A Picture of Reshoring Becomes Clearer as Earning Season Looms
Nothing in industry ever happens overnight. The progression forward into the next era of manufacturing is a slow plod that sees industry leaders making the first decisive moves, and middling players riding their wake. Such has been the case with Industry 4.0, and now with reshoring. It’s only a matter of time before jobs start coming back to American soil, but it’ll take the first bold steps of decisive leaders to encourage the industry shift.
With earnings season on the horizon for the United States’ largest producers, the first steps toward reshoring could happen sooner, rather than later.
BDO reports on reshoring possibilities
Each year, tax, consulting, and financial services giant BDO USA LLC puts out a Manufacturing CFO Outlook Survey. The survey polls 100 of the country’s top manufacturing chief financial officers (CFOs) to identify challenges, opportunities, and trends in the fiscal strategies of blue-chip manufacturers. This year’s survey has a wealth of valuable information as it pertains to reshoring potential.
As many as 24% of surveyed producers plan to adjust to ongoing supply chain disruptions by relocating supply chains to different countries. The top destination cited? Back home, to the U.S. (22%). The reason is evident in the state of their financial reports:
- 38% say they’re struggling to sustain profitability due to disruption.
- 31% believe they’ll continue to struggle in 2021.
- 20% believe supply chain stabilization is the most important catalyst in recovery.
- 52% plan to invest in supply chain, while 50% plan to diversify suppliers.
The marquee takeaway from the BDO report is clear: “Manufacturers say supply chain stability is the #1 factor most critical to the recovery of the manufacturing industry.” More and more, it appears the path forward to this stability is a return home, to U.S. soil.
Money talks, and balance sheets are shouting
Although conducted in September 2020, the BDO report comes at a time when public companies are beginning to report first-quarter earnings in March. As they compile their numbers and prepare to present at investor days, many manufacturers are concerned about the mounting costs of supply chain inefficiencies.
Despite an upswing and sustained recovery in the monthly Manufacturing ISM Report, producers are still logging losses on the balance sheet. Earlier this month, GM shut down production of its most profitable production lines due to a chip shortage. It wasn’t the only company. Setbacks, disruptions, and inflated costs are all compounding, and manufacturers can’t suffer them for much longer. The breaking point for action is coming, and that action appears to be a move back home in the wake of chaotic global supply chains.
Britain’s blueprint for reshoring?
Like the U.S., Britain faces a similar call for reshoring. With Brexit finalized, the country is striving to boost its now-isolated economy by calling home manufacturers with incentives and opportunities. Akin to the Biden Administration’s plan, early reports of reshoring interest are sending up positive signals for a wave of U.S. reshoring that could follow suit.
The driving factor in the U.K.’s reshoring success? The promise of shorter, more stable supply chains. While it requires an upfront investment in reestablishing supply chains at home, that cost is one manufacturers are willing to stomach as supply chain losses mount.
