WHY ARE COMPANIES LOOKING TO RESHORE?
With its entry into the World Trade Organization in 2001, the Peoples Republic of China became the go-to destination for off-shoring of production manufacturing as it had an unlimited supply of low-cost labor in proximity to large global shipping ports. Off-shoring manufacturing to China was the trend for almost two decades, however, since around 2018 companies in North America and the EU started to take a serious look at shrinking supply chains and reshoring.
There are a number of reasons that companies look to reshore, including:
• Increased labor costs in China narrowed the labor wage gap which increased the total cost of off-shoring
• An increased supply of low-cost energy in the United States
• Companies previously underestimated their total landed cost by 20-30% which negated projected savings
• Increased overseas regulations
• Recent trade agreements and tariffs enacted by the United States
• Increased investments and use of automation in the United States
• Concerns over high carbon footprints and sustainability associated with long supply chains
• Concerns over China’s crackdown on protestors in Hong Kong, the on-going mistreatment of Muslim Uyghur minorities, it’s poor environmental record, and failure to protect intellectual property
A February 2020 report by BofA Global Research indicates a tectonic, or slow-moving shift to de-globalization and reshoring. The BofA report indicates a strong move of manufacturing from China back to North America and indicates one of the key enablers is the investment and training American companies have made in automation. According to this report and research, it is believed that better computing, along with improvements in optical sensing, machine vision, voice recognition, environmental sensors, motion actuators and touch haptics are driving improved productivity and opening new possibilities for automation.
When the COVID-19 pandemic hit the world, global supply chains were seriously disrupted and, in some cases, came to a complete stop. With sentiment for offshoring already fragile, the pandemic made it very clear that the vast offshoring to China over the last two decades, especially of critical medical items such as ventilators, personal protection gear and pharmaceuticals, had become a national security concern. Public sentiment has shifted to bring the manufacturing of essential medical supplies back home. Research recently published on MarketWatch suggests reshoring of pharmaceuticals and medical supplies could potentially create more than one million new jobs and inject more than $250 billion into the United States economy.
According to MarketWatch, America’s global supply chain must be replaced with local and national sourcing, which doesn’t just entail healthcare, although a top priority, but in many industries as well. The United States must once again recapture its position as the world’s leading producing and innovator.
As companies have become more aware of the need for strong environmental stewardship, they have realized that long global supply chains have increased their carbon footprints. The shipping of raw materials and finished goods around the globe are a large producer of Co2 greenhouse gas emissions along with other pollutants. A 2017 paper published by the International Council on Clean Transportation indicates that 932 million tons of Co2 were emitted by shipping in the year 2015 alone.
Research indicates that United States manufacturers who have invested heavily in automation will be in the best position to take advantage of the reshoring wave that will be hitting the United States in the coming months and years.
MADE IN AMERICA
There is a growing trend among Americans to buy American made products even when they need to pay a premium for these products. Because of this, American companies and manufacturers are focusing more on the, “Made in America” theme. A Gallup poll as far back as 2013 showed on average that 45% of Americans make a special effort to seek out American made products when they make their purchases. With facilities in both Connecticut and Colorado, PTA Plastics is one of the industry’s most experienced firms with thousands of successful projects proudly made in America and completed around the world. We make American products that help save lives, products that help keep people safe, and products that help shape our future.
PTA PLASTICS - RESHORING ROUNDTABLE
PTA Plastics recently hosted a virtual roundtable to discuss a subject that has become very familiar to most manufacturing companies and their customers: “Reshoring”. The roundtable panel was comprised of industry professionals from PTA Plastics, as well as the Plastics Industry Association (PIA), and each brought with them a unique expertise and first-hand account of how reshoring is affecting our industry. The panel discussed some of the economic impacts of overseas manufacturing which have caused companies to bring work back home, as well as the challenges that come with reshoring and how to find the right partner to support the initiative.
