Monday, November 7, 2022

Where Inflation Will Come From Next: Reshoring Manufacturing

The reason American manufacturing went overseas was because it was cheaper—cheaper if you didn't price the risk of the whole chain breaking—reshoring and nearshoring are a form of insurance against the chain breaking but like any insurance the premiums are an immediate and ongoing cost with the pay-off only becoming visible (on the income statement) when bad things happen.

From Bloomberg via Canada's Financial Post, November 2:

US Manufacturers 'Pumped Up' About Supply-Chain Reshoring Trend 

US companies are acknowledging that reshoring -- once the subject of talk but no groundswell of action -- is accelerating, with at least one executive being “pumped up” about critical supply lines shifting away from nations such as China. 

“This reshoring, nearshoring, whatever they’re calling it this week is real, and we’re pumped up about it,” Jim Hoffman, the CEO of Reliance Steel & Aluminum Co. of Scottsdale, Arizona, said on a recent earnings call. “It’s going to fit right in our wheelhouse.”

According to a report Wednesday, Deloitte said some 62% of manufacturers it surveyed have started reshoring or near-shoring their production capacities. The survey included 305 executives at transport and manufacturing firms, mostly in the US, with annual revenue of $500 million to more than $50 billion. 

American firms are expected to reshore almost 350,000 jobs in 2022 — an increase of 25% from 260,000 in 2021, according to figures cited in Deloitte’s ‘Future of Freight’ report. Ultimately, the shift could reduce by 20% the share of Asia-originating shipments to the US by 2025 and by 40% by 2030, it said....

....MUCH MORE

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