U.S. reshoring has turned the tide into positive territory, according to business consultancy Kearney, while the Reshoring Initiative reports record onshore job creation in the first half of 2023.

The two organizations are rarely on the same page when it comes to U.S. reshoring trends as they measure the activity differently. But between 2022 and 2023, all data points to an increase in jobs created and products manufactured in the United States.

“After a decade of tracking reshoring and nearshoring activities, Kearney’s annual Reshoring Index can confidently declare what was once a strategic theory is today a market reality,” the consultancy reported. “We see a significant shift in this year’s Reshoring Index, which reflects a broader rewiring of global supply chains and marks the first time that domestic manufacturing growth outpaced Asian LCC [low-cost-country] imports growth since 2019.”

The Reshoring Initiative, which has been more bullish on reshoring, reported reshoring and foreign direct investment (FDI) job announcements in the first half of 2023 were in line with 2022’s record rate. “We expect to see upwards of 300,000 jobs announced by year-end,” the group reported. “EV battery and chip investments along with other essential product industries supported by Bidenomics account for the bulk of the announcements.”

Source: The Reshoring Initiative

The Reshoring Initiative tracks public announcements of reshoring, new foreign direct investment (FDI), and kept from offshoring (KFO) for its index. Kearney measures its manufacturing import ratio (MIR) by dividing the import of manufactured goods from 14 LCCs by U.S. gross domestic output.

Geographic shifts

Reducing dependence on China is the main reason manufacturers are relocating their business. Some are moving to other Asian nations, such as Vietnam and India, according to Kearney.  In the Americas, Mexico has taken a larger share of the U.S. manufacturing import market. Since the Covid pandemic, American imports of Mexican manufactured goods grew from $320 billion to $402 billion (+26 percent). The Chinese have also been starting manufacturing operations in Mexico.

Geopolitical disruptions are driving companies to reevaluate supply chain priorities, according to the Reshoring Initiative. Covid shutdowns, the war in Ukraine, the Israeli/Hamas conflict and increasing tension over Taiwan are reasons for companies to evaluate reshoring and nearshoring as “insurance” against catastrophic disruptions. Kearney noted that IP concerns, tariffs and overall geopolitical tensions are driving manufacturers away from China. And, in the U.S. and Europe, CHIPS Acts are incentivizing semiconductor manufacturers to move to their shores.

Electronics transformation

Electrical equipment, driven by EV batteries; and computers and electronics, driven by chip and solar investments, remain the top contributors to reshoring, the Reshoring Initiative noted. These and other industries such as clean energy and pharmaceuticals are currently doing well because they are funded by Bidenomics.

Source: Kearney

The ongoing electronification of products and the need to reset global supply chains will vastly expand what Kearney calls the external electronics manufacturing (EEM) industry. “The enormity of this challenge will lead many OEMs to partner with EEMs to enable and accelerate the needed transition by outsourcing ongoing management of their end-to-end global supply chains,” it said.

Other notable drivers are:

• Electronification – the IoT is incorporating electronics into products such as EVs, medical devices and wearables.
• Resilience mandates – the pandemic, ESG considerations, geopolitical tensions and demographics are driving the importance of supply chain resilience.
• Consumer sentiment – consumers are now willing to pay more for locally made products.
• EEM scale and maturity – the industry reached $500 billion-plus in 2022 making it the go-to destination for supply chain management.
• A worldwide network of manufacturing centers – EEM has the critical mass to be on the leading edge of supply chain transformation.

The challenge of executing EEM industry growth requires the active leadership of CEOs, Kearney concluded. CEOs need to assess the transformation readiness of their end-to-end supply chains — from product design through end of life — and decide to either outsource or redouble their own investment plans.

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