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The hazards of supply chain gaps and the advantages of domestic manufacturing have propelled companies to increase domestic investment, optimize operations, expand, and reshore production back to the U.S. These actions have driven reshoring and foreign direct investment (FDI) job announcements to an all-time high.
German-based automotive supplier Bosch is a good example. The Tier 1 auto supplier announced investments of $664 million in its U.S. operations this year and will use part of the investment for localization to offset rising material costs.
&ldquo;While we face headwinds related to the COVID-19 pandemic, supply-chain disruption, raw materials cost increases and more, our team in North America continues to rise to meet those challenges and support growth and recovery of the business here in the region,&rdquo; said Bosch North American President Mike Mansuetti.
Houston, Texas-based lighting products manufacturer SGL Lighting is investing $14 million in a U.S. manufacturing expansion to reshore its growing portfolio of durable luminaires. The move will eliminate supply chain challenges, reduce customer lead times by 80%, and create over 100 jobs.
Essential Goods Accelerate Job Announcements
In 2021 the private and federal push for domestic supply of essential goods drove reshoring and foreign direct investment (FDI) job announcements to a record 261,000, bringing the total jobs announced since 2010 to over 1.3 million (Fig. 1) Additionally, the number of companies reporting reshoring and FDI set a new record of over 1,800 companies. The Reshoring Initiative Data Report discusses the trend and how reshoring will continue to be key to U.S. manufacturing and economic recovery.
For instance, United Safety Technology Inc. (UST) is building a $350 million medical manufacturing facility in Baltimore, Maryland, to produce nitrile exam gloves, and create 2,000 jobs.
&ldquo;Our facility joins other projects around the country to bolster the resiliency of our healthcare supply chain,&rdquo; said Dan Izhaky, CEO, UST.
Import Shortages and Soaring Freight Costs Drive Reshoring Trend
The strength of the reshoring and FDI trends in recent years is based on a combination of factors. Major announcements in 2021 were driven by import shortages of essential products observed during the pandemic and by the dramatic increases in freight cost and delivery time. The high rate of 2020 and 2021 reshoring versus FDI also indicates that U.S.-headquartered companies are starting to understand the same benefit to localized production that many foreign companies have understood over the last decade (Fig. 2).
Josh Pecaric, founder of Verus Kayaks, recently reshored manufacturing from China to South Carolina due to delivery delays and soaring freight costs. The company went from paying $2,800 to transport a 40-ft. shipping container able to hold 120 kayaks, several years ago, to $54,000 per container in 2022.
&ldquo;And, believe it or not, it only costs $10 more to make a boat here than it does in China,&rdquo;said Pecaric.
The Time Is Right for Capital Investment 
Manufacturing capacity has fallen steadily since the 1970s as manufacturing offshored from the U.S. to low-cost countries. In April 2022, capacity utilization reached 80.4%, the highest since 2000, the first time above 80% since 2000, and 19.5% above the pandemic low in April 2020. When capacity exceeds 80%, investment increases since companies need additional capacity and can afford to pay for it.
Companies Scale up U.S. Manufacturing Investments 
A Fictiv 2022 State of Manufacturing study found that 65% of U.S. manufacturing companies want to increase reshoring due to continued supply chain disruptions. Evidence of companies scaling up manufacturing investment can be seen in non-residential building planning. Spending on U.S. factory construction is soaring according to the Dodge Construction Index, which cites reshoring as the main catalyst. Manufacturing construction starts reached a record $41.6 billion over the last year ending May 2022. That&rsquo;s 161% more than the 12 months ending May 2021.
Global auto components manufacturer Teijin Automotive Technologies is a prime example. In May 2022, auto components manufacturer Teijin broke ground on a $110 million expansion at its Huntington, Indiana, facility. The 164,000 sq.-ft. project will create up to 225 jobs. In June 2022, Teijin celebrated the official opening of its Seguin, Texas, facility. Teijin chose this location to produce pickup boxes for the next-generation 2022 Toyota Tundra pickup truck, motivated by customer responsiveness improvement, lead time, and time to market.
American CEOs Accelerate Reshoring Efforts 
American CEOs are accelerating their efforts to shorten supply chains. A McKinsey study found that, in a decade, supply chain disruptions cost the average firm 45% of one year&rsquo;s profits. CEOs highlighting plans to reshore or nearshore are up 1,000% versus pre-pandemic.
