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Geopolitical Risk And Industrial Policy Drive Reshoring

Geopolitical Risk and Industrial Policy Drive Reshoring

Geopolitical Risk and Industrial Policy Drive Reshoring

The Reshoring Initiative relased its 1H2023 Report on November 30. The group said that reshoring announcements were in line with 2022’s record rate. “We expect to see upwards of 300,000 jobs announced by year-end,” the group said in a statement.” EV battery and chip investments along with other essential product industries supported by Bidenomics account for the bulk of the announcements. ” A number of factors have been part of this rate including the fact that average spedning on factory construction during the first quarter was more than double the average in the past 17 years. Foreign direct investment (FDI) included 807 cases of reshoring that resulted in 182,000 jobs. The group notes that if this rate continues the projection for full-year 2023 is 365,000 jobs and 1,614 cases. The cumulative number of jobs brought back since the manufacturing low in 2010 is anticipated to be near two million by the end of the year – about 40% of what was lost to offshoring To put recent announcement rates into perspective, it took 11 years to return the first million jobs and only 3 years to return the second million Geoopolitical Risk The report notes that Geopolitical risk (GPR) is the probability in one year of a major disruption in trade resulting in the cessation of imports from that country to the U.S. as a result of an adverse geopolitical event. User data shows that 20 or 30% of what is now imported from China can be sourced domestically at equal or greater profitability. The group notes that it is revising its TCO calculation to include the geopolitical risk factor and should expects that this will drive that % to well over 50%. The revised Estimator will use geopolitical risk to calculate the expected value of lost margin on revenue lost due to stocking out of a component or product. By including that cost in Total Cost, the user can determine whether it makes sense to “insure” its supply chain by reshoring.

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Daisie Hobson

Daisie Hobson is a Director at the Reshoring Institute and an engineer with many years of experience in manufacturing and project management.

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