Inbound Logistics | January 2023

Factors Influencing Reshoring Decisions (from 2021 to 2022)

TOP FACTORS, ALL MAINTAINING HIGH RANKING OVER BOTH YEARS

OVERALL RANKING

FACTORS TRENDING UP

% UP FACTORS TRENDING DOWN % DOWN

Social/ethical concerns

700% Tari s 700% Total cost

-82% Government incentives

Walmart

-81% Skilled workforce availability/training

Supply chain interruption risk/natural disaster risk/political instability

Inventory

300% Lead time/Time to market

-70%

U.S. price of natural gas/chemicals/electricity

300% Impact on domestic economy 129% Under-utilized capacity 107% Quality/rework/warranty

-56% Proximity to customers/market

3 5 6

Freight cost Automation

-54% Eco-system synergies

-22% Infrastructure

Manufacturing/engineering joint innovation (R&D)

59%

Green considerations 32% The top 3 factors influencing reshoring decisions from 2010 to 2022 are still in the top 4, joined by supply chain risks. The factors that are currently down were some of the top factors before the pandemic. Previously, currently, and in the long run they are still important factors, but are understandably overshadowed by the most pressing issues of the day: supply chain problems and risks.

There are upsides to reshoring— shorter lead times, proximity to customers, and the availability of a skilled workforce, to name a few. But relocating supply chains to North America comes with its share of challenges, too. Many of them revolve around time and resources. “It takes a lot of effort to move a supply chain,” says Ben Bidwell, director of North America customs and compliance at a third-party logistics provider C.H. Robinson. “You need to take the time to stand up sourcing, production, and stafng.” Still, “don’t count reshoring out,” says Bidwell. It can be a viable means of fortifying a supply chain, especially for companies that are not diversied. Organizations that are unsure whether to make the move could start by reviewing their customs history to nd cost-saving opportunities, Bidwell recommends. THE EYEONTHE STORM If there’s one constant in supply chain management, it’s unpredictability. Geopolitics may currently be at the forefront, but that doesn’t mean that a nancial disruption or weather event couldn’t take place tomorrow. Supply chains rarely operate in a steady state environment. Given these circumstances, companies need to be familiar enough

with their sourcing to know how it could be impacted by an unforeseen incident, explains Sam Polakoff, founder and CEO of Brilldog, a supply chain management platform headquartered in New Freedom, Pennsylvania. Even businesses that aren’t directly affected by a particular disruption may nd that one of their vendors is. Weather events are one example. In November 2022, a 5.6 magnitude earthquake struck the west coast of Indonesia’s Java Island. Tremors could be felt as far as 60 miles away. “An earthquake might not impact a business directly, but what about your suppliers?” Polakoff says. “A vendor in the United States might still buy parts for your product from the affected area.” An array of visibility technology can help anticipate snags before they materialize. For example, Brilldog’s platform helps companies nd new sources of supply when an initial vendor is compromised. “The key is to get visibility into where a problem could occur,” Polakoff says. “That way, you can divert your supply chain so you don’t run into the issue in the rst place.” Coming off of a year of economic shocks and pandemic uncertainty, world trade is expected to be subdued in 2023. The World Trade Organization (WTO) forecasts that global trade will expand by a paltry 1% this year.

That prediction accompanies an equally muted economic outlook. The World Bank expects that global GDP will rise by a mere 1.7% annually— outpacing only 2009 and 2020 in terms of economic growth since the start of the 21st century. The culprit behind these meager estimates varies by continent. Efforts to clamp down on rising ination are what will mute import demand in the United States, according to the WTO. Monetary tightening will cut into spending on housing, vehicles, and xed investment. Meanwhile, high energy prices and resource scarcity will kneecap spending in the rest of the world. ONE BRIGHT SPOT Falling demand and a softening economy might not sound ideal to some executives. But there is an upside to the situation: Contract manufacturers may have more available capacity, making it an ideal time to refresh sourcing practices or make changes to a product. “If a company can tap into its suppliers' expertise, it can leverage existing capacity while accounting for changes it wants to make,” says Venky Arun, strategic operations partner at Kearney. “This is the best time to do that, because suppliers will want to work with you.” It could create a world of opportunity for U.S. importers for years to come. n

182 Inbound Logistics • January 2023