#191 – Inside Our Industry – Managing the Risks and Rewards of Onshoring & Reshoring

Posted on | Inside Our Industry

Reshoring, onshoring and nearshoring continue to be in the headlines. The benefits and risks should be carefully considered before making the move.

Managing the Risks and Rewards of Onshoring & Reshoring
As more companies move production and sourcing closer to home, several factors should be considered before making the move.
By Bridget McCrea, Editor, Logistics Management · March 1, 2024

Bringing production and sourcing back to the United States (onshoring/reshoring) or to a country that’s in close proximity (nearshoring) have always been goals for companies that want to gain better control over their supply chains. And while labor rates and availability have long been drivers of offshoring, the pandemic shined a spotlight on the risks of this common practice. Among the more visible issues was the great toilet paper shortage—followed by subsequent outages and disruptions—all of which forced organizations to rethink their supply chain setups.

As a result, more companies have been thinking about onshoring, reshoring, and nearshoring lately. They’re also putting more thought into their longer-term strategies and exploring opportunities in countries that they may not have previously considered, including places like Malaysia, Guatemala, India, El Salvador and Argentina.

Quantifying the current onshoring/nearshoring trend isn’t an exact science, mainly because no “official” agency is capturing the data so different groups size up the trend in different ways. MIT Sloan Management Review says companies are constructing new U.S. manufacturing facilities at a pace “not seen in decades.” The Reshoring Initiative reports that 360,000 jobs were either reshored or a result of foreign direct investment (FDI) in 2022 (up 53% over the previous year) and as the year closed out the group was expecting a total of 300,000 jobs to be reshored in 2023.

Hazy numbers aside, there’s little doubt that the reshoring trend is strong right now. “It has become quite obvious that the U.S. manufacturing sector is growing, and that the [related] job environment is positive right now,” says Rosemary Coates, executive director at the Reshoring Institute and author of the Reshoring Guidebook. Based on her own estimates, Coates says around 200,000 jobs are being reshored to the United States annually and that a high degree of domestic companies are “simply expanding without ever going overseas” in the first place. “In some ways, that also counts as reshoring because those organizations aren’t even considering going to China,” she explains.

Click here for the full report that further details both the risks and rewards of reshoring/onshoring and nearshoring.