American reshoring has come a long way in recent years.
Within the last decade, more American companies are bringing major elements of their supply chains back home -- attributed largely to government incentives and increased production costs overseas.
With the COVID-19 pandemic revealing shortcomings in the global supply chain when disaster strikes combined with American’s desire for domestically produced goods, American manufacturers are giving more consideration to reshoring.
Though offshoring may seem appealing to many businesses, there are hidden costs that are too often overlooked. Most businesses considering offshoring are still focused on unit prices rather than the total cost of ownership of their product.
Here are a few facts about the state of reshoring and the cost of doing business overseas:
13 Reshoring Facts for American Manufacturers
- Import tariffs and the COVID-19 pandemic are primary drivers for companies to reshore manufacturing operations from China (Bloomberg)
- To achieve self-sufficiency in manufacturing, the United States would need to increase domestic manufacturing by 40%. (Gray)
According to the most recent data from the Reshoring Initiative:
- 757,000 manufacturing jobs have returned to the United States since 2010.
- 2018 saw the biggest increase in reshoring job gains -- with 145,000 manufacturing jobs being moved back to U.S. soil.
- Southeastern states and Texas saw the biggest increase in reshored jobs in 2018 because of less stringent right-to-work laws coupled with low property costs, wage rates, taxes and energy.
- An FTI Consulting Survey found that 40% of respondents are willing to pay more for goods made in America.
- The share of American-made manufacturing goods consumed in the U.S. jumped significantly for the first time in 10 years in 2019. (Industry Week)
The Reshoring Insitute’s 2019 Survey of Global Manufacturing found:
8. 97% of respondents would consider a domestic source for parts if the price and quality were competitive to foreign suppliers.
- Reducing logistics costs, proximity to consumers, and total cost of ownership evaluation are the 3 most referenced reasons for reshoring.
- As of June 2020, U.S. natural gas prices cost $1.67 per million BTU, compared to China's $4.43 per million BTU. This is only one of the hidden costs of offshoring.
- One of the biggest concerns shared by American manufacturers is meeting a skills gap in attracting and retaining qualified workers. (National Association of Manufacturers)
- While China is one of the cheaper places for outsourced manufacturing, it’s labor costs -- namely wages -- are increasing (China Briefing)
13. Nearshoring seems to be on the increase for American manufacturers as many are starting to turn to Mexican manufacturing as a link in their supply chains. (Kearney)
(Editor’s note: This blog was originally posted in July 2016 and was recently updated.)