Reshoring Revolution: A Special Report

Zenni optical is expanding production of its ophthalmic lenses in Ohio, switching capacity from China. Commercial Vehicle Group is halving exposure to Chinese factories for supply of its automotive seat frames by building new plants in Morocco and Mexico. And Taco Comfort Solutions is spending more than $10 million to erect a new warehouse in Rhode Island to manage parts it makes in Europe and Vietnam. “We’ve put ourselves at huge jeopardy by becoming so dependent on other countries and not having our own capabilities here,” says Cheryl Merchant, CEO of Taco, a Cranston, Rhode Island-based manufacturer of industrial water-management systems. “We could just shut ourselves down if we continued with that. So everyone is scrambling to reverse the situation.” These three new developments are only fresh trickles in the vast, ongoing global movement of capital and utilization of labor. But in confluence with thousands of similar initiatives, they have helped form a virtual tsunami of new manufacturing investment being relocated from overseas, an opportunistic tidal wave of “reshoring,” “nearshoring” and “onshoring” that may produce nothing less than a once-in-a-century opportunity for the rebirth of economic sovereignty for North America. Job announcements for reshoring initiatives and foreign direct investment in U.S. plants surged to a record high of around 350,000 in 2022, according to the Reshoring Initiative, up from 260,000 in 2021 and 150,000 in 2020. The biggest movers were makers of electrical equipment and components, chemicals and transportation equipment. A Manufacturing Revival Slapped hard by the supply-chain mess brought on by the pandemic, worried about geopolitics that are the hairiest since the Cold War, enabled by automation advances in manufacturing and logistics, and encouraged by new government incentives such as the CHIPS and Science Act, many manufacturing CEOs are pivoting toward an expensive domestication of supply chains even as they’re coping with extreme inflationary pressures and the expectation of an economic downturn in 2023. “Before, there was a lot of conversation in trade magazines, but it was kind of quiet when it came to investor calls, and that’s now flipped around,” says Patrick Van den Bossche, a partner at Kearney consultants and leader of its annual Reshoring Index. “More companies are talking about reshoring and opening themselves up to investor communications to make that claim, and they’ll be held responsible if they don’t do it.” EY partner Claudio Knizek says companies “are looking at their manufacturing footprint a lot more holistically. In the 1980s or so, the focus was on holding costs down. Now, many companies realize it’s not only about costs but an ability to pivot and make changes to your supply base and production quickly, in order to service demand,” adds the leader of the consultancy’s global advanced manufacturing practice. Survey Says So how widespread is the trend, and what are CEOs focused on when it comes to deciding how, when and where to relocate? Chief Executive, in partnership with the Indiana Economic Development Corporation, recently conducted a survey of CEOs nationwide to find out. One number immediately jumped out: 58 percent of CEOs whose companies have had recent operations outside of the United States now are considering reshoring, with 18 percent pondering the repatriation of three-quarters or more of their operations. Reshoring assembly and parts manufacturing was the focus of 68 percent of intentions in the survey. Only 10 percent of reshoring plans involved R&D operations, and only 9 percent call-center and support operations. The main drivers were geopolitical risk exposure, cited by 48 percent of respondents; supply-chain resilience, 34 percent; closer management and oversight, 33 percent; tariffs and freight costs, 27 percent; proximity to customers and domestic markets, 22 percent; and brand image, 21 percent. And there’s urgency: 72 percent of respondents said they’re planning to fully reshore operations within three years, while 74 percent said their decisions to reshore had taken shape in the last three years. “All reshoring is going to have to take place in highly productive sectors: not in canning tomatoes or in bulk steel parts, but in very high-end assemblies and highly specialized items,” says Michael Hicks, a business professor at Ball State University. Meanwhile, a renormalization of the transpacific supply chain in recent months has removed some pressure to yank production from China. Also, it’s not all or nothing. “It’s not an either-or, staying in China or leaving,” says Van den Bossche. “It’s what can we do to hedge ourselves a bit, and there will be some cost implications in that, bringing ourselves to more expensive labor costs, […]

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