Reshoring Renaissance in Manufacturing: 5 Key Considerations

At a glance

• Main takeaway: There has been a resurgence brewing throughout the manufacturing industry to bring operations back to the United States. Manufacturers who are taking the leap into reshoring hope to mitigate further supply chain risk.
• Impact on your business: While the government has provided manufacturers with attractive incentives to reshore operations back to the U.S., it’s important to be fully cognizant of all aspects that come along with reshoring.
• Next steps: Reshoring is complex, yet very achievable. Aprio’s Operations & Supply Chain Advisory Services team can guide you through a feasibility study to determine if reshoring is right for your manufacturing operations.

Schedule a consultation with Aprio.

The full story:

The manufacturing sector is no stranger to overcoming tough economic times. It has faced numerous challenges, including a global pandemic, rising inflation, and global trade and geopolitical issues impacting supply chains, such as shipping through the Red Sea and the tanker-driven collapse of the Francis Scott Key Bridge near the Port of Baltimore. To confront these challenges, U.S. manufacturers are determined to regain control, so instead of offshoring production to China, they are reshoring operations.

Since the COVID-19 pandemic, there has been a resurgence of U.S. manufacturers reshoring their operations to mitigate supply chain risk. Despite slow growth within the industry and the large, up-front investment to reshore manufacturing operations, the U.S. government is heavily incenting manufacturers to reshore through key tax credits and legislations, such as the R&D tax credit, CHIPS Act for semiconductors, and the Infrastructure Investment and Jobs Act, all of which will boost U.S. manufacturing, the economy, and the job market. 

The automotive sector is leading the way

Though some may feel reshoring is just another trend sweeping through manufacturing and distribution, many have found reshoring to be a successful strategy to mitigate supply chain disruption and increase productivity.

Large automotive companies have been at the forefront of innovation in manufacturing from lean operational best practices to robotics and automation. So, it’s natural that automotive manufacturers are also the leaders in reshoring their operations. When you have large, global companies such as Toyota and General Motors successfully reshoring and expanding their production for batteries and electric vehicles in the U.S., we believe it will resonate throughout the industry, thus creating a ripple effect that demonstrates how manufacturers can be successful in reshoring their operations.

What manufacturers need to consider before reshoring

Like any change, there are positives and negatives to consider before taking action. It’s important for manufacturers to be fully cognizant of these aspects that come along with reshoring. Top considerations manufacturers must consider before reshoring include:

• Supply Chain Security: Manufacturers are still recovering from the supply chain disruption caused by the pandemic, as well as current global trade and tariff tensions and geopolitical issues. Reshoring operations back to the U.S. gives manufacturers more control to mitigate further supply chain risks.
• Shorter Lead Times: Consumers are spoiled with next-day delivery and the pressure to compete with shorter lead times continues to rise. For manufacturers to get products in and out the door at a rapid pace, they need a supply base that is closer to their operations.
• Innovation: The U.S. is a leader in technology-driven innovation through the adoption of automation, robotics, and artificial intelligence (AI). In addition, increased digital capabilities with cloud computing has enhanced the ability to capture real-time data, which is an indispensable tool for manufacturers.
• Labor Market: While manufacturers will likely pay a premium for labor in the U.S., the federal and state incentives to reshore operations outweigh the tightening in the labor market. Plus, according to recent Google Trends data, there continues to be a rising interest in manufacturing warehouse and factory jobs. With a piqued interest in manufacturing and the leverage of advanced robotics and AI technology, manufacturers can create more buzz for the industry and potentially reduce the labor challenges that seem to consistently plague the industry.
• Financials and Budget: There is no denying the large investment that comes with reshoring your manufacturing operations. Interest rates remain high with uncertainty of when the Federal Reserve will begin to cut rates, and local and national banks are more cautious with their lending. While the true cost and complexity of reshoring varies significantly on the size and scope of your operations, government incentives and advanced technology provides manufacturers with the right leverage to not just consider reshoring but actually move forward with the plans.

The bottom line

Reshoring is a transformational and complex undertaking, but it’s not something manufacturers should shy away from exploring because the benefits can be significant. It’s important to remember you don’t have to go at it alone. Aprio’s Operations & Supply Chain Advisory Services team can work collaboratively with you to perform a feasibility study and coordination to determine if reshoring is right for your company and minimize disruption to your current operations.

Is reshoring your manufacturing operations right for your company? Schedule a consultation with Aprio’s Operations & Supply Chain Advisory Services team today.

Related Resources/Assets/Aprio.com articles/pages

6 Manufacturing & Distribution Insights from Q3 2024 and What They Mean for You

Why Your Company Should Avoid Hitting the Brakes on ESG Despite Recession Worries

The Aprio 2023 U.S. Manufacturing Survey