A 2022 UBS study of C-suite executives found 90% of companies were moving production out of China or had plans to do so, with 80% considering some reshoring to the U.S.
Kevin Nolan, GE Appliances CEO, commented, &ldquo;I&rsquo;ve always said, this is just economics; people are going to realize that the savings they thought they had aren&rsquo;t real, and it&rsquo;s going to be better and cheaper to make them here.&rdquo;
U.S. Competitiveness Challenge
A study conducted by Deloitte and The Manufacturing Institute found that attracting and retaining a properly skilled workforce is a top priority for 83% of manufacturers. However, 45% of manufacturing executives surveyed have turned down business opportunities due to an undersupply of skilled workers. Companies are turning to robotics as they struggle with labor shortages.
U.S. robot orders have jumped by a record 40% in the first quarter of 2022 versus the same time period in 2021.
&ldquo;With labor shortages throughout manufacturing, logistics, and virtually every industry, companies of all sizes are increasingly turning to robotics and automation to stay productive and competitive,&rdquo; Association for Advancing Automation (A3) President Jeff Burnstein said. 
 A recent automation study found that 57% of global manufacturers are not displacing human workers with robots but rather adopting automation to augment human work.
Manufacturers Are Optimizing Operations
Manufacturers are increasing capabilities, capacity, and innovation with carefully chosen process improvements, strategies, and new technologies. For example, smart manufacturing, also known as Industry 4.0, encompasses coordinated physical and digital processes both in factories and across supply chains to optimize operations. On average, companies undertaking smart factory technologies have seen an increase in production output (10%), capacity utilization (11%), and labor productivity (12%).
Robotic welding and extensive automation drive productivity at GE Appliances&rsquo; new $70 million plant in South Carolina.
&ldquo;Using the latest innovative manufacturing technology and processes, our new Water Heater Manufacturing Center of Excellence will enhance our U.S. production footprint and enable us to continue expanding our portfolio of made-in-America products,&rdquo; said Kevin Nolan, CEO of GE Appliances.
TCO Helps Justify Domestic Investments
When companies make decisions based on a small Total Cost of Ownership (TCO) gap instead of a large wage or price gap, the ROI on domestic investment rises versus offshore alternatives. Companies then can often justify making investments in equipment and personnel. 
 U.S. firms could gain a competitive advantage by aggressive investment in advanced manufacturing technologies and processes and by implementing delivery-improving tools, such as lean and QRM (Quick Response Manufacturing). The resulting productivity improvements further reduce or eliminate the manufacturing cost gap with foreign production while improving product quality, delivery, and time to market. Such investment can thus further increase the percentage of work that is reshorable.
Future Projections
Based on the first half of 2022, Reshoring Initiative projects that 2022 reshoring + FDI jobs announced will be around 350,000. However, at some point, companies will become more focused on fulfilling the giant commitments already made before announcing more. We anticipate the strength of reshoring versus FDI to continue, consistent with a multi-year slowing in global FDI. The COVID-19 pandemic and geo-politically induced business disruption and uncertainty is causing companies to emphasize operations in their home countries.
Training a skilled workforce to fill the new positions will be a challenge and barrier to further growth. To meet this challenge, companies, trade associations, and states have been ramping up training programs. Perceptions of manufacturing jobs are also improving. According to a Deloitte study, there are &ldquo;big gains in perceptions of U.S. manufacturing as innovative, critical, and high tech.&rdquo;
A recent study of 18- to 24-year-olds (part of Generation Z) found that 56% have changed their views on manufacturing due to the COVID-19 pandemic. Of the 56%, 77% said they now view manufacturing as more important than they did pre-pandemic. U.S. manufacturers now have an opportunity to leverage positive public perception and attract more recruits. Public recognition of the strength of the reshoring trend helps to further improve the image of manufacturing as a good career. CS

United States of America

investment

Manufacturing Institute/The

Reshoring Institute

Mike Mansuetti

Teijin Automotive

The hazards of supply chain gaps and the advantages of domestic manufacturing have propelled companies to increase domestic investment, optimize operations, exp...

Companies Ramp Up U.S. Investment and Reshoring Amid Continued Global Supply Chain Crisis

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