Ride the wave of re-shoring

Manufacturers are moving operations closer to home — can your company benefit in the long-term?

 

9 minute read

Key takeaways

  • Many companies today are expanding their plans to move parts of their operations closer to home
  • Suppliers that are prepared to adapt their business and strategy may unearth exciting growth opportunities
  • It’s critical to continually identify the unmet needs of supply chain partners and to adapt accordingly

Business owners are breathing a collective sigh of relief as the post-COVID-19 recovery kicks into gear. It’s encouraging to see that companies are experiencing a return to normality. Still, there’s no denying that the business environment is vastly different than it was before the pandemic. Shortages and lost revenue during the lockdown highlighted the risks inherent in the global supply chain. Consequently, one of the more prominent corporate shifts has been an uptick in re-shoring, a movement where companies are bringing some of their offshore operations to the U.S. A survey of Bank of America at BofA Global Research’s analysts, who cover 3,000 companies worldwide, found that companies in more than 80% of global sectors suffered supply chain disruptions during the pandemic. As a result, three-quarters of those companies are widening the scope of their re-shoring plans.1

 

As you consider the opportunities that re-shoring presents, it’s important to view the long-term prospects for your business. “[Re-shoring is] a tectonic shift because we anticipate that it will happen slowly but persistently over the next five or 10 years,” suggests Ethan Harris, Head of Global Economics at BofA Global Research. “It won’t happen overnight, but the forces seem unstoppable.”

 

With change firmly underway, not only do the economy and labor force stand poised to benefit from an anticipated surge in production, suppliers across sectors will also have new opportunities to grow their businesses. Think beyond “Made in America” when considering your competitive edge. Instead, to take advantage of these new supply chains, you may want to look for ways to pivot your product lines or services in completely new and unexpected ways.

 

 

The forces that are shaping the re-shoring movement

 

Although the pandemic amplified the re-shoring conversation, it’s been a topic of discussion for several years. The relationship between the U.S. and China has long vacillated between cooperation and competition. With China as the biggest exporter to the U.S., there have been concerns that America is overly reliant on China — particularly for strategically important goods.

 

The need to rethink supply chains, however, extends far beyond any single country or industry. Burgeoning interest in re-shoring is pervasive and will affect manufacturers worldwide. In fact, some observers suggest that repatriating revenue lost to globalization has the potential to translate to $37 billion in new annual capital expenditure.2

 

As you weigh the opportunities that re-shoring might hold for your business — no matter the size of your company — here are three important considerations to keep in mind.

 

The opportunity: Don’t sell products, solve problems

 

For companies looking to participate in the re-shoring movement, a critical challenge — and opportunity — is to identify how best to support the shift to manufacturing stateside while helping industries and communities increase their resiliency in the years ahead. In other words, put the adage “don’t sell products, solve problems” at the center of your strategy. Companies that can pivot their businesses to meet the demands of those that are bringing their supply chains onshore will enjoy the most significant benefits.

 

To illustrate, consider how a range of companies rose to the occasion when there was a shortage of life-saving personal protective equipment. Through a lot of hard work and determination, manufacturers shifted their attention to assembly line modifications, metal fabrication, 3D modeling and custom tooling.

“[Re-shoring is] a tectonic shift because we anticipate that it will happen slowly but persistently over the next five or 10 years. It won’t happen overnight, but the forces seem unstoppable.”

The strategy: Look beneath the surface to identify the needs of supply chain partners

 

Open communication plays an essential role in taking advantage of the opportunities presented by re-shoring. Open a meaningful dialogue with companies in the supply chains identified as relevant to your business. You may even want to expand your search into new supply chains. And rather than making assumptions about their needs, learn everything possible about their objectives and pain points. Gather all the information you can, then enlist your entire team to develop alternative strategies and create solutions to help solve problems and meet customer objectives. Harness the creativity of small teams to innovate and propose ways to adapt existing product lines or offer expanded services to become a vital link in a new onshore supply chain.

 

“There is no substitute for understanding the unmet needs of customers,” says Raffi Amit, Professor of Management at The Wharton School at of the University of Pennsylvania. “That will allow you to discover whether you are able to supply those needs, at the price customers want to pay, and if you can still make a profit.”3

 

The long term: Continually develop new and innovative ways to work with supply chain partners

 

Re-shoring, as mentioned above, involves a shift that takes place over time. Supply chains will continue to evolve, and finding new ways to work with supply chain partners will require ongoing communication, iteration and innovation. Instead of focusing on the products and services you offer, think about your expertise and competitive advantages.

 

For example, smaller companies may have a lot to offer because it’s easier for them to be nimble and focus on innovation. In fact, some business experts suggest that while large teams tend to be adept at developing and expanding on existing ideas and designs, smaller companies are often skilled at disrupting current ways of thinking by coming up with new ideas, inventions and opportunities.4

 

Stay focused on the big picture

 

It’s important to remember that re-shoring is being driven by more than economics — it reflects the growing concerns over everything from supply chain disruptions and the market environment to risk management and public health. If your aim is to participate in this trend, consider strategies that will help you identify new opportunities and provide innovative solutions. Ultimately, companies that are prepared to adapt their businesses to meet the changing needs of their supply chain partners may have the greatest success riding the wave of re-shoring.

 

Ethan Harris | Head of Global Economics, BofA Global Research

Raffi Amit | Professor of Management, The Wharton School at of the University of Pennsylvania


 

1BofA Global Research.

2BofA Global Research, Standard & Poor’s.

3The Wharton School of the University of Pennsylvania.

4Harvard Business Review.