#55 – Inside Our Industry – Reshoring Initiative’s 2020 Data Report
Posted on | Inside Our Industry
Reshoring will remain a key source of new manufacturing jobs for the foreseeable future. Reshoring Initiative’s recent report identifies key forces that will affect reshoring negatively and positively going forward.
Reshoring Initiative’s 2020 Data Report
One bright silver lining to the pandemic is the broad public and corporate realization and acknowledgement of the need to shorten supply chains and produce goods at home. Despite COVID, reshoring numbers were up in 2020. Reshoring and foreign direct investment (FDI) job announcements for 2020 were 160,649, bringing the total jobs announced since 2010 to over 1 million (1,057,054). Also of significant importance: reshoring exceeded FDI by nearly 100%, the first beat for reshoring since 2013. Additionally, the number of companies reporting new reshoring and FDI set a new record: 1,484 companies. Reshoring will continue to be key to U.S. manufacturing and economic recovery in 2021 and beyond.
Forces likely to slow reshoring and FDI:
1. Concern about new tax rates, regulations, etc.
2. COVID related unemployment payments and remote schooling making work unattractive for some
3. Disrupted supply chains causing lack of availability of components
Forces likely to help reshoring and FDI:
1. Government actions to reduce national dependence on imports of key products – This effort is starting aggressively with medical products, chips, rare earth minerals, EV batteries, etc. to fill in current supply chain gaps.
2. Continued growth in efforts by MEPs (Manufacturing Extension Partnerships), EDOs (economic development organizations) and states to enable reshoring.
3. Continued decline in the USD – The dollar is down 10% from a brief March 2020 high and is approaching a 2018 low. A gradual further 20% decline in the USD would reshore over one million manufacturing jobs over several years by making U.S. manufacturing more competitive at home and abroad.
4. Corporate responsibility expands The Business Roundtable’s August 2019 Statement on the Purpose of a Corporation expanded the definition of stakeholders from just shareholders to now include employees, suppliers and community.
5. Shifting markets – World growth recovery will make other markets more attractive for offshore suppliers leaving domestic suppliers with less competition to supply the U.S.
6. Continued increases in usage of TCO (Total Cost of Ownership) instead of price in making sourcing decisions. Universal TCO usage, alone, would reshore about 1.5 million jobs.
7. Continued improvement in skilled workforce programs
8. Automation, IoT, Industry 4.0, AI shrinking the unit labor cost gap
9. Improving environmental consciousness – Domestic supply chains are more transparent than offshore and less polluting, cutting the world’s environmental impact by up to 25%, depending on the product. Sustainability practices will continue to increase as a corporate strategy and will help drive reshoring and FDI.
10. Possible aggressive “decoupling” by China
Conclusion: The revised rate of reshoring plus FDI job announcements in 2020 was up about 2500% from 2010. The cumulative 780,000+ jobs brought back represent about 7% of U.S. manufacturing employment. The acceleration of jobs coming back combined with the decline in the rate of offshoring has resulted in a plateauing of the non-petroleum goods trade deficit at about $900 billion/year. The COVID crisis has revealed the U.S.’s overdependence on imports.