How Reshoring Could Prevent Future Supply Chain Shortages

If there’s one thing the COVID-19 pandemic has taught us, it’s that our global supply chains are in desperate need of fortification. As Anshu Siripurapu, writing for the Council on Foreign Relations, so deftly noted while recapping the story of supply chains in 2021:

“The pandemic triggered a dramatic shift in consumer behavior. Almost overnight, an economy defined by going out became one defined by staying in. Instead of going to the movies, the gym, or a concert, people bought electronics, home workout gear, and musical instruments. This increased demand for goods has persisted even as businesses have largely reopened and spending on services has recovered.”

It has revealed that things aren’t as efficient as many thought them to believe, and at any moment, something unexpected like the pandemic can sweep in and completely change the landscape. To safeguard the future, businesses will need to determine how they can best shore up their supply chains, and it turns out reshoring could hold at least part of the answer.

Reshoring, if you were unaware, is like the opposite of offshoring. Jobs that were once sent overseas (because of cheaper labor costs and greater potential profits) are brought home again due to new incentives that make the domestic option more attractive. 

Think, for instance, about something like machining. Instead of relying on foreign workers, a business could instead opt to align with a domestic manufacturer like Fictiv, then take advantage of their CNC machining services to keep costs manageable while enjoying faster lead times and superior precision compared to a strictly-human machining operation.

Now, how could this reshoring apply to supply chain shortages? The reasoning goes that reshoring will help simplify certain supply chains and make them more resilient to disruption. It’s easier to move goods around if they’re manufactured domestically, after all, and reshoring could help further bolster the economy in other ways while bolstering the supply chain.

There’s some evidence to suggest that reshoring may help entice younger workers to pursue manufacturing, which could help address skills gap and workforce shortage issues, and the reshoring process can also help improve the quality of products at lower costs.

It’s important to note, however, that reshoring is a long-term process, and as a short-term solution it’s not going to solve supply chain issues on its own. Though some 80% or more of North American manufacturers plan on reshoring (and governmental policy is shifting to help encourage reshoring efforts), it will still take years (perhaps even a decade) to counteract the many years of offshoring that have led businesses to their current position.

In addition to moving supply from overseas locations to domestic ones, businesses should also be looking for ways to modernize their supply chains with technology, improve their ability to adapt to unexpected changes, and minimize risks by diversifying supply chain options and opting for sustainability. Implementing these strategies will help businesses to weather the pandemic, and should provide a foundation upon which they can build back in a post-pandemic world.