CHECKINGIN
Vol. 42, No. 5 May 2022 THE MAGAZINE FOR DEMAND-DRIVEN ENTERPRISES www.inboundlogistics.com
Reshoring? Not So Fast
STAFF
PUBLISHER Keith G. Biondo
publisher@inboundlogistics.com
M any companies are on a path to reshore manufacturing and supply back to the United States for several reasons, including capricious actions such as the Shanghai lockdown; future pandemics; retaliatory actions that deliberately choke supply as a response to sanctions; rising cost of transport lift from the East; rising labor costs in China; monetary manipulation; intellectual property risks; squeezing container supply; saber-rattling and outright war. Some supplies, such as lithium for batteries and microchips for everything, have only a few supply points, making reshoring efforts impractical in the short term. To support companies looking to reshore manufacturing and supply to keep business from cratering, the U.S. Administration floated initiatives in February 2022 aimed at encouraging the reshoring trend. Mandating where private companies source and manufacture products is difficult even with a mix of incentives—subsidies, tax breaks, loan-guarantees and funding for R&D—to encourage them to bolster domestic supply chains. But government efforts to spur reshoring are exactly wrong, say some global trade deep thinkers, especially considering that national policy created more headwinds in the past two years despite the incentives. For starters, there’s an anti-transportation and manufacturing energy policy. Add overall inflation and dramatically rising domestic costs for manufacturing. Tax rates are not going down, either. Is an activist U.S. government intent on more regulations? Ya think? How about green policy costs? High over here, very low, if at all, over there. Then there’s the labor issue, if you can get enough skilled workers. The World Bank and the International Monetary Fund (IMF) are convinced that reshoring is not at all the answer to current and future supply chain disruptions. “Supply chain disruption will not be solved by reshoring,” says the IMF report on reshoring. Global management consultant McKinsey & Company agrees, and combines reshoring with today’s buzzword, “friendshoring” supply chains. Wait what? “We could not get labor, we could not get raw material on time, and we decided, ‘Let’s go to Mexico,’” says Isaac Larian, CEO of MGA Entertainment, the maker of Little Tikes. MGA is keeping factories in the United States and in China but it recently opened two factories in Mexico and has another on tap. Then there is the friendlier Mexico-U.S. relationship, significantly lower transportation costs, lower intellectual property theft risks, and easier border crossings. Some observers call the move to friendlier Mexico a “tidal wave.” Reshoring is not as attractive an option as it was two years ago. Unless U.S. policies and trade relationships change in the next few years, enterprise planners will slow-walk reshoring and fast-track friendshoring. n
EDITOR Felecia J. Stratton
editor@inboundlogistics.com
SENIOR EDITOR Katrina C. Arabe
karabe@inboundlogistics.com
Chris Cavallo ccavallo@inboundlogistics.com
AUDIENCE DEVELOPMENT & RESEARCH
CONTRIBUTING EDITORS Sandra Beckwith • Thomas Gresham Karen M. Kroll • Amy Roach
CREATIVE DIRECTOR Jeof Vita
jvita@inboundlogistics.com
Keith Biondo, Publisher
DESIGNER Nicole Estep
nicole@inboundlogistics.com
Amy Palmisano apalmisano@inboundlogistics.com
DIGITAL DESIGN MANAGER
PUBLICATION MANAGER Sonia Casiano
sonia@inboundlogistics.com
CIRCULATION DIRECTOR Carolyn Smolin
SALES OFFICES PUBLISHER: Keith Biondo
212-629-1560 • FAX: 212-629-1565 publisher@inboundlogistics.com WEST/MIDWEST/SOUTHWEST: Harold L. Leddy
847-446-8764 • FAX: 847-305-5890 haroldleddy@inboundlogistics.com Marshall Leddy 612-234-7436 • FAX: 847-305-5890 marshall@inboundlogistics.com
SOUTHEAST/MIDWEST/ECONOMIC DEVELOPMENT: Joseph Biondo 516-578-8924
jbiondo@inboundlogistics.com NORTHEAST: Rachael Sprinz 212-629-1562 • FAX: 212-629-1565 rachael@inboundlogistics.com MEXICO & LATAM: Guillermo Almazo 212-629-1560 mexico@inboundlogistics.com FREE SUBSCRIPTIONS www.inboundlogistics.com/free
Inbound Logistics supports sustainable best practices. Our mission is rooted in helping companies match demand to supply, eliminating waste from the supply chain. This magazine is printed on paper sourced from fast growth renewable timber.
Inbound Logistics welcomes comments and submissions. Email us at editorial@inboundlogistics.com; call (212) 629-1560; or mail 5 Penn Plaza, NY, NY 10001. For advertising or subscription information, call (212) 629-1560, or e-mail publisher@inboundlogistics.com. Inbound Logistics is distributed without cost to those qualified in North America. Interested readers may subscribe online at bit.ly/get_il. Subscription price to others: in North America: $95 per year. Foreign subscriptions: $229. Single copy price: No. Amer. $10, foreign $19, back issues $15.
8 Inbound Logistics • May 2022
Powered by FlippingBook