Reshoring Manufacturing: Opportunities and Impacts
by Ryan Burns
A couple of weeks ago, I interviewed Harry Moser, President of the Reshoring Initiative about the opportunities and impacts that reshoring has and will have on the manufacturing community throughout the US and here in Colorado. The full interview can be found on YouTube but some of my key takeaways are shared below.
Harry’s passion for reshoring grew from his very personal observation of the impacts offshoring was having on the economy and American manufacturing as a whole. He saw the Singer Sewing factory in his hometown of Elizabeth, New Jersey close and how that impacted the community. Multiple generations of his family had worked there – including Harry on summer breaks. Its closure had impacts far beyond the factory. He then saw similar stories again and again while selling machine tools to US manufacturers. He decided to do something about it and the Reshoring Initiative (RI) was born.
What is the goal of RI and how is success measured?
RI looks to increase US-based manufacturing by 40% and bring back 5 million manufacturing jobs through reshoring or new direct-foreign investment (non-US companies putting plants in the US.)
What drove the offshoring trend?
A focus on price – lower wage rates in other countries created an economic environment that drove companies to offshore to save money. This only increased as more work moved out; capacity rates fell and that drove up costs for the remaining business, so the imbalance only grew.
What is driving the reshoring trend now?
Those competitive wage differences have shrunk – China specifically has seen wages increase nearly 400% in the past 10 years, though still below US levels. Add the complexity of global trade and its total cost: tariffs and duties, freight costs, inventory holding costs, increased geopolitical risk, currency rate fluctuations, and environmental and social impacts. That complexity means many manufacturers didn’t understand the total cost for these purchases and only started to understand them through their diligence after the cost savings didn’t hit the bottom line. There is also the renewed focus on supply chain risk after COVID and its impacts; leaders and shareholders want to know that a company’s supply chain is resilient enough to handle the disruptions that come next; and a close supply chain reduces that risk.
How can manufacturers address reshoring?
First, understand the total cost of ownership (TCO) of what they buy and sell. This is difficult for most companies; especially small to midsize manufacturers, but the impacts are real. RI has a great TCO tool that is available as a free resource.
Then use that TCO knowledge to improve your procurement strategy and use it as a commercial tool to educate your customers. RI also has great resources they can share that show who imports the goods you manufacture to help you target those companies that have needs in your market – with the right action reshoring can be a revenue booster for most American manufacturers.
Is there anything more?
Yes – in the next newsletter, I’ll share some thoughts on what is needed to make this happen and how it really is possible, not just a great idea. Then I’ll address the benefits to all manufacturers, whether your market has been affected by offshoring directly or not.
About Ryan Burns
Ryan Burns is a global supply chain leader with over 15 years of experience in the industrial manufacturing and service industries. Throughout his career he held roles of increasing responsibility leading strategic procurement, inventory management, acquisition integration, freight & logistics, trade compliance, and sales & operations planning. In his current consulting practice he works with small to middle-market manufacturers to reduce the cost, risk, and environmental impact of their supply chains; especially those preparing for or experiencing periods of extreme growth. Ryan is the owner and principal at RBB Management Consulting.