As U.S. businesses enabled by an array of digital capabilities look to overseas markets for new customers post-pandemic, a curious reversal of sorts is happening in the unlikeliest of places: industrial manufacturing. Many manufacturing firms that offshored years ago are now returning to U.S. soil — and it’s not about patriotism. As the saying goes, it’s just business.
“Reshoring accelerated by the pandemic is the single biggest opportunity U.S. manufacturers have seen in 70 years. That is without question,” Tony Uphoff, President and CEO of supplier discovery and product sourcing platform Thomas told PYMNTS.
It’s a hot topic in an election year featuring a global pandemic. PYMNTS reported in May on chief White House economic adviser Larry Kudlow’s comment to Fox Business that, “We will do what we can for full expensing and pay the cost of moving if [an American company] return their supply chains and their production to the United States.”
Talk of a $25 billion government fund to pay for reshoring and near-shoring of American business kicked the conversation into high gear, but there’s been no announcement as yet.
According to the May/June Thomas Report surveying manufacturers on industry trends, however, “Two in three (69 percent) of manufacturing companies are looking into bringing production to North America (compared to 54 percent in February),” adding that “91 percent of the respondents believe the North American manufacturing sector can recover from the pandemic,” fund or no fund.
PPE Shortage Sparked A Revolution
Uphoff first remarked on the COVID-era reshoring phenomenon during a recent PYMNTS panel discussion within the month-long B2B Payments 2021: What Will You Change? series of programs running until Oct. 23, and available free on-demand at PYMNTS TV.
Founded over 120 years ago and long considered the go-to for procurement and industrial sourcing professionals, Thomas tracks over 72,000 categories on its digital platform. That put the company in an ideal position to see early signals of a shift, Uphoff said, starting with the mad scramble for personal protective equipment (PPE) like gloves, facemasks and the like.
“In any given year those categories show a 1 percent or 2 percent volatility at most,” Uphoff said. “For decades upon decades of hospital sourcing, [there were no] wild swings in demand for gloves and gowns and masks or respirators. These are supply chains that frankly were perhaps taken for granted.” Those shortages begat other shortages in a cascade of supply chain failures and logistical tangles that made PPE impossible to find and overpriced for months.
That was a revelatory moment for American manufacturers.
Thomas noted in a July blog post that scores of companies are awakening to the fact that they “underestimated the risks of manufacturing overseas.” That company point of view said that “many will look to end their reliance on manufacturing in remote parts of the world,” adding that “the shift towards reshoring is likely to accelerate rapidly in the coming months and years.”
Recovery And Reshoring Go Well Together
Reshoring is also seen as part of the recovery for a stalled and damaged U.S. economy. Manufacturing jobs pay well and often anchor surrounding communities. More to the point, there are hundreds of thousands of these positions unfilled today, sans reshoring efforts.
TV personalities including “Dirty Jobs” host Mike Rowe have long called for a renaissance of American manufacturing jobs, which are in need of an image consultant more than anything.
“The average American perception [of manufacturing jobs] is this grimy black and white photo of some beleaguered person standing at a lathe,” Uphoff said. “But if you look at the reality it's robotics, it's artificial intelligence, it is advanced manufacturing data and software, and it's highly automated. That doesn't mean there aren't people involved. There's actually a shortage of skilled workers for these types of jobs.”
He chalks up outdated perceptions in part to the fact that manufacturing no longer happens inside urban centers, but rather in industrial parks and zones miles out of town.
“I think there's a very simple reason that manufacturing is not well understood in our country,” he said. “You don't see it. You do see knowledge work happening. You go into your local Starbucks and see people on computers, or your next-door neighbor works ... in financial services. But you have to drive somewhere [to see industrial facilities and workers].”
One reason manufacturing is neither seen nor heard in more densely populated parts of the country is the decades of regulations that have moved factories out of sight, smell and so on.
However, Uphoff told PYMNTS that not only is North America — and the U.S. especially — the world leader in clean manufacturing, but the regulatory atmosphere has also improved.
Pointing to joint bipartisan efforts by Connecticut Senator Chris Murphy and New York Congressman Tom Reed to support reshoring, Uphoff said, “What's starting to happen, slowly but surely, is that we're getting better at aligning our government and regulatory interests around what, in the U.S., is a $2.4 trillion industry that's growing.”
He added that “as industry 4.0 starts to play out, you're going to see a renaissance and a resurgence in global manufacturing, but particularly in North America, that's going to be dramatic.”