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Reshoring Poised to Surge 38% to Record High

Harry Moser

The pandemic has spurred a national push to strengthen the domestic supply chain, driving reshoring numbers higher. If the second half of 2021 progresses at the same rate as the first half, reshoring and foreign direct investment (FDI) job announcements for 2021 are projected to be over 220,000, or 38% above an excellent 2020. That would give 2021 by far the highest yearly rate recorded to date (Table 1).

Essential Products Lead the Charge

Essential products targeted by the Biden administration are driving the reshoring numbers higher. For the year, these products—semiconductor chips, electric vehicle (EV) batteries, personal protective equipment (PPE), pharmaceuticals, and rare earths—will total 62,500 jobs, 28% of the total. 

Top Takeaways From the Report

•    For the second year in a row, reshoring job announcements outpaced FDI 62% vs. 38%. Companies are focusing on their home market.
•    The number of companies reporting new reshoring and FDI is also set for a new annual record: 1,800+ companies. 
•    The jobs that are coming back in transportation equipment are mostly in electric vehicle battery production (Table 2).
•    The computer and electronics industry has seen the largest jump in percentage of jobs due to semiconductor/chip investment. 
•    Both PPE and pharmaceuticals are down from 2020. 
•    So far this year, Ohio, Arizona, and Tennessee have seen the most job announcements. Texas dropped from second in 2020 to 13th in 2021. South Carolina is 11th after years as No. 1.

Quantifying the Competitiveness Gap

Localization, meaning producing near the consumer, often reduces total cost due to shortening supply chains and contributing to a lean and agile strategy. The savings on non-manufacturing costs as a result of producing in the market where the products will be sold can often overcome a 15-20% manufacturing cost gap caused by an 80% wage gap. The Reshoring Initiative recommends using Total Cost of Ownership instead of manufacturing cost or Free on Board price when making siting and sourcing decisions. A total cost analysis is the best way to recognize these savings.

Reshoring continues to be key to U.S. manufacturing and the economic recovery in 2021 and beyond, but more needs to be done to address the underlying problem: Our manufacturing costs are about 15% higher than Germany’s and 40% higher than China’s. The Reshoring Initiative offers the Biden administration help in developing essential policies. The “Competitiveness Toolkit” is available to help quantify the impact of policy alternatives, including a stronger skilled workforce, competitive corporate tax and regulatory structures, and a lower U.S. dollar.
China’s industrial policies continue to pose concerns, and the U.S. has limited control over China’s initiatives.  However, we have unlimited control over our competitiveness initiatives and our ability to achieve our ambitions.

Let’s collaborate to support American competitiveness and rebuild a U.S. manufacturing powerhouse.    CS

See the full report at this link: https://reshorenow.org/blog/.

Click here to view the article in the November/December 2021 Casting Source digital edition.