I pointed out some years ago that when shipping and logistics costs were low, it made sense for US manufacturers to “off-shore” their manufacturing to countries with low labor and input costs, because the expense of shipping them to the USA was less than paying US wages and input costs. However, if those logistics costs grew, it would make offshore manufacture much less attractive.
Well, as we’ve seen, the cost of shipping goods from the Far East to the USA has exploded; so now manufacturers are actively “re-shoring” their facilities and production. The Loadstar reports:
A new report by supply chain platform provider Thomas indicates a pronounced increase in manufacturers’ interest in shifting sourcing.
Its survey of North American manufacturers found 83% likely, or extremely likely, to reshore sourcing, a leap from 54% in March 2020.
Thomas president and CEO Tony Uphoff said: “We are witnessing the wholesale re-examination of supply chain relationships, which will realign global manufacturing for decades.
“With North American businesses accelerating reshoring and replacing some of their overseas suppliers with domestic alternatives, US manufacturers are being presented with an unprecedented opportunity.”
Companies had already begun to shorten their supply chains with the impact of the tariff war between the US and China, noted Brian Bourke, chief growth officer of Seko Logistics. Then, Covid-19 and Brexit prompted firms to reshore and diversify, he added.
US-based forwarder Team Worldwide has noticed an increased interest in nearshoring. SVP international Bob Imbriani said: “It’s now becoming more of an issue.”
A survey of more than 130 manufacturers published by technology and professional services provider Sikich and Industry Week, found that 93% of respondents had experienced challenges from Covid-19, and 76% reported that the pandemic had exposed gaps or weaknesses in their supply chains.
In addition to frequent supply chain disruption, extending lead times significantly, the higher costs of logistics are also causing companies to reconsider their options, Mr Imbriani said.
He notes it is not only container rates that have gone through the roof, but also the cost of land transport, including demurrage and detention charges, that are undermining the viability of importing goods from Asia. Some smaller companies had dropped unviable product lines or gone out of business, he said, adding that some low-cost products had been in short supply.
Almost half of the respondents in the Sikich study said they were diversifying their supply chains to reduce the risk of single- or limited sourcing, while others looked to production closer to their markets, or bringing production inhouse.
There’s more at the link.
However, “re-shoring” is likely to happen on the most favorable terms for manufacturers, not the US economy as a whole. That means their human workforce is increasingly likely to be replaced, as far as possible, by robots and other automation technology. Automated production lines don’t get sick, don’t have disruptive political opinions, don’t have to worry about political correctness or “woke” pressures, don’t want time off or vacations, and avoid a host of other issues in our society. That means those hoping for a windfall of job opportunities due to “re-shoring” are probably doomed to disappointment.
That, in turn, means that we’re going to have to consider very carefully what we’re going to do with our existing workforce. Some argue that we’ll have to provide some form of basic social income for those who can’t get or hold down a job, and they have a point: if a significant proportion of the US population can’t support itself because there are no jobs available for them, we can’t just leave them to starve. On the other hand, it also has serious implications for the Biden administration’s deliberately permitting illegal aliens to flood across our southern border. Many of them will be willing to work for a lot less than US workers, which will lead to conflict between them and local labor. That might make our cities and industrial areas a lot more volatile than they already are.
Each of those factors affects, and is affected by, every other factor. We can no longer look at manufacturing in isolation. It now has very real international and domestic political, social, economic and cultural implications. How it will all shake out, nobody knows . . . but it’s going to be interesting to find out.