Reshoring manufacturers to the U.S.

Rosemary Coates, founder and executive director of the Reshoring Institute, shared during the FreightWaves: F3 Future of Freight Festival that an increasing number of U.S. manufacturers are looking into new reshoring options in an effort to reduce their reliance on other countries, as reported by FreightWaves.

“Up until the pandemic, there was kind of a slow build of companies that were considering reshoring, but when the pandemic hit, so many companies experienced shortages and parts because they were unable to get products from China,” Coates said.

Such an abrupt change in response to the pandemic necessitated an immediate response from U.S. manufacturers.

“I have a client in Chicago who told me they’re paying 17 times more for their freight than they were before the pandemic,” Coates said. “The shortage of parts was one thing, then there’s the risk in terms of being able to serve your customers was another. All these variables really made executives sit up and take notice. Instead of a slow build of reshoring, now we’re seeing a significant amount of activity.”

Coates founded the Reshoring Institute in 2014, far before the pandemic forced manufacturers to reassess their reshoring operations. She has over 25 years of supply chain management and consulting experience and has worked overseas in both Asia and Europe for long periods of time. Prior to officially founding the Reshoring Institute, Coates helped U.S.    companies offshore factories to China.

“I spent lots and lots of time in China, helping companies source and manufacture there, then in the 2012 presidential election, both Mitt Romney and Barack Obama were China bashing like crazy, and I thought, ‘I can’t tell anybody what I do for a living. This is awful,’” she said. “But what happened was it really started to spark conversations between my clients, who said, ‘Would it be possible to bring manufacturing back [to the U.S.]?’ That then resulted in us putting together a methodology and approach on how to determine whether or not to reshore, and out of that came the birth of the Reshoring Institute.”

The Reshoring Institute aids their clients in several ways, including guiding them in choosing sites, paying attention to possible tax credits, comparing costs, and aligning clients in partnerships. Coates said that while many companies are assessing where they source factories, costs are the biggest influence on the final decision a company will make.

“Businesses are economic animals, and they’re looking at profit and loss all the time,” she said. “You have to look at the total cost, including the labor costs, the ability to automate, the proximity to markets and certainly sustainably.”

Although total cost is an important factor to address, many U.S. regions are seeing the benefits of reshoring. States in the Southeast, Southwest, and Mountain West have witnessed the benefits firsthand.

“The Southeast is very attractive because of the low wages, and it’s not as unionized as other places and there is the availability of labor,” Coates said.