The Reshoring Movement and its Impact on U.S. Manufacturing

Published Feb 24, 2021 by A.J. Mistretta

The COVID-19 pandemic has exposed many vulnerabilities for American business, from the critical importance of remote connectivity to the risks of open office design. But for manufacturers and others dependent on the global supply chain, the pandemic brought their exposure into stark focus when parts of the chain broke down last spring. Companies dependent on materials and supplies from China and other nations were left waiting weeks or more for those products in many cases.

Acknowledging the risk, a number of U.S. companies are looking to “reshore” parts of their own operations and seek out domestic producers for critical supplies. These businesses hope to strengthen their supply chain by reducing its length.

Experts came together to discuss the reshoring phenomenon and the advantages to businesses looking to supply the federal government in a special Business Beyond Borders presentation this week hosted by the Partnership. The conversation resumes with a Part 2 on Reshoring on March 2. Register here.

Dr. Sanju Patro, Director of TMAC Gulf Coast and Harry Moser, President of Reshoring Initiative, talked about the growing movement toward domestic production.

The Buy American Act requires that the federal government buy products made in the U.S. from materials mostly supplied domestically. But loopholes and ambiguity surrounding the law often make it easy to circumvent. Patro said a recent executive order from the Biden Administration seeks to close those loopholes and directs federal agencies to review their procurement process. That’s creating renewed incentive for American companies to source and manufacture domestically, which could boost employment.

“As more and more U.S. companies work to reshore manufacturing, there will be greater demand for skilled labor,” Patro said.

Moser said the pandemic has brought to light many of the hidden costs of outsourcing. While many companies source and manufacture overseas, they aren’t factoring in the “total cost of ownership,” or the additional costs tied to the supply chain.

Over the last 20 years, the value of U.S. manufacturing has plateaued due in large part to offshoring. “We are consuming more goods than ever before, but we simply aren’t producing them anymore,” said Moser.

Moser offered an example many have become familiar with during the pandemic. Disposable masks are largely manufactured overseas and at the beginning of the pandemic, these were in short supply due to the breakdown in the supply chain. According to Moser, if mask making had been done domestically it would have created 180,000 additional manufacturing jobs.

To watch the full program Business Beyond Borders: COVID-19 Supply Chain Wake-Up Calls for Reshoring Now, Partnership members can log into the membership portal via the link at the top right of the page.