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What’s next for the supply chain? Potential reshoring

What's next for the supply chain? Potential reshoring

The novel coronavirus pandemic, along with the various shutdowns and slowdowns it caused, taught a lot of people whose jobs rub up against the supply chain some valuable lessons in 2020. As millions of businesses worldwide look to the new year, one thing procurement experts believe will happen as a direct result of the pandemic is more companies will bring as much of their supply chain operations as they can back to the U.S.

To be fair, this was a process that was largely already in place before the pandemic hit. A 2019 survey from the Reshoring Institute found that more than half of companies in the supply chain were at least considering reshoring as an option even prior to 2020, according to Material Handling & Logistics. Moreover, nearly all respondents believed they should at least consider a domestic supplier if they were competitive with foreign companies in terms of price and quality.

Those that hadn’t yet looked at the efficacy of reshoring said it was because of concerns around things like higher labor costs, lack of extant facilities within the U.S., finding skilled workers and so on, the report said. However, it seems that more recently, many of those concerns have been overtaken by the shortcomings laid bare by the COVID pandemic.

Are supply chains shifting back to the U.S.?Are supply chains shifting back to the U.S.?

Striking the right balance
At the same time, some within the industry would caution that they’ve seen this song and dance before, and it didn’t necessarily go well, according to The Economist. When there was a H1N1 swine flu outbreak in 2009, many companies rushed to reshore various aspects of their supply chain. When demand shifted back to its pre-outbreak state, many were left holding the bag — and suffered major financial losses as a result.

Of course, COVID has been a much bigger issue than the swine flu, for a lot of reasons, and even if companies are a little gun shy about reshoring as a result of the problems suffered more than a decade ago, some may now be strengthened in their resolve to shift back to American operations, the report said. Even if estimates on the lower end of industry surveys — on the order of 15%, give or take — come to pass, that’s still about 1 in every 7 U.S. companies saying they will give reshoring a hard look.

Beyond the supply chain itself
That having been said, the fact is that some of the issues discussed above are outside the hands of supply chain professionals, according to IndustryWeek. Surveys conducted in early 2020 (here too, before the outbreak gripped the U.S.) showed that reshoring for the manufacturing sector was already heavily underway and that likely didn’t stop when China and other foreign nations effectively shut down to control the spread. As such, existing supply chains had to be shifted, and new ones built from whole cloth, to accommodate the “new normal.”

Will that continue even after COVID has largely dissipated? The smart money is likely on at least a slow trickle of reshoring, even if there won’t be a massive wave of such activity. Nonetheless, supply chain professionals would be wise to prepare for either scenario.

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