December 2022 E-News: Reshoring Sets New Record in Q3 2022
Q3 data is in, and it shows reshoring + FDI job announcements were at the highest rate ever recorded, about 15% above Q1 2022, the previous record. 4Q 2022 looks strong enough to reach a 2022 total of 350,000+ jobs. Top takeaways:
Projected 350k reshoring jobs announced for 2022
EV batteries make Electrical Equipment the top industry
Private and federal entities are investing in skilled workforce development, one of the top barriers to success
With the IRA, Chips Act and Infrastructure Bill, the U.S. Government is finally getting started on an industrial policy. Although, a more comprehensive plan is needed.
“The investment will help fund a state-of-the-art advanced manufacturing facility, accelerate workforce development programs, and grow the region’s talent pipeline and technical and manufacturing abilities.” Many companies are focusing on similar investments. Bosch’s corporate foundation has reportedly spent more than $2.5 million in STEM education grants around Charleston in the past decade.
A Generational shift in sourcing strategy: A global deep dive into near-sourcing, nearshoring and reshoring in the post-pandemic world" Great insights. “The most popular change in sourcing location is to reshore operations back into the same country as the final market (27%), underlining the trend to move much closer to the customer.” “The previous business case for reshoring used to be around cost … I think what’s driving it now is more supply security. Supply security has a much bigger impact on any business' EBITDA, because cost is only part of that P&L, but if you don't have product on the shelf, or you're not able to sell the product, you've got a massive hit straightaway on revenues.”
A change in mindset is required “from focusing the most attention on suppliers with the largest spend to focusing on those supplying products with the greatest potential to cut into your company’s topline. Revenue impact needs to be the new way to segment and define critical suppliers.” Very consistent with RI’s revised TCO Estimator.
Per SAP survey “Anticipating those trends, business leaders say they expect e-commerce volumes to increase this season compared to last year (73%), and that they are prepared to focus on six strategies for selling their products: speed of delivery (64%); customer service excellence (57%); product availability (52%); sustainability credentials (47%); price reductions (42%); and “made in the U.S.” status (38%).” Of the six strategies, reshoring is a must for the 6th and generally the best means to the 1st thru the 4th. Use of TCO will often show that reshoring works on the 5th, price.
Mexico’s manufacturing industry has been “booming” as a result of recent nearshoring initiatives, BofA’s Capistrán wrote. The sector has grown 5% so far in 2022 alone, and has already exceeded its pre-pandemic size, he added. Capistrán noted that average labor costs in Mexico are now cheaper than in China, incentivizing more companies to move manufacturing operations to its shores.
The volatility in stock markets is telling us the story of huge structural change — one that takes us back to an old normal. “The next few decades won’t be about apps, brands and eyeballs. They will be (in fact, already are) about building energy assets, improving electricity grids and building new manufacturing capacity across the western world. Think capital expenditure boom and industrial super-cycle.”
China’s “top technology overseer,” has “convened a series of emergency meetings over the past week with leading semiconductor companies, seeking to assess the damage from the Biden administration’s sweeping chip restrictions and pledging support for the critical sector.” The Ministry “has summoned executives from firms including Yangtze Memory Technologies Co. and supercomputer specialist Dawning Information Industry Co. into closed-door meetings since Washington unveiled measures to contain China’s technological ambitions.”
Article makes clear that the U.S. needs a supply of upstream material such as gallium. Without these materials our chip foundries cannot produce. The Reshoring Initiative has shown that we also need to develop a downstream market for semiconductors. Without a domestic market our foundries will not produce.
“The uncertainty and chaos of this changing trans-Pacific paradigm…will drive unpredictable and disruptive shipper behavior similar to that seen in 2018, 2020 and 2021. Stockouts will be followed by inventory gluts and vice versa, as importers pay too much to move their goods that are stored too long and arrive too late, compressing gross margins….even a prudent trade strategy seeking to de-risk China by sourcing goods in other Asian countries will be exposed to knock-on effects from the challenges the U.S.-China trade is fated to face.”
Companies that source in China are accelerating climate change. A Reshoring Initiative study showed that sourcing an aluminum diecasting in China instead of in the U.S. increases emissions by 25 to 50%.
CATL, the world’s biggest battery manufacturer, has slowed plans “for investment in battery plants in North America on concern that new U.S. rules on sourcing battery materials will drive costs higher,” two people with knowledge of the matter said.”
"Bringing manufacturing back to the USA from China can be a tricky decision. The slide deck shows Eric P Rose’s experience working with a Los Angeles based PPE manufacturer to bring to the USA from China some PPE contract manufactured items and the compelling business case to do so. This decision to reshore was made before the COVID-19 pandemic and associated supply chain problems even began."
Webinar quantifies the cost advantage of plastic molding in the U.S. near Ohio vs. in China.
Seeking Your Help The Reshoring Initiative is collaborating with Industry Reimagined 2030 and other organizations in research to collect valuable insights about implementing Lean manufacturing and resulting operational gains.
The aim is (1) to assess how to improve the deployment in organizations already using Lean and (2) to better convey Lean to organizations familiar with but not yet deploying Lean. Your experience, results, and insights will assist to evolve Lean models to our ever-changing world.