CSC-Blog-3 Reasons Why Companies Are Reshoring_072022

3 Reasons Why Companies Are Reshoring (During Rising Inflation)

“Made in America” is seeing a resurgence, due in large part to what happened to the global supply chain during the pandemic. According to the Reshoring Initiative’s latest Data Report, reshoring and foreign direct investments job announcements hit a record in 2021. The report notes that the year-over-year increase is almost exclusively due to companies filling the supply chain gaps of essential products, including electronic batteries, semiconductors, PPE, pharmaceuticals, rare earths and renewable energy. At least 63% of the projects reshored were from Asia, and the South was the most popular region for reshoring; Texas and Tennessee were the top two states for the number of jobs announced.

With supply issues as a backdrop, there are three primary reasons why this rampant reshoring is taking place, despite the fact that inflation has long passed the “transitory” period some predicted: costs, customer demands and technology.

Costs. Even before the pandemic, some executives were rethinking the economics of having their manufacturing facilities offshore. Tariffs were one consideration, along with the costs of inventory carrying, transportation, intellectual property, management and overhead, logistics and more. The math started to come down more on the side of returning stateside.

Customer demands. Whether or not you’re a fan of Amazon, you have to admit its fast pace has increased customer expectations with respect to delivery time. Immediate is becoming the new standard, even when an order change is made, and people want easy returns and replacement products—which are all out of the question without a U.S. presence.

Technology. As automation advances, labor costs are moving lower and quality defects are lessened as checks are built into the manufacturing process. Artificial intelligence, Internet of Things (IoT), additive manufacturing and 3D printing are becoming more popular, improving uptime, lowering waste, allowing print on demand and supporting quicker R&D.

Seize the Opportunity

Even though reshoring is rising rapidly, it may not be fast enough—manufacturing needs to run even faster to keep up with the demand. Companies have realized the lengthy lead times from Asia and the inability to pivot rapidly to changing conditions are unacceptable. Also now considered unacceptable is:

  • Having a minimum of just 13 weeks of inventory in the extended supply chain
  • Being dependent on suppliers that can triple container shipping prices with extended delays
  • Running out of warehouse space to store the “wrong” products in the “wrong” place

As a result of all this, companies are taking control and expanding manufacturing capabilities, either internally or through partnerships. The chance to succeed is there for those who jump into action, prepare to scale and look for opportunities—and lack of capital should not be what holds anyone back.

The Takeaway

Need a working capital loan? Small business loan? Equipment financing? All these business loans can be part of a great strategy to build your business and get in on the Made in America craze. Unlike traditional lenders like banks, whose application and approval process can be cumbersome and often end with a “no,” alternative lenders are in your corner and focused on helping you make your business dreams come true.

If you have any questions about which type of business loan is right for you and how to apply, give Clear Skies Capital a call at 800-230-9822. You may be pleasantly surprised at what you qualify for.