Solving the Reshoring Dilemma

This is an excerpt of the original article. It was written for the January-February 2014 edition of Supply Chain Management Review. The full article is available to current subscribers.

January-February 2014

With the demands for more skilled supply chain professionals, the silver tsunami of retiring workers, and a shortage of supply chain students and instructors, a perfect storm may be brewing. Penn State authors Kusumal Ruamsook and Christopher Craighead outline the factors that may limit the pool of supply chain talent and offer five strategies to help weather the storm. Get this issue to learn more.

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It’s not news that manufacturing in the U.S. has become more attractive in the past few years. And, even though there is no torrent of renewed manufacturing activity moving the needle just yet, it’s clear that the reshoring movement is growing. At the very least, it should make U.S. companies think twice about where they will manufacture their products in the next few years. But how do you figure out whether to jump on the reshoring bandwagon or sit this one out? There are a few tools and tests that can help you assess whether reshoring is the right choice. And if the answer is “Yes,” making sure your assumptions are realistic and you are factoring in all the moving pieces into your analysis is crucial to avoid any nasty surprises.

A number of macroeconomic factors have tipped the balance in favor of domestic manufacturing, at least for some industry sectors. Among them are the appreciation of China’s currency versus western currencies, China’s labor rate inflation, increased concerns about supply interruption, lower energy costs in the United States as a result of shale gas exploration, and a general push from federal and state governments to reduce the costs and administrative barriers of bringing manufacturing back.

Companies are responding: A growing number of reshoring cases, ranging from heavy machinery and appliances to chemicals, have been covered by the media in the past few months. Several recent studies have added even more fuel to the fire by identifying a number of industry sectors that, based on macroeconomic factors and industry cost models, should consider reshoring their operations. The usual suspects include computers and electronics, appliances and electrical equipment, primary metals, machinery, furniture, plastics and rubber, paper, and fabricated metals.

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