price (40% of respondents) and speed (23% of respondents), the overwhelming majority of respondents still planned to reshore operations. The registered users of the Thomasnet.com® platform are reflecting this trend in reshoring as well. Thomas has processed more than $204 billion in sourcing requests over the past twelve months in comparison to $69 billion in calendar year 2018.
To download the complete 2021 State of North American Manufacturing Annual Report, click here.
Two sources of data were used to construct this report: the State of North American Manufacturing Survey, which was conducted online through Qualtrics, and Thomasnet.com® anonymized sourcing data.
Participating suppliers were mostly OEMs and custom manufacturers from a variety of industrial sectors with revenues spanning from less than $4.9 million to over $500 million. This latest installment of the Thomas Industrial Survey series garnered a total of 709 responses with 542 qualifying responses.
Survey respondents reported an average new supplier contract size of about $900,000. If 83% of the 579,811 manufacturing companies in the U.S. plan to engage with a domestic supplier on one new contract at that average size, this would total $443 billion in economic opportunity.